The Challenges of Doing Business Overseas - Assignment Example

Running Head: DOING BUSINESS OVERSEAS The Challenges of Doing Business Overseas [Please Insert Here] of Department, ] Oct 2009 Background: Steve Kafka, an American of Czech origin and a franchisor for Chicago Style Pizza, has decided to expand his business into the Czech Republic. He knows it is a risky decision; when he became a franchisor, he had to overcome a lot of difficulties. Steve anticipates he will face some of these difficulties again at the new location in Prague, Czech Republic. Although he was born in the United States, he has family and friends in the Czech, speaks Czech fluently, and has visited the country of his origin several times. In other words, he knows the people and the culture. Or does he Q.1 Are there major differences and incompatibilities between the U.S. and Czech cultures Will these differences create major business risks for Steve How might Steve mitigate these risks There is a strong economic, political and cultural relationship between the U.S. and Czech Republic, especially reinforced after 1993 ("U.S. Department of State," July 2009). Since Steve proposes to set up Pizza outlets at Czech, he must address issues related to their eating habits, and factors that would affect the customer services:- Czechs are primarily meat eaters; pork, beef and chicken based dishes are popular. Goose, rabbit, duck are found in many common dishes. Many of Europe's popular cakes and pastries have a Czech origin. From a marketing perspective, Chicago style Pizza would have to be positioned against the Czech's popular fried cheese. Whilst the U.S. accept humor (sometimes with sarcasm), and encourage innovation; Czechs are more modest, value education, frown on status, and its outward representation (Lukes, 2007). Both the U.S. and Czech citizens are sticklers of time. The Czechs in particular, would seek promptness in service, and expect cozy ambience in the restaurant. Eating out in restaurants is not very prevalent in Czech, although this situation is fast changing. The new generation Czechs are quickly adapting to the western culture. Czechs generally prefer to spend their weekends in their cottages, or summer houses. The cultural differences between U.S. and Czechs are addressable, and should not unduly hamper Steve's business prospects. As a marketing strategy, Steve may wish to explore a few possibilities, such as, to provide: Combo flavors - Chicago style pizza with Czech fried cheese. Differential discount pricing for kids and "generation-next", targeting young adults. Weekend packages for families with ambience as near as Czech cottages and summer houses. Sober, but caring hospitality. Q.2 What comparative advantages exist in the Czech Can Steve take advantage of these The primary economical advantage to Steve would be the lower wage expectations by Czechs. Hofstede's four dimension indices (http://www.geert-hofstede.com/) can be used to evaluate the business climate at Czech:- Power Distance Index (PDI): This represents the extent to which inequality in society is endorsed by people. The PDI of Czech is 57, as against the U.S. which is 40. Steve can therefore use his positional power, and expect Czech employees to be more subservient than the U.S. counterparts. Individualism (IDV): This represents the extent to which individuals are knit into tight groups, including extended family. A lower index indicates tight grouping, whereas, higher index reflects individualism. As against Czechs index of 58, the U.S. stands at 91. This means that relatively Czechs are more group (as well as, family) oriented. Steve can use this fact to market group discount pricing strategies on eateries. Steve should also use the advantage of knowing Czech culture for better market strategy. Masculinity (MAS): A higher index means assertive (masculine) behavior versus a lower index which indicates caring (feminine) traits. As against Czechs index of 57, the U.S. stands at 62. Although this is a marginal difference, yet it does indicate that Czechs would expect a more caring disposition, than assertion, in business values. Steve would need to make suitable adjustment in dealing with people in Czech. Uncertainty Avoidance Index (UAI): This index represents society's tolerance for uncertainty and ambiguity. A higher index would mean lesser tolerance to uncertainty. Czech's index is at 74, as against the U.S. figure of 46. Steve should appreciate that Czech stakeholders would seek more certainty in success, and continuance of business, than in the U.S. who are more risk taking. Q.3 What kind of trade barriers would Steve need to be aware of Czech Republic is often seen as a rising star in terms of business possibilities and growth. After Czech accession to EU in 2004, trade barriers have reduced, and financial sector largely privatized. After its accession to EU, trade has to follow the EU norms. Since there would be no tariff preferences for Czech when trading with the U.S., the prices of U.S. goods would be higher. Although there is nothing much that Steve can do regarding trading practices regulations, he certainly can leverage the advantage by trading goods in the EU block. Q.4 How would Steve assess the demand for pizza at different prices How would he assess the cost structure he would face What could Steve infer about the price and income elasticity's of pizza Steve would do well to obtain available relevant survey reports on eating habits of Czechs, especially, those related to snack food. He could also take snap polls across the street, near restaurants serving pizzas, to establish eating preferences, and demand. Steve could also undertake surveys to establish the prices of pizzas from across the street counters, to more posh restaurants - stand-alone, and those annexed with shopping malls. He may accordingly strategize on the pizza offerings, flavors and quality. The pricing strategy can target kids, and young adults, for preferential discount pricing to boost up sales. Bulk quantity discounts could be considered for party, or festive time, sales. To assess the cost structure, Steve would have to consider the cost of raw ingredients, labor, rental and incidental expenses, branding, and overhead costs. In doing so, Steve must look at comparative pizza prices at other restaurants and establish suitable trade-off between pizza offerings versus acceptable brand quality. Armed with the unit cost for pizza varieties, and estimated market demand and market growth, Steve could work out income scenario for different conditions: optimistic, pessimistic and realistic. He could also formulate different business plans for market growth and forecast demand to study business viability and sustainability. References Luke, D. (2007). Czech Values, Attitudes and Habits. Retrieved from: http://bohemica.com/czech_cultural_values/czech_values_attitudes_and_habits U.S. Department of State. (July 2009). Background Note: Czech Republic. Available at: http://www.state.gov/r/pa/ei/bgn/3237.htm Read More