Business Economics

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BA 529 FINAL EXAM

MAHESH REDDY MURAKA
BA 529
Final exam
Schiller International University
Dr. Harris

1. What is the greatest challenge to a company that decides to set up a branch in another nation?

Online auction site eBay is one of the world's best-known firms, boasting 157 million active buyers and reporting just shy of $18bn (£11.4bn) in revenues last year. Yet when it first tried to launch in China it failed. The difficulty of competing with local rivals meant that in 2006, a mere two years after entering China, it was forced to admit defeat and shut down its main website in the country. Instead it formed a joint venture with a local partner to help operate an online auction business in the country. Critics say it failed to recognise that having a strong US brand would not automatically translate to success in China.
And eBay is not the only firm to struggle with transferring a successful business model overseas. Tesco reportedly spent a decade preparing for the launch of its Fresh & Easy chain on the West coast of America, with its top executives even spending time living with Californian families to observe the way they lived and ate.
Yet six years after it opened, it announced it was pulling out - costing the firm a hefty £1.2bn.
Similarly one of the world's best known brands, US giant Starbucks, was forced to close almost three quarters of its shops in Australia just eight years after it opened them, after it struggled to win sales from local competitors.
There is also an important aspect that needs to be related to the process of internationalisation: Experience. The process of entering international markets by new ventures provides firms with knowledge that can be used to build additional value by the creation of skills (Barkema & Vermeulen, 1998; Ghoshal, 1987). According to Zahra et al. (2000) “New ventures competing in…...

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