BUS 2900-001
International Business Plan: Part II
Module 6
Selecting a Global Company Structure
1) STRATEGIC PLANNING (a, b, c, and d):
Develop strategic objectives that communicate MAJOR goals related to: (a) goods or services offered (include clear
product definition and key attributes), (b) target market and customer benefits (who is your target? What are the
key customer needs?), (c) enumerated financial aims (sales per year, market share after first year, etc.), (d) social
contributions. (Strategic goals are commonly stated in a manner that can be measured objectively, such as "Next
year, we will provide 30,000 households with 50 liters of clean drinking water per month at a slightly lower price
compared to the competition.")
a) In our first year of business, we will contract solar panel installation b) with 20 small businesses and 3 large
corporations . After our first year, once we have established our brand with businesses in Nanjing, we will extend
our market to individual households, with a goal of 500 household solar panel installations for our second year of
business along with our continued small business and corporation contracts and outreach. c) Our profits in the first
year will yield enough to cover 1/3 of the initial capital invested in this business opportunity, contributing to our
goal of making a profit within 5 years of starting our business. d) After our first six months in Nanjing, our focus will
extend to more thoroughly include a community education and outreach program to promote cleaner energy and
establish a presence in Nanjing.
2) ENTRY MODES:
Choose an appropriate entry mode that you will use in your target country. The list comes from chapter 12 in our
textbook. (exporting, turnkey projects, licensing, franchising, contract manufacturing, joint venture, and whollyowned subsidiaries.) Which will work best for your company? Keep in mind that you are doing business in that
country and so you may be importing something from another county (not exporting to your target country).
SUMMARY:
Due to the government and business laws and regulations in our choice of place, we have resolved to
begin a joint venture with another company in Nanjing. Working in a joint venture with another company will
reduce the risk of corruption within our business, seeing as we will be working alongside the Chinese instead of
merely competing with them. This is the best (and really only) choice for our business in China.
RESEARCH:
Wang, Shuang. "Determinants of MNCs' entry mode strategies in China." Uppsala Universitet. 26 May. 2011. Web.
Accessed on 11 Nov. 2014. <http://www.diva-portal.org/smash/get/diva2:426303/FULLTEXT01.pdf>.
3) STRATEGIC ALLIANCES:
Identify local companies of the country or international companies operating in the country that could be a
business partner AND briefly explain how you would utilize their expertise. These strategic alliances may be
suppliers, distributors, sales representatives, or consultants. (For example, a bottled water company might reach
an agreement to transport and sell its product through the existing distribution system or a soft drink company.)
Sun Tech was one of China's first solar energy companies and is now one of the world's largest solar panel
producers. In 2010, they opened a plant in Arizona penetrating the western market.1 If we could form a
distribution alliance with them, it could decrease our distribution costs as we would benefit from shared
distribution costs. As for product development, Sharp Solar would be a great partner because they are continuing
1
"Who We Are and What We Do." Panasia Information. n.d. Accessed on 4 Nov. 2014. Web. <http://www.suntechpower.com/menu/about-suntech.html>.
to break records in solar cell conversion efficiency.2 It is important, especially in the solar energy field, to
continually find better ways for technology to increase the energy input in the cells of the solar panel. Being in
China we have cheaper labor and materials so we can focus more time and energy on innovation to gain and
maintain a competitive edge.3
RESEARCH:
See Footnotes.
2
“First Solar is the Global Leader in Photovoltaic (PV) Solar Energy Solutions.” First Solar. n.d. Accessed on 4 Nov. 2014. Web.
<http://www.firstsolar.com/en/about-us>.
3
Ouma, Clint. "Top Energy Companies." Exploring Green Technology. n.d. Accessed on 4 Nov. 2014. Web.
<http://exploringgreentechnology.com/solar-energy/top-solar-energy-companies>
Module 7
Financing Sources for Global Business Operations
1) START-UP COSTS:
Identify expenses (with estimated amounts and a grand total) that would be necessary when starting this global
business enterprise. These expenses are NOT the on-going costs to produce the product (which we call operating
expenses and examine later), but just the one-time, fixed expenses to get started. Be sure to consider equipment,
buildings, vehicles, infrastructure improvements, training costs, consultants, legal fees and licenses.
