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(b)    Discuss the effects of culture shock when assigning an employee to work in another country.

Culture shock is a psychological process that affects  people living abroad, characterized by homesickness,  irritability, confusion, depression etc.

(c)    Explain three (3) ways in which companies could minimize such failure.

1. Improve the selection process

-Establish criteria and standards

2. Provide intensive pre-departure and onsite training.

3. Offer effective compensation package

-need to consider all needs(family, housing, amenities)

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“Starbucks has been sparring with hiring American in its overseas stores as they believe that in the intermediate term, these businesses should be run by the locals”. Identify the staffing policy adopted by Starbucks, and the advantages and disadvantages of this policy. Also, do you agree that this is the best policy for Starbucks?

Starbucks used Polycentric Staffing (Individuals from host country manage operations abroad) which are company hiring host nationals to manage operations abroad.

Advantages

·       Responsibility on those knowing local business

·       Avoid expensive relocations from home nation

·       Less cultural “myopia”

·       More autonomy in decision making

Disadvantages

·       Potentially harm operations (Lose control/no integration)

·       Resemble a collection of national entities

·       Gap between host and home country managers (Poor integration may lead to miscommunication resulting in low work moral)

·       Limited opportunities for host nationals to gain experience outside own company (Host national would have more freedom in decision making)

I agree that this is the best policy for Starbucks because it avoid expensive relocations from home nation, less cultural “myopia” and more autonomy in decision making.
Locally hired managers know more about the kind of menu to come up with (Localized Menu)
Reduce cultural clash and in turn facilitate customer operations.
However, Starbucks should focus on training barista to make sure that whichever Starbucks they visit, they will get the same quality of their favourite beverage.

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Advantages of Geocentric Staffing-develop global managers who can adjust easily to any business environment  They are capable and are able to adapt to any environment easily, thus easier for them to cope with different environments
. The disadvantage of Geocentric Staffing -difficult with immigration law and policies They may be from another country and there are many rules to restrict foreigners from working for a top position in their company.
To hire such a capable staff, it would cost a lot of money for the company.

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Family Question 3

(a)    Explain in detail all the factors that could have contributed to expatriate failure.

1)      Cultural shock – The psychological process that affects people living abroad, characterised by homesickness, irritability, confusion and depression due to a cultural environment which is different from one’s own.

2)      having cultural "myopia" -  Language barrier – culture insensitivity during business dealings
Culturally myopia, do not understand taste and preference of the locals and adapted products or standardized products may not be popular in foreign country
3)      staffing may be incorrect as he may not perform as good in other country than their own country

4) Responsibility overload

5) Poor candidate selection

6)Family Stress

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(a)    Boeing produced 30 percent of the parts and components of the aircraft. Explain THREE benefits arising from a make decision to Boeing. (9 marks)

Lower cost – they do not need to pay a third party additional fees to produce

Greater control – raw materials, product design and production process

Protect proprietary technology

(b)   Boeing outsourced 70 percent of the parts and components to suppliers. Explain THREE benefits arising from the outsourcing decision to Boeing. (9 marks)

Lower cost – outsourcing to suppliers means suppliers have to compete to get costs low so they can supply Boeing, a huge company. By having suppliers compete to provide something, cost will be lowered

Lower risk – suppliers carry the risks as they are the producers of the goods and Boeing is just assembling it together. If Boeing purchases a certain quality and suppliers provide something subpar, it is the suppliers fault.

Greater flexibility – Boeing can easily change suppliers to cut costs and do not need to undergo huge changes in production to increase cost efficiency.

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Key factors in facilities location planning

Cost and availability of labor and management, raw materials and energy, infrastructure and component parts, political and legal, economic, cultural, others and technological.

a)      location economies

economic benefits derived from locating production activities in optimal locations.

b)      Centralized versus decentralization

Centralized = 1 location

Decentralized > 1 locations

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A company can decide to enter a foreign market using either contractual entry mode such as licensing, franchising, management contracts and turnkey projects or investment entry mode such as wholly owned subsidiaries and joint ventures.

(a)      Explain franchising with examples. (6 marks)

Franchising is an entry mode where the franchisee pays fees and royalties to use a company’s trademark and sell its product and services. It is a commonly used entry mode.
It has a high success rate in terms of entering foreign markets. Some examples would be Subway, Burger King and Charles and Keith.

(b)      Highlight THREE differences between franchising and licensing. (9 marks)

1)    Franchising starts of when the business has already proven to be able to make a profit and where their brands have regional recognition whereas licensing is where you pay for the use of intellectual property.

2)    Franchising has no say in how you’ll run your business because the franchiser does not retain control over the IP, it also retains control over how the franchise business is operated whereas for licensing, you are allowed to run your business however you see fit.

3)    Licensing does not provide you with any support like site selection, training, marketing or any of the other support systems you enjoy when you are part of a franchise system.

(c)       Elaborate on TWO advantages and TWO disadvantages associated with franchising from the perspective of the franchisers. (16 marks)

The two advantages are:

·      Capitalized Expansion – Expansion requires the investment of capital and resources that for many successful business owners is limited and‚ sometimes‚ difficult to raise. Franchising serves as a source for the capitalized expansion of a successful business. Rather than borrowing funds from lenders‚ franchisees invest their own funds to expand your business.

·      Continuing Revenue Streams – Successful franchisors benefit from continuing royalties that are‚ typically‚ based upon a percentage of franchisee gross sales and paid on a monthly basis.

The two disadvantages are:

·      Legal Regulation – Franchising is a regulated activity and requires compliance with federal and state franchise laws.  To successfully establish a franchise‚ franchisors are required to work with an experienced franchise lawyer to establish a solid blueprint for franchising.

·      Investment – Although franchising serves as a source for the capitalized expansion of your business (i.e.‚ franchisees invest in your expansion)‚ the estabblishment of a franchise system requires the investment of capital to cover legal fees and the cost of establishing a franchising infrastructure.

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Regional economic integration (REI) is whereby countries form trading blocs and establish agreements to either reduce or eliminate barriers to allow the free flow of products, people and capital. Discuss FOUR benefits of REI. (8 marks)

- There is trade creation. Integration should create new trade opportunities and deliver a wider selection of goods and services at a lower cost.

- There is greater consensus. Building consensus may be easier among a small group of countries than it is in larger groups, such as the World Trade Organisation.

- There will be political cooperation. Political cooperation may reduce the potential for military conflict among members.

- There will be creation of jobs. New employment opportunities can arise when people are allowed to relocate internationally for work or higher wages.