Case and Objective
You are the corporate vice president of Billy's B-B-Q, a successful barbecue chain in the United States. The CEO and the board of Billy's B-B-Q want to expand into other countries. After completing a year of market research, the CEO has narrowed the new markets to two: Beijing, China and Mexico City, Mexico. The board, however, only wants to pursue one new international market at a time. The CEO has asked you to help her decide which market to pursue. You will prepare your recommendations for the CEO in a Written Proposal with a supporting PowerPoint Presentation. When choosing a city, following are several criteria to consider.
• Age, demographics, and income? This will help to determine the market size.
• Students should provide information on the total population size, population growth rates, age structure, urban and rural split, and attempt to estimate the size of the middle class, which would be the primary market.
• What is the best way to organize to enter the market? (franchising, joint ventures, and licensing)
• Students should review each of the market entry options available: wholly owned, joint venture, franchise, or licensing, along with the benefits and risk of each approach.
• What is the profit potential as supported by the demographics?
• Students should estimate the size of the potential market based on the size of the target age group that falls within the quantified middle class. Profits will be based on what the market can afford to pay for the product, based on total sales figures.
• What are the barriers of entry for this market?
• Students should look at any limitations on foreign ownership, if the country welcomes FDI, and if there are any other barriers to entry, such as tariffs on imported supplies, etc.
• Does the political, legal, and economic structure of the host country support new enterprises?
• Students should consider the type of government and government stability. They should also research economic freedom (www.heritage.org/index) and the ease of doing business (www.doingbusiness.org/rankings) from the World Bank.
• What is the local competition?
• This may be difficult to find in some cases. However, there will not only be local competition but also other foreign competitors. The competitors may even include other U.S. companies; look at other U.S. brands in country (McDonald's, Yum Brands, Starbucks, etc.).
Further research should also be done from an operational perspective. Following are additional questions that you need to consider.
• How easy will it be to hire and train workers?
• Students should look at labor statistics for size of potential workforce. Look at average education attainment rates and also employment laws on the practice of hiring, firing, and union recognition.
• What is the crime rate?
• Students should not just look at violent crime, but also white collar crime and corruption as they would relate to working in that country.
• What changes, if any, will need to be made to the product for it to be embraced by the locals?
• Students should look at local consumption of food products for comparison.
In your presentation, be sure to consider the following.
Part A: Subtopic A in the Presentation are Due at the End
The political system and economic structure of the chosen country. (Regional Differences: Political Systems and Economic Structures, TCOs 1 and 2)
1. Consider whether the country is a democracy or a totalitarian system.
2. And as stated earlier, is it stable?
3. Consider whether the economy is market based or a command economy.
4. Very few command economies left: N. Korea and Cuba are the only ones of major import.
5. Consider the barriers to entry due to political and legal issues. (For example, will the country allow United States residents to own 100% of the store?)
6. Consider the economic factors, such as economic growth, currency stability, taxation, and repatriation of profits.
7. Plus total GDP, plus GDP growth rates, and per capita income
Part B: Subtopic B in the Presentation are Due at the End
The legal system and culture of the chosen country. ( Regional Differences: Legal System, and Culture, TCOs 2 and 3)
1. Consider common and expected business practices.
2. Students should look at average number of days to set up a business. They should look at the level of corruption (will bribes be a required practice?). Transparency internationally ranks in the Corruption Perception Index (cpi.transparency.org/cpi2011).
3. Consider common and expected hiring practices.
4. As mentioned above, what are the employment laws? Are there minimum wage laws, and are there penalties for firing employees?
5. Consider crime rates.
6. Consider demographics.
Part C: Subtopic C in the Presentation are Due at the End
The best strategy for going global in the chosen country. (Week 5, TCOs 5 and 6)
1. Consider licensing.
2. Consider franchising.
3. Consider joint ventures.
4. Also consider wholly owned subsidiaries here.
Part D: Subtopic D in the Presentation are Due at the End of Week 7
The amount of product localization that would be needed. (Week 7, TCO 8)
1. Consider popular local foods.
2. Consider the likely reaction of the locals to a B-B-Q store.
3. Suggest alternate flavors, side dishes, and drinks that would have local appeal if necessary.
Additional Consideration: Students May Also Consider Infrastructure
Physical:
Roads and railways: Do they have efficient road and rail services to ship goods easily around the country? (How many kilometers paved and unpaved, for example.)
Airports: Are they modern and efficient? Possibly you will need to ship some goods in by air.
Waterways and Ports: It is possible you may ship some required goods in by water. Are the ports efficient? Is there corruption at customs?
Communications:
Fixed and Wireless Telephony: How many connections of each, are they efficient and growing?
Internet Penetration and PC Ownership Rates: If your business needs connectivity, you need a reliable and fast data network to operate. Also, if part of your marketing communication includes web-based activities, you need to know the extent of Internet penetration. Do people own PCs in their homes?
TV and Radio: Who owns the broadcast networks (private or government). Is the media available for advertising? What is the penetration of TVs in the home (people who could see your ads)?