The three questions behind most assignments
Most international business assignment briefs reduce to three linked questions: why go abroad at all, which country to choose, and how to enter it. A clear answer takes each in turn and lets the earlier answers shape the later ones.
| Question | Frameworks that help |
|---|---|
| Why internationalize? | Market seeking, resource seeking, efficiency seeking, strategic asset seeking; the OLI paradigm |
| Where? | PESTLE, CAGE distance, Hofstede's dimensions, a weighted country scoring matrix |
| How? | Entry mode comparison, the Uppsala model, risk and control trade-offs |
| With what strategy? | The integration and responsiveness grid |
Assignments are often set as a report to a company's board recommending a market and an entry mode. Treat the reader as a busy executive: state your recommendation early, then support it.
Measuring distance: CAGE and Hofstede
Pankaj Ghemawat's CAGE framework argues that markets differ along four kinds of distance, and that distance usually matters more than raw market size.
| Distance | Examples | Hits hardest |
|---|---|---|
| Cultural | Language, religion, social norms, consumer tastes | Products with high cultural content, such as food or media |
| Administrative | Trade agreements, currency, legal system, political ties | Regulated industries and government buyers |
| Geographic | Physical distance, time zones, transport links, climate | Heavy, fragile or perishable goods |
| Economic | Income levels, cost of labor, infrastructure | Products priced for a particular income level |
For cultural distance, Hofstede's model scores countries on six dimensions: power distance, individualism, masculinity, uncertainty avoidance, long-term orientation and indulgence. Use the scores to predict specific issues, such as how a flat management style might be received in a high power distance culture, and acknowledge the main criticism that national averages hide large differences within countries.
A worked example: weighted country scoring
A weighted scoring matrix turns your PESTLE and CAGE findings into a transparent comparison. Choose criteria, weight them by importance (weights sum to 1), score each country and multiply.
Choosing a first export market (hypothetical company and scores, 1 = poor, 5 = excellent)
| Criterion | Country X | Country Y | Country Z | Weight |
|---|---|---|---|---|
| Market size and growth | 4 (1.20) | 5 (1.50) | 3 (0.90) | 0.30 |
| Political and regulatory risk | 3 (0.75) | 2 (0.50) | 4 (1.00) | 0.25 |
| Cost of operating | 3 (0.60) | 2 (0.40) | 4 (0.80) | 0.20 |
| Cultural and administrative closeness | 2 (0.50) | 3 (0.75) | 4 (1.00) | 0.25 |
| Weighted total | 3.05 | 3.15 | 3.70 | 1.00 |
Country Y has the largest market, but Country Z scores highest overall (0.90 + 1.00 + 0.80 + 1.00 = 3.70) because it is lower risk, cheaper and closer.
Test how sensitive the result is. If market size were weighted at 0.45 and closeness at 0.10, would Country Y win? Showing that check, and justifying your weights from the company's situation, makes the matrix far more convincing than the totals alone.
Choosing an entry mode
| Entry mode | Control | Investment and risk | Suits |
|---|---|---|---|
| Exporting | Low over the foreign market | Low | Testing demand; early stages |
| Licensing | Low | Low; risk of creating a competitor | Technology or brand owners avoiding investment |
| Franchising | Moderate through the franchise agreement | Low to moderate | Service businesses with a replicable format |
| Joint venture | Shared | Moderate; partner conflict possible | Markets needing local knowledge or where law requires a local partner |
| Acquisition | High | High; integration risk | Fast entry with existing customers and staff |
| Greenfield subsidiary | Highest | Highest; slowest | Protecting technology and building a company's own way of working |
Franchising and licensing questions often ask what the owner earns. If a franchisee's outlets sell $2,000,000 a year and the agreement sets a 6 percent royalty, the franchisor receives 2,000,000 x 0.06 = $120,000 a year, plus any initial fee. Weigh that steady, low-risk income against the profit the company could earn running the outlets itself, and against the risk that a poorly run franchise damages the brand at home.
