(Solved Homework): Scooter Land had been headquartered and doing business solely in the United States for five years…

Scooter Land had been headquartered and doing business solely in the United States for five years. They had an excellent reputation for a quality product and demand was at an all-time high. The CEO of the company decided to explore the possibility of expanding into two or three foreign countries. Each foreign facility would include operations, distribution, and sales of the scooters.

The CEO assigned John, the Director of Operations, to be in charge of performing the preliminary work in making the decisions regarding the expansion into other countries. John started by visiting Central America and Africa because of the reported low cost of doing business in these areas. After his visits, however, John rejected these countries because of the dangerous business climates and insufficient disposable income in their marketplaces.

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John also performed a detailed analysis of 75 additional countries, hiring an expensive consultant to assist him with the analysis of the extensive amount of information obtained. By the time that John and the consultant finished their analysis, six months had passed and they had spent more than $100,000.

Before completely giving up on the project, the CEO asks you to provide input to John. He feels that the project can be saved if John heads in the right direction. He asks you to first describe five (5) external sources of information that John should have used to collect country information for analysis purposes. Because you oversee operations, he also asks you to identify and discuss three (3) control instruments that the business might use to govern the international operations. This is critical to know if the company moves forward with the expansion.

Scenario Analysis: 1 Page Required Written Response

Expert Answer

For international operations, it is essential to under the business climate, the political risk, the currency risk and the consumer’s propensity to spend and accept the product in those regions. To have a good appreciation of the business environment in those regions it is useful to understand the following indicators:

  • GDP of the country: This can be obtained from the world bank and IMF data. This shows the scale and robustness of the economy.
  • Per capita income: Through a review of the per capita income, it is possible to get information on the consumers ability to spend and buy products in that country.
  • Ease of doing business: Available data from world bank reports and also getting information from companies who are already doing business in those countries.
  • Logistics performance index: A sense of the logistics performance index shows how smooth the cargo can flow and also about the infrastructure of that country and to the extent it supports businesses.
  • Country reports of world bank & IMF: These reports can indicate to the extent these countries have matured political system for aiding a conducive business environment. Also they give useful pointers towards the potential political and economic risk prevailing in doing business in those countries.

With regards to the establishment of control instruments following might have been useful:

  • Formal system of management information system for getting information on resources allocated and potential return on projects undertaken.
  • Establishing a composite team with members across departments and also belonging to different geographies thus having a wider outlook
  • Establishing a matured reward system which takes into account the results and success globally for rewarding managers.

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