It can be challenging for an American company to be successful overseas. When attempting to go overseas with a bushiness venture they have to take some risks when making business decisions. The franchisor for Chicago Style pizza, Steve Kafka, is an American of Czech origin and he has decided to try his hand at expanding his business to the Czech Republic. When he first became a franchisor it was a risky decision and he had to overcome a great deal of difficulties. Kafka anticipates these same kinds of problems when he opens his new location in the Czech Republic. He was born in the United States but has family and friends in the Czech Republic and he speaks fluent Czech. Kafka has visited the Czech Republic several times, which has helped him understand the people and the culture. For this business venture to be successful Kafka has to take into consideration cultural differences and evaluate how these will affect the business decisions he must make. Kafka has to also become familiar with any trade barriers he might have with the Czech Republic and how to deal with the macroeconomics and microeconomics realities that will affect how he prices his pizzas.
Kafka may be familiar with the Czech culture but he has to keep in mind that there are still differences in handling business in the U.S. versus the Czech Republic. Another thing that he has to keep in mind is that although he is going global that does not mean that it will be just like in the U.S. Taking the environment and capitalizing on it when franchising into a foreign country can be a successful way to enter new markets. One thing that Kafka should take into consideration is keeping operating expenses down. He can do this by using the local markets in the Czech Republic for ingredients instead of having to import them. By not importing these items, he is minimizing the risk in one area that could fail. Kafka will have to take into consideration how the Czech people like their dining environment compared to Americans. In Europe, dining is a more social event and needs more of a relaxing environment whereas in America, most like to get in and out of a place so the actual environment isn’t as important.
When evaluating the Czech business environment, Kafka should take into consideration Hofstede’s four primary dimensions (Hodgetts, Luthans and Doh, 2005). In order for him to ease successfully into the Czech Republic business environment, it will be helpful for Kafka to determine which category the Czech Republic fits into. The best way for Kafka to accomplish this is to use his personal experiences, discussions with friends and family there as well as researching the country.
The power distance of the Czech Republic is 57(Clearly Cultural, n.d.). In the United States the power distance is 40, this can be good for Kafka because he is the person in the position of power. If he is a good leader, his employees will be more willing to be subservient than in the United States. The uncertainty avoidance in the Czech Republic is 74 (Clearly Cultural, n.d.) which is much higher that the U.S.’s 47. This can affect Kafka because the Czech employees will expect the expansion to be successful and that they will have jobs in the future. A benefit for him is that the employees in the Czech Republic will accept lower wages. In regard to individualism, the Czech Republic is in them idle with an index of 58. Kafka will have to make a big adjustment here, as the U.S. index is 91. This is where Kafka has an advantage because he already knows the Czech culture is a tight knit type of people and this is how he was raised. The masculinity index is around a 57 (Clearly Cultural), which is lower than the U.S. and shows that in the Czech Republic women are considered to be almost equal where powerful, successful women are respected.
Franchising in a new country will always have some kind of barriers. Although the Czech Republic is a country where it is not expensive to enter the business trade, there are trade barriers, court proceedings and complicated tax legislations to consider. The European Union has specific rules and policies that must be followed. According to the U.S. Commercial Service 2008, Kafka has to take into consideration the value-added tax of 9% that is charged for select goods such as food and services and the 19% for all other goods both domestic and foreign sold in the Czech Republic Another tax he has to consider is the excise tax which is “…imposed on the following goods produced or imported into the Czech Republic: fuels and lubricants, tobacco products, beer, wine and liquor. The rate is determined by the type and quantity of the product and must be paid within ten days after being notified by the Customs Office of the tax amount due,” (US Commercial Service, 2008).
Cost structure is an important part of business planning when considering franchising. IN the Czech Republic, Kafka can take advantage of cheap labor. According to the Czech Republic website, now is a good time to start franchising because the younger generation is adopting more of a Western culture when it comes to eating out. Pizza is considered a treat because many people still do not go out as much as they do in the U.S. Kufka has to take this into consideration when deciding on a price for his pizza. It is the older generation that has the disposable income where as it is the younger generation that is more likely to eat out. Kafka should have introductory prices to attract all the customers for example, buy one slice get another slice half off with a free soda. He has to take into consideration that pizza is a very high elastic item and that if he charges too much no one will be interested in visiting his place.
When deciding to do business in a new country, many things need to be taken into consideration. The cultural differences will impact how business is done. Trade barriers and minimizing costs need to be taken into consideration. Although Kafka has a background that supports his knowledge of the Czech culture and people, it is advisable that he does research to make sure that he approaches this business venture in the right way. As long as Kafka incorporates his knowledge and the local community, his venture into franchising overseas should be successful.
References
Clearly Cultural. (n.d.). Making Sense of Cross Cultural Communication. Retrieved August 8, 2009, from http://www.clearlycultural.com/geert-hofstede-cultural-dimensions/power-distance-index/
CultureGrams. (2009). Czech Republic. Retrieved August 7, 2009, from http://online.culturegrams.com.ezproxy.apollolibrary.com/secure/world/world_country.php?contid=5&wmn=Europe&cid=41&cn=Czech_Republic
Czech Republic - The Official Website. (n.d.). Visit Czech Republic. Retrieved August 8, 2009, from http://www.czech.cz/en/economy-business-science
Hodgetts, R. M., Luthans, F., & Doh, J. P. (2005). International Management: Culture, Strategy, and Behavior (6th ed.). New York: The McGraw-Hill Companies.
US Commerical Service. (2008). Czech Republic: Trade Regulations, Customs and Standards. Retrieved August 6, 2009, from http://www.buyusa.gov/czechrepublic/en/118.html
No comments:
Post a Comment