- Some suggest that foreign markets are graveyards for entrepreneurial firms that overextend themselves. Others argue that foreign markets represent the future for SMEs. If you were the owner of a small, reasonably profitable firm, would you consider expanding overseas? Why or why not? What are the key issues here? What are experiences and lessens that you have got from your previous simulation practice rounds?
1. Some suggest that foreign markets are graveyards for entrepreneurial firms that overextend themselves. Others argue that foreign markets represent the future for SMEs. If you were the owner of a small, reasonably profitable firm, would you consider expanding overseas? Why or why not? What are the key issues here? What are experiences and lessons that you have got from your previous simulation practice rounds?
As an owner of a small reasonably profitable firm I would first consider the factors that impact expansion overseas. I would make my decisions based on the industry based considerations, institutional based considerations, resource based considerations. These considerations would help me to better understand the industry and how institutions operate in foreign countries and the culture of the people. The financial impact on accessibility of resources would also be a big decision making factor as well. Other consideration would be, if my product/service be needed and if so how is the competition and what is the firm offering that the competitors are not /competitive edge, will the firm be sustainable overseas and so on.
I would also consider the international strategies for entering and staying in foreign markets, considerations would be if the firm will direct export and what will the licensing or franchising requirements and will this take time to process and what will the financial impact be? How will the firm use foreign direct investment (FDI)? and so on. These are very critical questions for a firm manger to research and come to a decisive conclusion on the direction they would take for their firm. A comprehensive research and analysis of all the factors that would impact the business are very important before making the decision to invest overseas or not.
I would seriously consider expanding overseas if the above highlighted considerations are acceptable to my business model and are in sync with the firms, core values, vision and mission. I would not invest if there are concerns of major impact to the business and therefore would hold off on the investment until the internal and external factors come to a form of balance that’s acceptable for the organization to be successful.
From the practice simulation, I have learned that it is very important to fully understand the currency exchange impact to the business, since I think I went in without a plan of how to handle the exchange rate even thou I know better. It was interesting to see the results after all other companies were factored in, that goes to say that a firm can be making the best decision they see fit for the firm but when the other organizations decisions are factored in then the chips fall where they may and the best decision wins. It seemed very difficult to predict which direction the other organizations would go to. Looking at the other firm’s numbers was helpful to know what their mind set was and what they did to be successful.
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