Write 1-2 page answer to Exercise 2, Chapter 8, and submit your answer to Blackboard by Mar 30, Sat. Please also post on the discussion
forum #11 by Mar 31, Thu, to discuss your answer with the class.
This is an individual assignment, not a group assignment. You can use either Jack in the Box or other fast food chain to do this exercise.
For Question 1, choose an intemational location(s), you can choose one or two countries as your target location for expansion, then look up
information about the macro/general environment such as GDP and inflation from the references listed below. | recommend using CIA World Factbook
and Wikipedia to look up country information. There are also rankings of political risks, corruption, etc. Transparency International is a good source.
EIU (the Economist Intelligence Unit, www.eiu.com ) and Euromoney (https:/Awww.euromoney.com/research-and-awards/surveys-and-awards/country-
tisk-survey ) also provide country profile and political risk ranking but require registration and subscription.
For a fast food company, you may want to consider the countries with a large and relatively affluent population and a stable and growing economy, i.e.
large GDP, per capital GDP, healthy growth rate, relative even income distribution (not-too-high Gini Index, OECD average pre-tax is 0.46, US is 0.49),
low inflation, low political risks, and not-too-fierce competition (within industry rivalry).
- CIA World Factbook on country profile (external analysis on general environment of the country):
Economic indicators related to market potential: GDP, per capita GDP, GDP growth rate, Gini Index (income distribution), unemployment rate;
Population indicators related to market potential: total population, growth rate, age structure;
Govemment/Political factors related to political risks: democracy or not, number of political parties;
Economic indicators related to economic risks (currency crisis or depreciation): inflation rate, current account deficit (trade deficit) and the ratio to GDP,
public debt as a percentage of GDP
- Transparency International:
Corruption Perception Index (corruption ranking of countries’ political risks)
Or, Heritage Foundation’s country ranking in “Economic Freedom”:
http:/Awww. heritage. org/index/ranking
For Question 2, choice of entry mode, you should base your choice on the results from Question 1. If your target market has low political risk and low
economic risk, then you can choose licensing/ranchising/joint venture/wholly-owned subsidiaries, or a combination of these, such as setting up a joint-
venture with a local company as the master franchisee and then set up franchising network around the joint-venture (as Starbucks did in some
overseas market); if both risks are high, your choice will be tipped toward non-equity options, i.e. licensing/ranchising. But if only political risk is high,
and economic risk is low, you may want to consider joint venture again, because a local partner can offer protection or knowledge to navigate the
political system in the host country.