SUMMARY:
Equipment
CNC Machines
Soldering Irons
Building
Manufacturing Site (2yr lease)
Outreach Offices (3 people, 2 yr lease)
Transportation
Delivery Truck
Travel for United States Workers
Training Costs
Solar Panel Accreditation (Initial Fee)
Consultant
Legal Fees12
Capital Verification Report
Company Seal
Organization Code Certification
Licenses
Minimum Capital Deposit
4
5 at $15,000/each = $75,0004
10 at $150/each= $1,5005
CN¥ 0.65/day/m2 for 4500 m2 = about $63.5 million6
CN¥ 1588/person/month = about $20,563.207
$19,9998
3 tickets at $700/ticket = $2,1009
$50010
CN¥ 107/hr for 10 hrs = about $174.4211
CN¥ 350 = about $57.00
CN¥ 300 = about $48.85
CN¥ 102 = about $16.61
CN¥ 30,000 = about $4,885.4313
Total: $63,624,844.51
"CNC Lathes & CNC Milling Machines, CNC Machine Center :." CNC Lathe, Cnc Metal Lathe, Cnc Mill, Cnc Milling, Cnc Milling
M at Bolton Hardware. N.p., n.d. Web. Accessed on 10 Oct. 2014. <http://www.boltonhardware.com/category/boltontools/metal-lathes-wood-lathes-milling-machines/cnc-lathes-cnc-milling-machines-cncmachinecenter/?gclid=Cj0KEQjwh96hBRCnsefbvZrKrpcBEiQAF7oMdKwNoPCrJ0tmxTVeQOlkMjFRuE65Y0uJx8cYFquMjzMaAoha
8P8HAQ>
5 Wholesale Electronics. Wholesale Electronics, n.d. Web. Accessed on 10 Oct. 2014.
<http://www.weisd.com/test/WEISD_TBL_view.php?editid1=WELWPA2>
6 Nanjing Longtan Logistics Base. "4500 Sqm Warehouse for Rent." RightSite.Asia. N.p., 22 June 2010. Web. Accessed on 10
Oct. 2014. <http://rightsite.asia/en/property-listing/4500-sqm-warehouse-no1in-bond-rent-nanjing>.
7 Dixon, Mark. "Thanks for Asking about Regus Offices in Nanjing." Message to the author. Accessed on 23 Oct. 2014.
8 "Alibaba.com." Chengli Special Automobile Co., Ltd. N.p., n.d. Web. Accessed on 30 Oct. 2014.
<http://clwtruck.en.alibaba.com/>.
9 "KAYAK - Flight, Hotel and Car Rental Search." KAYAK. N.p., n.d. Web. Accessed on 30 Oct. 2014. <http://www.kayak.com/>.
10 "Company Accredidation Handbook." (2013): n. pag. NABCEP, 23 Jan. 2013. Web. Accessed on 30 Oct. 2014.
<http://www.nabcep.org/accredited>.
11 "Hourly Wage Survey in China in Legal Consultant [Company Size: Less Than 250 Employees]." Hourly Wage Survey in China in
Legal Consultant [Company Size: Less Than 250 Employees]. Salary Explorer, 2014. Web. Accessed on 30 Oct. 2014.
<http://www.salaryexplorer.com/hourly-wage.php?job=520&jobtype=3&size=250&loctype=1&loc=44>.
12 "Starting a Business in China." Doing Business. World Bank Group, 2014. Web. Accessed on 10 Oct. 2014.
<http://www.doingbusiness.org/data/exploreeconomies/china/starting-a-business>
13 Harris, Dan. "How To Start A Business In China — The Minimum Capital Requirements For A WFOE." China Law Blog. Harris
& Moure, 5 Dec. 2009. Web. Accessed on 10 Oct. 2014.
<http://www.chinalawblog.com/2009/12/how_to_start_a_business_in_chi_1.html>.
