TUNGHAI UNIVERSITYDepartment of International Business - Taichung

Toolkit Discussion

Distance Still Matters

Distance Still Matters

• What is our Market?– Country Portfolio Analysis– Population– Demographic (Male, Female, Age)– Ability to Pay

= Total Addressable Market

Simplified Chinese translation :潜在市场总额 /有开发价值的市场总额

Entered by: Mark Xianghttp://www.proz.com/kudoz/914252

International Market Analysis

• Logical, Calculated• Methodological• Scientific• Reliable

• But is it Valid????

Ghemawat begs to differ….

• The Country Portfolio Analysis & TAM Models omit the real world factors that reduce your revenue potential

• Some Cultural examples:– Language increases by 300%– Confucius doctrine (cultural transmit knowledge

increases copyright infringement))

– Ethnocentricity (Star TV English Programming reuse)

Impact of Distance (Continued)

• Administrative/Political – Colonial Examples account for 900%

increase:• Spain/Latin America• France / Canada & West Africa• US / Britain

• Today’s EU attempts to gain from this fact– Potential for China & Taiwan?

Impact of Distance (Continued)

• Political/Administrative Challenges– National Pride

• Airlines, Commodity (Oranges, Coffee)

– National Security (Telecommunications)

– National Defense (Software, Arms)

• Governments will protect these industries and restrict trade, especially for “distant” sellers

Impact of Distance (Continued)

• Geographic– Perhaps the best known/understood– Logistical limitations

• Travel to and within• Technological distance (modern/ traditional )• Trade costs (Shipping costs)• Time zones

• Recently though, geographic distances are shortening (though technology and cost improvements)

Impact of Distance (Continued)

• Economic– GDP Trends– Total Addressable Market– Growing Middle Class

– More countries are meeting the minimal level of critical mass to attract global attention (i.e. WalMart, Starbucks, Dominos Pizza)

Tricon Example

• CPA analysis indicated poor market potential for Mexico

• Was limited to financial screening• Failed to observe the cultural and

geographical distance to Tricon’s Headquarters– Cultural Similarities– Common Border– Trade Agreement

• Moved from 16th place statistically to number 2 (of 20).

Discussion: Distance Still Matters

1. Describe the four dimensions of distance and why they are important.

2. What distance factor can help increase trade by nearly 900%, Why?

3. What does China suffer from the most in terms of distance?

4. What do you think is the most important distance factor? Why?

Cage Framework (Distance Still Matters)

1. Start with a Base Business Plan created in your home country for Target Market

2. Review Each Distance Factor for applicability

3. Make Adjustments to Base Business Plan

4. Plan for Problems, Delays, Work Stoppages, Labor-Hiring Difficulties…

Create Contingencies

5. Especially Time Orientation (Hofstede)

For Next Week:

• Read carefully and analyze Disney Case– Prepare individual responses to Discussion

Questions– You may Collaborate after you prepare your own

DQ responses

• Prepare for a student driven discussion…

Feedback

• Was anything unclear? Fuzzy?

Write it down and leave it at the desk…

…I will address it next time we meet.

Thank you.