The Cultural Challenges of Doing Business Overseas - MMPBL/501 FORCES INFLUENCING BUSINESS IN THE 21ST CENTURY

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

Environmental Analysis MMPBL/501 FORCES INFLUENCING BUSINESS IN THE 21ST CENTURY

Verizon Wireless is a company that operates within the telecommunications and technology industry. Regardless of the current economic condition, Verizon Wireless, a joint venture of Verizon Communication and Vodafone, has had a continued rise in subscribers since 2001. Some of the macroeconomic variables that may affect the industry as a whole are unemployment/employment, personal disposable income, inflation and the stock market. Each of these variables has an influence in the future of the telecommunications industry.

Verizon Wireless, just like its competition, is constantly changing. They are adapting to the new technologies that develop and the demands of their customers as soon as they can. Although the unemployment rate has fluctuated between 6% and 4.5% from 2003 to 2007 (U.S. Department of Labor, n.d.) there were periods that were higher but did not influence the rise in subscribers to Verizon Wireless. In the below graph, it illustrates how Verizon Wireless still had an increase in subscribers although there were times when unemployment reached a high of 6 %.

According to the graph, from 2001 to 2007 the number of people who subscribed to Verizon Wireless increased from 29.4 million in 2001 to 65.7 million in 2007. During this time the unemployment rate reached a peak of 6 % and a low of 4.6% which did not hinder Verizon Wireless from attaining new subscribers.

Disposable income “is personal income less personal taxes,” (McConnell & Brue, 2006, p.121) which people can use as they choose by either spending or saving. The Economist Intelligence Unit Limited (2009) Web site has personal disposable income rising in conjunction with the median income going up according to the U.S. Census Bureau. The graph below shows the average disposable income and average income rising over the same period as subscribers and unemployment rates. While incomes are increasing people are choosing to limit their bills by switching from wired phone lines and wireless to wireless only.

“The mega-trends in telecommunications - the shifts from analog to digital technology, from wired to wireless platforms, and from narrowband to broadband services – have fundamentally changed the way people communicate.” (Verizon Communications, 2008). A change in how many people have wireless only service has helped Verizon Wireless increase their subscribers. By the end of 2008 one in five American households may well not have a home phone line according to a The Nielsen Company (2008). “At the end of 2007, 16.3 percent of U.S. households had abandoned their landline phone for their wireless phone, but by the end of June 2008, just 6 months later, that number had increased to 17.1 percent,” (The Nielsen Company, 2008).

Although incomes have been rising, consumers are going wireless only. In the graph below it compares households that have both landline and wireless, only landline and only wireless. The trend to go wireless has been growing at a very fast pace. It jumped from 3.2% to 13.6% in five years and is projected to jump to 20% by 2012 according to Verizon Communications (2008).

The telecommunications industry has many opportunities to expand their business as technology changes everyday. By developing new ways to connect to people, the challenges of marketing to customers and keeping them have also evolved. Verizon Wireless has used to its advantage that “49% of Americans are starting to see cell phones as a necessity,” (Morin & Taylor, 2009). Many of the plans offered include long-distance so there is a cutback in costs to keep in contact with friends and family out of the local area. Another attraction Verizon Wireless offers are the new phones that come out constantly and with those come contracts. This will continuously create profits for the determined amount of time plus the cost of the new phones.

Research costs into new phones, software, marketing and customer service can initially be high but projected sales, demand for carrier specific items and keeping loyal customers more than makes up for the initial cost. All these challenges help stimulate the economy by training people, increasing sales there fore increasing profit that can be redistributed.

Competition is a challenge that all wireless companies face. In 2003, under a program called Local Number Portability, wireless customers were able to change carriers and keep their existing wireless phone numbers. Verizon Wireless has faced this battled by providing one of the most reliable networks in the United States and by providing broadband network capabilities. All these new services and maintenance to the network needs to be supported by employing more workers which helps reduce the unemployment rate. Verizon Wireless can contribute to the economy by employing people and by providing consumers what they want at a reasonable price.

Although the unemployment rate has varied, Verizon Wireless customers have increased at a steady rate. Part of this could be the increase in disposable income or the move to go from a wired-line to a wireless line. Many macroeconomic variables like unemployment, disposable income, inflation and stock market have an affect on the telecommunication industry. Competition and technology are some of the challenges faced by Verizon Wireless. There are several ways for them to combat this by providing a superior product, many options and a reliable network. The more the company needs to rise to the challenge of competition, the more employees will be needed to meet this challenge.