RESEARCH:
"Starting a Business in China." Doing Business. World Bank Group, 2014. Web. Accessed on 10 Oct. 2014.
<http://www.doingbusiness.org/data/exploreeconomies/china/starting-a-business>
Taylor, Ben. "How to Start a Solar Cell Manufacturing Company." Small Business. Demand Media, n.d.
Web. Accessed on 10 Oct. 2014. < http://smallbusiness.chron.com/start-solar-cell-manufacturingcompany-15208.html >.
2) FINANCING SOURCES:
Compare the availability and costs associated with different sources for funding this global business enterprise.
Recommend actions that might be taken to obtain financing for the proposed global business enterprise. (Large
companies may sell stock, issue bonds, and obtain loans. Smaller organizations might make use of personal
investors, small business loans, venture capital sources, or government-guaranteed loans.)
SUMMARY:
Many small businesses have had difficulties in attaining loans from Chinese banks and are therefore
searching for roundabout ways to receive financing. Called informal financing, this type of funding involves "small,
unsecured, short term loans restricted to rural areas, agricultural contracts, households, individuals or small
entrepreneurial ventures."14 A majority of small business were forced to use informal funding in 2009, despite the
big boom in bank loans.15 The United States, on the other hand, has numerous loans and protective measures for
small businesses.16 While informal finance options are readily available in China, it has been shown that businesses
funded by formal financing are more likely to sustain economic growth.17 Both the formal and informal banking
system are extremely risky within China, therefore our company will mostly be funded by American institutions in
the form of small business loans. It is also important, however, to create ties between our company and the
Chinese people, however, so we will look for some private investors within China to fund a portion of our
company. While this means that there is the potential for conflict about the company culture, we believe that our
company will have greater success if we create a network within China while still securing our finances through
American funding.
RESEARCH:
See Footnotes
14
"Formal vs. Informal Financing: Evidence from China." The World Bank Group, Jan. 2008. Web. Accessed on 29 Oct. 2014.
<https%3A%2F%2Fopenknowledge.worldbank.org%2Fbitstream%2Fhandle%2F10986%2F6462%2Fwps4465.pdf%3Fsequence%
3D1>.
15 Beijing, Austin Ramzy /. "In China's Lending Boom, Small Businesses Go Begging." Time. Time Inc., 15 July 2009. Web.
Accessed on 03 Nov. 2014. <http://content.time.com/time/world/article/0,8599,1910514,00.html>.
16 "What SBA Offers to Help Small Businesses Grow." The U.S. Small Business Administration, 2014. Web. Accessed on 3 Nov.
2014. <http://www.sba.gov/content/what-sba-offers-help-small-businesses-grow>.
17 "Formal vs. Informal Financing: Evidence from China." The World Bank Group, Jan. 2008. Web. Accessed on 29 Oct. 2014.
<https%3A%2F%2Fopenknowledge.worldbank.org%2Fbitstream%2Fhandle%2F10986%2F6462%2Fwps4465.pdf%3Fsequence%
3D1>.
Module 8
Creating a Global Management Information System
1) GLOBAL INFORMATION NEEDS:
Identify the types of reports and other data that would provide managers with the information necessary for
organizational decision making. (Common categories of management information include financial documents,
inventory data, sales and marketing reports and human resource records.)
SUMMARY:
As a solar company we have a lot of inventory to keep track of. We are using three financial documents
used for book keeping. The income statement, which will provide information such as total revenue spending, cost
of research and development and our total net income. The balance sheet will provide information on assets and
liabilities. The cash flow statement will provide information on net cash from total operating activities.
To help keep track of inventory we are using a program called “Odoro.” This program helps solar
companies by providing real-time network inventory and asset service management. 18 To keep up with the
current market we will look at the Solar Market Insight Report from SEIA, the Solar Energy Industries Association.19
It provides very comprehensive and current solar market information. Our Human Resource records will all be
done electronically using a HR service called “Insperity.” This service takes care of administrative jobs like payroll
processing, W-2’s and online pay stubs all the way to employer liability management, employee records and
training.20
RESEARCH:
See Footnotes.
