Distance Still Matters

In: Business and Management

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TOOL KIT Companies routinely exaggerate the attractiveness of foreign markets, and that can lead to expensive mistakes. Here’s a more rational approach to evaluating global opportunities.

Distance Still Matters
The Hard Reality of Global Expansion by Pankaj Ghemawat


Included with this full-text Harvard Business Review article: 1 Article Summary The Idea in Brief—the core idea The Idea in Practice—putting the idea to work 2 Distance Still Matters: The Hard Reality of Global Expansion 12 Further Reading A list of related materials, with annotations to guide further exploration of the article’s ideas and applications

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TOOL KIT

Distance Still Matters
The Hard Reality of Global Expansion

The Idea in Brief
Why did U.S. media giant Star TV lose $500 million trying to deliver TV programming to Asia? Like many companies, it was so dazzled by the foreign market’s immensity that it ignored the difficulties of pioneering new territories. For example, it assumed—wrongly—that Asian viewers wanted English-language programming. How to avoid this fate—and select the right targets for your firm’s global expansion? Look beyond a country’s sales potential (as expressed by national wealth or propensity to consume)—and analyze the probable impact of distance. But don’t focus only on distance’s geographical dimension. Consider three other dimensions as well: cultural factors (religion, race, social norms, language); administrative factors (colony-colonizer links, currencies, trading arrangements); and economic factors (income, distribution-channel quality). The more two countries differ across these dimensions, the riskier the target foreign market. By contrast, similarities along these dimensions suggest great potential. Common currency, for example, boosts trade more than 300%. Also, types of distance affect industries…...

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Resumen Distance Still Matters

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