References

DeNavas-Walt, C., Proctor, B.D. & Smith, J.C. (2008). Income, Poverty, and Health Insurance Coverage in the United States: 2007. US Census Bureau. Retrieved July 31, 2009, from http://www.census.gov/prod/2008pubs/p60-235.pdf

The Economist Intelligence Unit Limited. (2009). Data Tool. Retrieved August 2, 2009, from http://data.eiu.com/EIUTableView.aspx/personal_disposable_income

McConnell, C.R. & Brue, S.L. (2005). Economics. Principles, problems, and policies (16^th Ed). New York: The McGraw-Hill Companies.

Morin, R. (2009). Luxury or Necessity? The Public Makes a U-Turn. Pew Research Center. Retrieved August 1, 2009, from http://pewsocialtrends.org/pubs/733/luxury-necessity-recession-era-reevaluations

The Nielsen Company. (2008). Call My Cell: Wireless substitution in the United States. Retrieved August 2, 2009, from http://www.nielsenmobile.com/documents/WirelessSubstitution.pdf

United States Department of Labor. (n.d.). Household Data Annual Averages. Retrieved August 1, 2009, from ftp://ftp.bls.gov/pub/special.requests/lf/aat1.txt

Verizon Communications. (2008). . Retrieved August 1, 2009, from http://investor.verizon.com/profile/industry/.

Wong, Wailin. (2008). USA telecoms: Cellphones to ring up sales even in time of recession. ViewsWire. Retrieved August 1, 2009, from http://viewswire.eiu.com/article1483133133.html?pubtypeId=1162462501&text=cell%20phones

Macroeconomic Impact MMPBL/501 FORCES INFLUENCING BUSINESS IN THE 21ST CENTURY

Macroeconomic Impact

The Federal Reserve Board has three many tools that is uses to control the supply of money in the United States. These three tools are the reserve ratio, the discount rate and open-market operations. When the Fed uses thee tools they influence the money supply and affect macroeconomic factors. I will discuss how money is created and when it needs to be increased or decreased in supply. I will also discuss how the three tools the Fed uses affects our economy. I will discuss to specific monetary policies that combined that will achieve a balance between economic growth, low inflation and a reasonable rate of unemployment.

Current money is based on how money first came in to play. According to Hayne, Boettke & Prychitko, people did not like having to barter with gold and silver and other metals because it was hard to regulate the quality of the product as well as the fineness of it. Merchants and wealthy people who owned bars of gold and silver started looking for a place that would be safe to store them and in doing so found goldsmiths to be the solution. The goldsmiths issues receipts when securing the items and this was perhaps the first form of paper money.

“At this point the goldsmiths-embryonic bankers-used 100 percent reserve system; they backed their circulating paper money receipts fully with the gold that they held ‘in reserve’ in their vaults,” (McConnell & Brue, 2005, p.253).

Eventually goldsmiths realized that paper receipts could be issued in excess of the amount of gold held according to McConnell and Brue. Goldsmiths put into circulations these receipts by making interest-earning loans to merchants, producers and consumers. Everyone accepted loans in the form of gold receipts as a medium of exchange in the marketplace.

The basic condition of money is that everyone has to accept the form of currency as a medium of exchange without this acceptance no matter what anything is printed on or how it is printed it will have no value. What is currently in use today as the medium of exchange consists almost entirely of the IOUs of trusted institutions (Heyne, Boettke & Prychitko, 2006, p.400). The Federal Reserves notes are the combination of coins and paper money that has become the trusted medium of exchange.

There are three ways the Federal Reserve can control the money supply: changing the required reserve ratio, changing the discount rate and engaging in open market operations. The required reserve ratio establishes a link between the reserves of the commercial bank and the deposits (money) that commercial banks are allowed to create. If the Fed wants to increase the money supply, the Fed can decrease the required reserve ratio, which allows the banks to create more deposits by making loans.

The discount rate is the interest rate the Fed charges banks for short –term loans according to Heyne, Boettke & Prichtko. If a bank borrows from the Fed it leads to an increase in the money supply. If the discount rate is high, it will cost more to borrow money, which then leads banks to do less borrowing.

When the Fed purchases or sells government securities in the open market it is called open market operations. This is a tool that is used to increase or decrease the amount of reserves in the system and in turn the money supply. This tool is the most significant tool the Fed can use to control the supply of money. It can be used with a certain amount of accuracy, is flexible and is fairly predictable. Through the open market operations, the Fed can have the money supply be whatever value it wants.

How Money is created

The Fed can increase the supply of money by using its three most powerful tools and by doing this they are creating money. When expansionary monetary policy is in effect, decreasing the reserve ratio will give commercial banks the ability to lend to more customers. When the Fed decides to lower the discount rate, the Federal Reserve Bank will lend more money to the commercial bank which will increase the money supply by increasing the amount commercial banks have in reserve. This allows banks to have more available funds for lending. When the economy is showing signs of recession and unemployment, the Fed can buy securities to increase commercial bank reserves. The open-market operation is the most common tool used through the sale and purchase of government bonds.

