Questions
13-1. Discuss the risks that an international restaurant company such as Burger King would have
by operating abroad rather than just domestically.
13-2. How has Burger King’s headquarters location influenced its international expansion? Has
this location strengthened or weakened its global competitive position?
TEACHING TIPS: Review the PowerPoint slides for Chapter Thirteen and select those you
find most useful for enhancing your lecture and class discussion. For additional visual
summaries of key chapter points, review the figures and tables in the text.
CLOSING CASE: Carrefour
This case explores the location, pattern, and reasons for Carrefour’s international operations.
Carrefour opened its first store in 1960 and is now the largest retailer in Europe and Latin
America and the second largest worldwide. By 2015, Carrefour had stores in 33 countries, which
it divided into 5 geographic areas. These areas and the number of stores were as follows: France,
5680; Other Europe, 4711; South America, 840; Asia, 396; and Other Countries, 283. A guiding
principle for most of Carrefour’s international expansion has been countries’ economic
evolution. A former CEO indicated that two market opportunity conditions were important for
choosing the right countries to expand: (1) to pick countries with probable economic growth so
as to grow with the country and (2) to enter a country before competitors so as to gain first
mover advantages. Nevertheless, Carrefour has sometimes deviated from this principle, with
poor results. Another factor influencing Carrefour’s choice of country has been the ability to find
a viable partner familiar with local operating needs. Carrefour also considers whether a country
can justify enough additional stores to gain distribution economies.
To help gain these economies, Carrefour has recently been expanding via acquisition
Carrefour means “crossroads,” which is apropos because the company has been facing tough
choices for improving its performance. At the same time, a wide range of specialty retailers are
competing on nonfood items. Finally, some analysts feel that Carrefour
will never become the world’s largest retailer without a significant presence in the United States
and the United Kingdom.
Questions
13-3. What advantages and disadvantages would Carrefour likely have compared with domestic
retailers where it operates?
13-4. Evaluate the reasons for following a geographic concentration versus diversification
strategy as they apply to large retailers such as Carrefour.
13-5. When the three big global retailers—Walmart, Carrefour, and Tesco—have entered the
same country, only one has generally succeeded. Are the markets in China and India so big that
all can succeed there? Support your conclusion.
ADDITIONAL EXERCISES: Country Evaluation and Selection
Exercise 13.1. As the phenomenon of economic integration progresses, the process of
country selection takes on new dimensions. Ask students to compare and contrast the
opportunities and risks associated with establishing operations in the European Union to
those in the NAFTA region. Would such investments be primarily resource- or
market-seeking? Be sure students explain and give examples to support their ideas. (LO: 1,
Learning Outcome: To grasp company strategies for sequencing the penetration of
companies, AACSB: Analytical Skills.)
Exercise 13.2. Ask students to compare the costs and benefits of investing in an
industrialized economy to the costs and benefits of investing in a developing economy from
the standpoint of an MNE. Then ask the students to debate the idea that MNEs have a
responsibility to work toward developing global efficiency, i.e., that economic
considerations should be weighted more heavily than other factors in the country selection
process. (LO: 2, Learning Outcome: To see how scanning techniques can help managers
both limit geographic alternatives and consider otherwise overlooked areas, AACSB:
Multicultural and Diversity Understanding.)
Exercise 13.3. During the 1970s, a number of MNEs such as Coca-Cola and IBM made
decisions to abandon operations in certain developing countries and not to enter others
because of government restrictions. Ask the students to discuss the likelihood that MNEs
will face such decisions in the future, given the progress of the WTO and movements toward
economic integration in many parts of the world. Do the students foresee other factors that
might cause more divestments in the future? (LO: 5, Learning Outcome: To understand
some simplifying tools for helping to decide where to operate, AACSB: Dynamics of the
Global Economy.)
Exercise 13.4. Have the students use the simplified grid to compare countries for market
penetration (Table 13.2) to compare South Africa, Ireland, and Argentina for a possible
investment. Encourage them to use outside data sources such as www.doingbusiness.org,
www.worldbank.org, and www.nationmaster.com to gather information and make
meaningful comparisons. Which of these three countries would be most suitable for
investment? Why? (LO: 6, Learning Outcome: To consider how companies allocate
emphasis among the countries where they operate, AACSB: Analytical Skills.)