2) GLOBAL INFORMATION SOURCES:
List the main (a) external and (b) internal sources of data for your global business enterprise. (External sources
include government agencies, financial institutions, trade associations, etc. Internal sources include research
information, accounting data, employee records, sales figures, and inventory reports.)
SUMMARY:
An external source of information that we use to collect data is from the SEIA, the Solar Energy Industries
Association. SEIA reports cover extensive information about the solar energy market. The resources are used by
government agencies, solar businesses and consultants to help them make informed decisions.21
Our internal sources of data will include information from balance sheet records, cash flow statements
and the income statements. The electronic program “Allegro Financials” allows us to manage accounting and
financial reporting and caters to the energy industry operations.22 Using Allegro will allow us to easily gather
accounting data from previous months and years. The program “Insperity” will keep track of all the employee
history reports and any HR records. 23
18
“Manage Inventory Across All Your Stores In One Place”. Ordoro. Web. Accessed on 29 Oct. 2014.
<https://www.ordoro.com/features/inventorymanagement?utm_source=capterra&utm_medium=cpc&utm_term=inventory&
utm_campaign=inventory>.
19 "Research and Resources." SEIA. Web. Accessed on 29 Oct. 2014. <http://www.seia.org/research-resources>
20 "An HR Service That Works With Your Business." Insperity. Web. Accessed on 29 Oct. 2014.
<http://www.insperity.com/service/hr-outsourcing/whats-included>.
21 ”Research and Resources.” SEIA. Web. Accessed on 29 Oct. 2014. <http://www.insperity.com/service/hr-outsourcing/whatsincluded>.
22 "Top Energy Management Software Products." Capterra. Web. 29 Oct. 2014. <http://www.capterra.com/energymanagement-software>.
23 "An HR Service That Works With Your Business." Insperity. Web. 29 Oct. 2014. <http://www.insperity.com/service/hroutsourcing/whats-included>.
RESEARCH:
See Footnotes.
3) TECHNOLOGY FOR MANAGING INFORMATION:
Describe computer systems and other technology that would facilitate the processing, reporting, and use of
information for international business operations. (For example, a global computer network may be used to record
and report inventory and sales from various branch offices.)
SUMMARY:
With technology on the rise, there are a lot of great computer systems to use to help our company run
more efficiently. Using Allegro Financials we can input all of our accounting information in electronically. It is set
up with balance sheets, income statements and cash flow statements to record all vital information for company
records and any audits.24
Using the HR service Insperity we can have vital information for employees all online including ways to
sign up for benefits, access your W-2 and all your pay stubs.25 They are also very helpful with liability management
training and offer an array of online services at the discretion of managers.
The way our various offices can stay together with information on inventory and sales is a program called
“Odoro” which specializes in keeping your inventory in sync across all of your storefronts. 26 The powerful software
monitors changes in inventory as orders come in and are restocked, which helps decrease production time by
using hands off inventory management, therefore lowering costs.
RESEARCH:
See Footnotes.
24
"Top Energy Management Software Products." Capterra. Web. Accessed on 29 Oct. 2014.
<http://www.capterra.com/energy-management-software>.
25 "An HR Service That Works With Your Business." Insperity. Web. Accessed on 29 Oct. 2014.
<http://www.insperity.com/service/hr-outsourcing/whats-included>.
26 “Manage Inventory Across All Your Stores In One Place”. Ordoro. Web. Accessed on 29 Oct. 2014.
<https://www.ordoro.com/features/inventorymanagement?utm_source=capterra&utm_medium=cpc&utm_term=inventory&
utm_campaign=inventory>.
Module 9
Identifying Human Resources for Global Business Activities
1) STAFFING:
Identify needed skills of employees and managers. Compare the use of ethnocentric, polycentric, geocentric, and
regiocentric approaches to staffing. Pick one or a combination as your approach and defend. (Most organizations
need employees skilled in clerical work, marketing and sales, and financial planning.