“In addition, the Federal Reserve can use "moral suasion" by pressuring certain market participants to act in a particular manner or through "open mouth operations" where the Fed states what goal it will be focusing on in hopes of getting the market to build these future monetary actions into expectations and thus increase the effectiveness of the current monetary actions,” (Keefe, 2008).

Recommended Monetary Policy

When determining the levels of money supply the Fed uses the Monetary policy which is “the process by which the government, central bank, or monetary authority of a country controls (i) the supply of money, (ii) availability of money, and (iii) cost of money or rate of interest, in order to attain a set of objectives oriented towards the growth and stability of the economy,” (Wikipedia, n.d.). According to McConnell and Brue, the advantages over fiscal policy are the speed and flexibility, and the isolation from political pressure. When the Fed uses the open-market operation to sell or purchase government securities daily to affect the money supply and interest rates, its affects are felt immediately. When adjusting a combination of discount rates and reserve requirements, the Federal Reserve Bank can influence how the monetary policy is used to achieve a reasonable balance between inflation and economic growth. During a recession, like in 1990s, using the Easy Money Policy would be a good way to try to jump-start the economy. The drawback in using this policy is that it can create too much money and spending. When this happens it can lead to inflation which needs to be curbed by the Fed who would reduce reserves in the banking system by raising interest rates (McConnell & Brue, 2005, p. 281). The Tight Money Policy incorporates the increase in interest rates with raising the discount rate and selling securities to decrease spending and control inflation. This two policies used correctly can help achieve an environment with a stable economy.

Economics for Managerial Decision Making

In the Monetary Policy simulation provided by the University of Phoenix (2009), scenarios were presented to students in regard to monetary policy. The simulation put a student in the position as the Chairman of the FED and required that person to make decisions with the tools available to the FED to control the supply of money. By using the tools the student gets to see how they affect the Real Gross Domestic Product (Real GDP), the Inflation Rate and the Unemployment Rate. These are the three main macro-economic indicators that can be affected by the money supply. In the one scenario the economy is in a slump, industrial production is slow and unemployment seems to be rising. Using all three tools available, I did not touch the Discount Rate (DR) and Federal Funds Rate (FFR) spread, decreased the Reserve Ratio to 9.1 and sold $500 million government securities in the Open-Market. The results of my choices were an increase in the Real GDP to 6.59% from 2.54%, inflation rose from 4.4% to 8.15% and unemployment decreased from 7.25% to 6.21%. By selling the securities, the supply of money went up which also increased inflation. When the Real GDP increases the usual result is a decrease in unemployment which is what happened in my scenario. This simulation made it possible to see how the monetary policy affects the economy and how the FED controls the supply of money through its three major tools.

Conclusion

The required reserve ration, the discount rate and the open-market operations are the three tools of monetary policy that the FED uses to control the supply of money. A combination of these tools will be used during a recession or growth through either an expansionary monetary policy or contractionary monetary policy. These policies will influence the commercial banks and anyone else who can create money. Banks will have more flexibility to lend money when the FED lowers the required reserve ratio also making them more willing to do so. When lowering the discount rate, the FED is allowing commercial banks to borrow more from the Federal Reserve Bank which increases the availability of money for lending. The open-market where government securities are bought and sold is the most common tool used and increases commercial bank reserves. This tool is used daily through the stock market. For the Fed to be able to act quickly in response to a combination of issues or individual issues like inflation, unemployment and economic growth, the monetary policy is policy that is used.

References

Heyne, P., Boettke, P. K. & Prychitko, D. L. (2006). The economic way of thinking (11^th Ed). Upper Saddle River, New Jersey: Prentice Hall.

Keefe, T. (2008). How much influence does the Fed have?. Investopedia.com. Retrieved Month Day, Year, from http://www.investopedia.com/articles/stocks/08/monetary-policy.asp

McConnell, C.R. & Brue, S.L. (2005). Economics. Principles, problems, and policies (16^th Ed). New York: The McGraw-Hill Companies.

Wikipedia. (n.d.). Monetary Policy. Retrieved July 29, 2009, from http://en.wikipedia.org/wiki/Monetary_policy

Yikes it's been a while

This wont be long either. Have lots going on. My son starts school on Monday, 1st grade, wow time flies. And we are going to a Def Leppard concert tonight in Raleigh so that of course means tomorrow we have to hit Chapel Hill.

