The Cultural Challenges of Doing Business Overseas

Running Head : The Cultural Challenges of Doing Business Overseas

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Executive Summary

Establishing companies in wholly different markets offers wide range of challenges and opportunities to businessmen . This is especially exemplified when companies are starting operations in different countries that have potential to increase revenue and exposure . Faced by that challenge , Steve , a franchisee of Chicago pizza , has to develop new ways of dealing with the challenge . First , he has to take time and study the market , regulatory framework , and trade barriers in Czech Republic

br This will enable him to be completely prepared to before opening operations . Further , it shall be possible for him to understand future growth of his company , because he shall have information regarding different markets in the country

Introduction

The challenges of establishing companies in new territories can be easily overcome though of this . The first section shall describe the cultural and business differences between the United States , where Steve is currently operating , and Czech Republic , where he is intending to open Chicago Pizza outlets . The second section shall elaborate on the comparative advantage that his new operation provides the section shall also elaborate on Hofstede 's four primary dimensions of business operations in different countries . The last section shall explain the trade barriers , demand and income elasticities that Steve will have to face . A conclusion regarding the important points made in the shall follow

Overcoming Challenges

The major cultural difference that Steve will have to deal with includes Czech population 's propensity to eat out . Most American families eat at restaurants several times a week and thus have budgets pertaining to that kind of spending . On the other hand , Czechs mostly eat from their homes , meaning that their marginal propensity to start allocating budgets for restaurant meals was lower . Secondly , Pizza is a popular mean within the United States , but not so in Eastern Europe . Steve will thus have to use his business skills to cultivate a pizza eating culture within his restaurant 's location . Business culture between the two counties is also different . Regulatory frameworks between the two countries exemplify that fact United States ' frameworks are much more efficient and easier to access , whereas those of Czech are quite rigid and less efficient (World Bank , 2003 ,

. 97 . Such cultural and business challenges will force Steve to be more innovative and flexible in establishing his debut foreign restaurant

The challenges will however not create unassailable business challenges for Steve . His experience in the United States will come handy in overcoming the hardships of operating under new regulatory frameworks and serving a culturally different set of customers . Steve seems to be well prepared and determined to succeed in Czech . In to avoid being caught up in the slow process of starting his business in Czech Steve should consider getting all the necessary documents , such as registration and operations licensing before he sources equipment and labor . Taking enough time is important because registering a business in Czech Republic could take up to 91 days (World Bank , 2007 . Steve should also undertaking market research that will enable him to locate business operations in strategic areas , target the right client base - both of which will lead to strong business plans capable of producing nothing but success (Reid , 1993 ,

. 73 . Middle and upper income suburbs shopping and city centers are some of the best choices they are frequented by individuals with higher tendency of spending on pizza which could be regarded as luxury food . Successful operations in these areas should be followed by new operations in lower income areas this should also come with fairly priced products

Comparative Advantages and Hofstede 's Four Primary Dimensions

The low production costs will serve as Steve 's best comparative advantage in his new country of production . This advantage is more pronounced in the labor which is usually in high supply compared to demand . Such comparative advantage may not be useful to Steve in the initial stages given that the pizza business will be capital intensive in the initial stages . Only in later days that cost of labor will become an important factor

It shall be important for Steve to consider the Hofstede 's Four Primary Dimensions detailed below (Hofstede , 2003

40 Power Distance Index (PDI ) score : this refers to whether power is distributed equally between leaders and followers in all organizations be they family , public or private sector . Lower meaning that most powers in the production process are bestowed upon the leadership class followers also expect this to happen . In to conform with that criteria and hopefully improve it , Steve should ensure empowering team leaders in his restaurants

68 Individualism (IDV ) score : This refers to the degree by which individuals depend on themselves and how they are interconnected with different groups in their communities . The 68 percent dimension is exemplifies satisfaction that potential employees will wore effectively within teams and effectively when working independently

63 Masculinity (MAS ) score : This refers to the degree by which roles are subdivided between genders . The 63 percent score is indication that roles are less devided into genders but according to ones ability to perform certain tasks

69 Long-Term Orientation (LTO ) score : This dimension compares population 's preference of long term achievements verses short term ones . The 69 score is indication that Czechs are long term oriented and therefore willing to make short-term sacrifices to reap benefits got years to come , exactly what is needed in a business environment

Trade Barriers , Demand and Income Elasticities

Steve is most likely to deal with trade barriers in terms of high import duties on the production goods that will have to be imported from the United States or other countries . This especially applies to the machinery he will be using in pizza business . Further , Steve could face regular import taxes on ingredients he will be importing from Chicago pizza , as the franchise could demand of franchisees . In determining demand for Pizza in different localities and prices , Steve should compare the demand and prices of substitute in the market . This would help to determine how much his new customers could be willing to pay for the product , as well as their willingness to switch from their current product to pizza . Understanding that will enable Steve to develop competitive cost structures compared to competition . Price and income elasticity of pizza will largely demand on demographics of Steve 's customers . Since pizza is a consumer product and debut customers will most likely be the middle and upper class , both demand and price are destined to be completely inelastic , at least in the initial stages

The key to Steve 's success in the business is his recognition of the cultural and business practices between the United States and Czech which will enable him to adjust into the new environment . The new country of operation offers wide range of challenges and opportunities in pizza retailing business . It is thus up to Steve 's determination to use his experience in the business to wither through challenges in to successes in Czech Republic . Taking time in studying the market choosing locations with higher spending power , and taking time to understand regulatory framework in Czech should be build the cornerstone of his operations in this new territory

References

Hofstede , G (2003 . Geert Hofstede Cultural Dimensions Czech Republic Retrieved

March 17 , 2008 , from HYPERLINK "http /www .geert- " http /www .geert-

hofstede .com /hofstede_czech_republic .shtml

Reid , G (1993 . Small Business Enterprise : An Economic Analysis . New York

Routledge

World Bank (2003 . Czech Republic : Capital Market Review . Washington DC World

Bank Group

World Bank (2008 . Doing a Business 2008 Report . Retrieved March 17 2008 , from

HYPERLINK "http /www .doingbusiness .org /economyrankings http /www .doingbusiness .org /economyrankings PAGE

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The Cultural Challenges of Doing Business Overseas ...