SUMMARY:
Our staffing strategy will be Geocentric and regiocentric. In order to navigate the Chinese government
we’ll need locals in management. Also we’re required by Chinese law to do a joint venture with a Chinese company
so that will equate to Chinese leaders. But we’ll need to send American employees to maintain company culture
and to be a link between R&D centers in America and production centers in China.We would also be open to hiring
Korean and Japanese nationals.
Top managers will need proficiency in both English and Chinese with exposure to other Asian
languages. Panel installers need to be NABCEP(North American Board Of Certified Energy Practitioners) certified
regardless of nationality27. All employees will receive language training, especially in English if they are Chinese and
Chinese if they are not Chinese. We will also have language learning programs for Japanese and Korean for
employees who will need such skills. Ideally employees have background in these foreign languages before they
are hired.
RESEARCH:
"Raising Standards. Promoting Confidence." NABCEP. N.p., n.d. Web. Accessed on 04 Nov. 2014.
2) TRAINING, DEVELOPMENT AND PERFORMANCE APPRAISAL:
List needed topics and instructional methods for ongoing training and management development related to
technical skills, interpersonal skills, language, and cultural awareness. Suggest performance guidelines that would
balance organizational goals and individual needs, and which would reflect the cultural and legal situation.
SUMMARY:
Language will be an important component of our business model. We will obviously have Americans
working in China and Chinese working with Americans. Therefore bilingualism will be necessary for both Chinese
and American employees. This skill will be sought for in the hiring process, but also will be honed in within the
company through regular language studies. Furthermore, it is likely that we will be working with Japanese and
Korean companies for supply and technical expertise, so employees will be trained in and study basic language
skills for both Japanese and Korean. Potential employees with previous exposure to these languages will be sought
after as well in the hiring process.
American employees, especially those to be relocated to China will undergo a month long Chinese
culture course focused on business ethics and customs, culture and history and politics in China in order to aide
with the process of assimilating our employees and their families to ensure a successful expatriate.
Employees directly involved with the installation of solar panels will certified to the level of the North
American Board of Certified Energy Practitioners. 28 This is to ensure quality, safety and dependability in our brand.
RESEARCH:
See Footnotes.
28
"Raising Standards. Promoting Confidence." NABCEP. N.p., n.d. Web. Accessed on 29 Oct. 2014.
3) COMPENSATION:
Determine suggested wages and salary levels for various job positions based on company and country factors.
Propose an employee benefits package based on economic and cultural factors.
SUMMARY:
We have three main employees in our company. The managers, the researchers, and the installers.
Since the managers will be a mix of Chinese nationals and foreigners (whether it be American, South Korean or
Japanese) there will be varying sizes in salary. The key will be to find a balance between offering large enough
salaries to American expatriates that will attract them to key jobs, but not so high that Chinese nationals feel
resentment in the difference in pay. Because the average salary of an expatriate Sales and Marketing Managing
Director in China is $315,000 or more29, we will begin the salaries of our employees lower than that at the outset
of our company.
Our expatriate starting salaries will be at $250,000 with the move to China paid for by the company.
Chinese national’s starting salaries at the management positions will start at $150,000. Researchers will start at
$90,000 for American researchers. Foreigners who move to America for the job will start at $130,000. 30 Installers
are the rank and file employees; the boots on the ground. This is where we need great customer interaction and
quality performance. Therefore, among many strategies to attain such employees, we will pay our employees
higher than average, in order to attract the cream of the crop. Hourly rates for installers in China will be $10.
In addition to the salaries, other benefits such as health care etc. will be provided to all salaried
employees. Also all employees in the company will receive discount solar panel installation for their own homes,
which will not only provide additional sales, but will facilitate the spread of our brand name.
RESEARCH:
"Energy Manager Salary." Salary.com. N.p., n.d. Web. Accessed on 28 Oct. 2014. <http://www1.salary.com/EnergyManager-Salary.html>.
"Solar Energy System Installer Salary (United States)." Solar Energy System Installer Salary (United States). PayScale
Inc., n.d. Web. Accessed on 29 Oct. 2014.
<http://www.payscale.com/research/US/Job=Solar_Energy_System_Installer/Hourly_Rate>.