Home Depot Issue resolved

Finally, everything has been resolved with my countertop from Home Depot.  I finally have the two pieces I need in the sizes I need.  I also received a delivery refund from Home Depot and was able to pick it up from them.  I was so glad I did not have to deal with the delivery people again. Now I just have to figure out how to install them or get someone else to do it.

Vacation Over :(

It’s definitely been a while since I wrote on here but that’s what happens when you combine vacation with starting on you Masters degree.

It seems like the month really flew by and it’s hard to believe class is done.  Well almost I have not quiet finished my paper yet so technically it’s not done yet since the work isn’t finished but class is.  The paper is very interesting and maybe if I had been at home this would have been done on time and then there would be no issues but spending my whole vacation doing assignments and not being able to relax and enjoy my family wasn’t cutting it.  I didn’t spend lots of cash on two tickets to Germany and save all my vacation time so I wouldn’t enjoy my time.  Well my lesson is learned, note to self, next time take school break when going on vacation or else it is not a real vacation.

Let’s up date, I have not heard from Home depot after emailing Cliff about the counter top people continuously trying to deliver the counter top while I was on vacation.  That was very stressful and really uncalled for I specifically told them I would not be available to take delivery until after the25 of June.  Since the email there have been no more unannounced delivery attempts but I also have not heard from Home Depot in any form so I have no clue where things stand at this moment.

I think next time I will also avoid checking my voicemail while away, it just brings up stressful situation that I can’t handle as I’m not there in person.

After the zoo we kind of just hung out as a family, we went to our local zoo and to Pirmasens for a hands on type how things work museum and then K went off to computer camp for a week which brought much joy to all of us.

I even was able to swing a trip or two to the spa ok maybe more like 5 or 6 trips but I did need some me time somewhere in this month long vacation

We of course went up to our Landstuhl castle “Burg Nanstein” and even took Kristen and Carl.

I was able to see Kristen and even Jen a couple of time, which was nice.  I really miss our time together at the “Palace”.  We went to visit Kristen and Carl in Heidelberg which a lot of fun.  They took us to a special event Heidelberg holds 3 times year to re-enact when the French attacked the Heidelberg castle and set on fire.  They light up the castle to make it look like it’s on fire and then they have fireworks afterwards.  We watched all this from downtown Heidelberg.  The next day we went to the Heidelberg castle to stroll around there some.  Then we went to Speyer to go eat at a Mexican restaurant, which of course wasn’t open yet.  That was our second attempt to go to a restaurant that wasn’t open.

During this whole time I was hoping to try and get a job over in Germany but no such luck so far.  I really want to move back home even if it is just for a few years.  I am also trying to get to Korea or Japan.  We’ll see if anything pans out, I wont ….

 

*****Side note *****

Ok completely off topic and it really is ticking me off since I am sitting here with no choice but look at a big breast sticking out of a shirt.  This lady two seats ahead of us to the left, is standing facing everyone on the plane breast-feeding her child.  While I have no issues with breastfeeding in public most people are courteous enough o others and at least are discreet about it.

Now that that has completely sidetracked me, I may have to end my current blog now and try to get back to it.

I will post this as is once I get off the plane and will start a new blog when I can get my thoughts together besides I am hoping we are landing soon but probably just wishful thinking.

 

DrumTV on the News!

AFN Balkan Aircheck

Blues Festival - News Feature story

Really Home Depot has it come to this

Here I am trying to enjoy my vacation in wonderful Germany with my family, thinking that finally everything has been settled with my coutnertop from Home Depot and it should be waiting for me once I return. Right?
Wrong, although I mentioned several times in my meeting with Home Depot that I would not be able to accept delivery of my countertop because I would not be available, they have (well not home depot but their sub-contractor) attempted to deliver the countertop a few times already. I even received a phone message from the delivery guy that he was at the house and no one was there. Then I received another message from the delivery guy saying he was trying to deliver the countertop. First off this company has a habit of just showing up without calling before hand to deliver. On one occassion I was in a meeting and could not leave on the second occassion I had to take time off work to meet them at the house, only to find out the countertop was the wrong size.
So here we are, they are trying to deliver again without calling AND home depot obvisouly forgot to mention that I would not be able to take delivery until later on. It went even so far that Home Depot called me saying that this other company attempted to deliver the countertop but they couldn't reach me and they just wanted to let me know that they would be trying again on 9 June. Hello I will not be there.
I have even emailed Cliff (the Home Depot manager type) to remind him about the fact that I had told them in the meeting I would not be able to take deliver during specific dates. He has not yet emailed me back so I am not pleased.
This is not the type of thing I want to be thinking about on my vacation.
Ok that's it, I hope to not have to mention this issue again.