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    Barriers to international business expansion

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    PPQ Parts has determined that for the company to expand globally over the next several years, its managers must be properly trained in multiculturalism and diversity management. PPQ Parts executives must be aware of any political and economic concerns that may arise during the expansion.
    What are some of the issues the host foreign country could face as a result of the expansion?
    Explain what cultural barriers and diversity issues are commonly encountered by international/multinational (MNC) and global organizations.
    Why has diversity become such an important topic in the international arena?
    What can occur when issues related to multiculturalism and diversity are ignored in an international company?
    Describe at least 2 political and 2 economic issues that may arise during global expansion and proposed methods of addressing them.
    Explain the importance of and the implications of each of these items in PPQ Parts's expansion plans to Germany and Japan.

    1,629 words

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    Solution Preview

    The expansion of business operations outside the borders of the business' home country is always interesting, complex, and risky. It is interesting because there is much to learn; complex because so many more variables must be taken into account; and risky, because for that particular business, they are going to be in uncharted waters, at least for the first couple of years, until they learn how to 'move' in the new environment.

    INTERNATIONAL INVESTMENT VIA EXPANSION OF OPERATIONS:

    Management needs to carefully consider a number of key areas when deciding on international expansion:

    - Credibility of target-country market data
    It is often the case that market data is the developing world is either out dated, unavailable, or generally thought to be not credible either because of the method in which it was gathered, or because the data simply does not exist. Therefore, due diligence requires that available market data (if used as a business justification for the expansion) is validated. Research points to the fact that people who speak one language who are asked to provide data to a survey in a different language provide significantly different answers in the foreign language than they do in their native language.

    - Political stability of target country
    Target country political stability generally refers to the rate and method of political change. Does change occur incrementally and slowly; or quickly in wide, unpredictable shifts. Revolutionary movements, rogue armies and uncontrolled insurrection or frequent coup attempts are all bad for business. If the target country is subject to some or all of these dynamics, the planning for expansion into that country needs to be strong and prudent.

    - Credibility of target country's legal infrastructure
    Due diligence will require a full analysis of the resilience of the target country's legal infrastructure as it relates to intellectual property protection, property acquisition/leasing/rentals, employment law, and technology transfer issues. Key to this area will be a determination of whether adherence to stated laws is formal or informal, subject to whim, generally consistent or capricious. Most importantly, does the expanding company have credible access to complaint and remedy at the bar.

    - Foreign investment constraints
    Research must also account for and deal with any foreign investment constraints against foreign direct investment by international firms in the target country. Such legislation may require that the investing firm transfer a certain level of capital, intellectual property, technology or ...

    Solution Summary

    This solution addresses some of the main challenges to a business when expanding operations outside home country borders.

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