29
"Salaries for Expats in China." Expat Arrivals. N.p., n.d. Web. 29 Oct. 2014. <http://www.expatarrivals.com/china/salaries-forexpats-in-china>.
30 "Do You Know What You're Worth?" Salary Wizard. Salary.com, n.d. Web. 28 Oct. 2014.
<http://swz.salary.com/salarywizard/Research-and-Development-Engineer-Salary-Details.aspx>.
Module10
Managing International Financial and Business Risks
1) ECONOMIC AND FINANCIAL RISKS:
Identify key areas of uncertainty related to level of economic development, infrastructure, and changing economic
conditions in the country being considered for business operations. (A weak infrastructure or volatile currency
increases the risk of doing business in a foreign market.)
SUMMARY:
China’s economic conditions are changing year after year due to the rapid growth experienced in the last
ten to fifteen years. Such a dynamically changing environment creates the potential for high economic and
financial risk. However, this risk is mitigated by the fact that most of the change is good and leads to a more
internationally friendly business atmosphere.
As a new international powerhouse currency, the Chinese Yuan Renminbi has continued to strengthen
year over year against the US Dollar31. Historically such trends in international currencies begin to fluctuate,
sometimes significantly, after a period of strong growth. Therefore we feel that the currency exchange rate could
become a significant risk factor.
The recent intervention of the China Central Bank to weaken the Yuan illustrates the potential risks. In
this case the Central Bank ordered banks throughout China to purchase US Dollars in an effort to make imports
from the US less feasible to the average consumer. 32
While the economic changes could prove to be risky, infrastructure and ongoing economic development
in Nanjing are estimated to continue to improve and grow for the foreseeable future, making the risks in these
areas are small.33
RESEARCH:
See Footnotes.
2) POLITICAL AND LEGAL RISKS:
Analyze the uncertainty that might be created by political stability, corruption potential, and business regulations.
(Required labeling, tariffs, or ownership restrictions may be encountered in various nations.)
SUMMARY:
The potential for political corruption is extremely high. There are hundreds of examples of this, including
many in the solar panel manufacturing industry where the Chinese government hides behind unenforceable
international patent laws to essentially put foreign companies out of business.
Ownership restrictions can be very prohibitive. Small business are commonly required to provide at least
49% ownership to Chinese citizens and ensure that the local managing director is a Chinese citizen. Finding a
trustworthy local manager is always a significant challenge.
RESEARCH:
"Corruption Perceptions Index 2013." Transparency International. N.p. 2013. Web. Accessed on 27 Oct. 2014.
<http://www.transparency.org/cpi2013/results>.
31
"Exchange Rates." X-Rates. N.p., n.d. Web. Accessed on 27 Oct. 2014. <http://www.x-rates.com>.
32
Wei, Linling. "China Intervenes to Lower Yuan." Wall Street Journal [Beijing] Accessed on 26 Feb. 2014: n. pag. Print.
33
Gagon, Rory. President of Romaric Co, an automation software provider for the semiconductor and solar panel industries.
Personal Interview. Accessed on 30 Sept. 2014.
Roberts, Dexter. "China's Communist Party Admits It Has A Big Corruption Problem." Bloomberg Businessweek
[Beijing]. 10 July. 2014. Print. Accessed on 27 Oct. 2014.
Back, Aaron. "China's Murky Ownership Rules." The Economist. Print. 30 Dec. 2014. Accessed on 27 Oct. 2014.
3) RECOMMEND RISK MANAGEMENT TECHNIQUES:
Based on the above analysis, suggest various risk reduction strategies you might employ when doing business in
other countries. (Common risk management methods include insurance, diversification of product line, strategic
alliances with local partners, and employing local managers.)
SUMMARY:
As a small business there is very little we can do to influence and/or reduce the risks inherent in the areas
of government, infrastructure, and economic development. However, much can be done at the corporate level.
We will hire a Chinese citizen to manage the Chinese operation. The manager must be educated in the United
States and understand the merits of the open market, and have experience working in a solar panel manufacturing
company in the United States or Europe. We will also explore insurance that can protect us from the noted risks.