The Uppsala model suggests firms usually internationalize gradually, starting with nearby markets and low-commitment modes as they learn. Born-global firms, often digital, challenge that pattern, and pointing out the contrast is a good evaluation move.
Dunning's OLI paradigm explains when direct investment beats exporting or licensing: the firm needs an ownership advantage (such as technology or brand), a location advantage in the host country, and an internalization advantage that makes doing it in-house better than contracting it out.
Global strategy types
Bartlett and Ghoshal's framework places firms by two pressures: to cut costs through global integration and to adapt to local markets.
| Strategy | Integration pressure | Local responsiveness | How it works |
|---|---|---|---|
| International | Low | Low | Home-country products and know-how transferred abroad with little change |
| Multidomestic | Low | High | Each country unit adapts products and operates largely independently |
| Global | High | Low | Standardized products made where it is cheapest, managed centrally |
| Transnational | High | High | Efficiency and adaptation together, with knowledge flowing between units |
Recommend the strategy that fits the industry. Cement and consumer foods face strong local pressures, while semiconductors face intense cost pressure. Many real firms mix approaches by product line, which is worth saying.
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Order your international business paperCurrency risk: a worked example
Trading abroad exposes a company to exchange rate changes between agreeing a price and being paid. This is transaction exposure.
Pricing in euros (hypothetical)
A US exporter agrees to sell machinery to a German buyer for €50,000, payable in 90 days. When the contract is signed, the exchange rate is $1.10 per euro, so the sale is worth 50,000 x 1.10 = $55,000.
By the payment date the euro has weakened to $1.04. The exporter receives 50,000 x 1.04 = $52,000, a loss of $3,000 against expectations.
Had it locked in a 90-day forward rate of $1.08 at signing, it would receive 50,000 x 1.08 = $54,000 whatever happened to the spot rate. That costs $1,000 against the original spot value but removes the uncertainty, and it would also have given up any gain if the euro had strengthened.
Transaction exposure is not the only kind. Translation exposure affects how a foreign subsidiary's results look when converted into the parent's reporting currency, and economic exposure describes how a lasting currency shift changes a firm's competitiveness, for example when a strong home currency makes every export more expensive. Name the type you are discussing, because each calls for a different response.
Other responses include invoicing in dollars (moving the risk to the buyer), currency options, and natural hedging by matching costs and revenues in the same currency.
Trade barriers and the institutional environment
Governments shape international business through tariffs, quotas, local content rules, product standards and controls on foreign ownership. World Trade Organization rules and regional agreements limit some of these measures, so whether two countries share a trade agreement often changes the economics of entry.
How a tariff changes landed cost (hypothetical)
A company exports kitchen appliances with a customs value of $40 each, including shipping and insurance. The destination charges an ad valorem tariff of 12 percent on that value: 40 x 0.12 = $4.80 per unit. Landed cost becomes $44.80 before local distribution.
If the company wants to keep a 25 percent gross margin on the price it charges distributors, it must charge 44.80 / 0.75 = about $59.73, against $53.33 (40 / 0.75) with no tariff. A rival assembling locally, or exporting from a country with a free trade agreement, may undercut that price.
Tariffs are only part of the picture. Institutional voids, such as weak contract enforcement or unreliable payment systems, can matter more than duties. North's idea of institutions as the rules of the game, formal and informal, is a useful lens when a case describes corruption, red tape or sudden policy change.
Structuring a market entry report
- Executive summary The recommended country, entry mode and the main reason, in a few sentences.
- Company background The company's capabilities and why it is considering expansion now.
- Market screening Shortlist with PESTLE and CAGE, then the weighted matrix.
- Industry analysis Competition and customers in the chosen market.
- Entry mode Alternatives compared on control, cost, risk and speed.
- Risks and responses Political, currency, cultural and operational risks with mitigations.
- Implementation A phased timeline with milestones and measures.
Cite current data for every country figure, with the source and year. Out-of-date statistics quickly undermine a marker's confidence in the whole report.
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