BUSN604 Week7

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May 28, 2024

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1 Feasibility of the company making an investment in a new product line overseas or keeping in the US American Public University COURSE: BUSN604 03/24/2024 One of the most important factors to consider is the legal and political stability of the country. Apart from a country's political stability, other factors such as tax regulations and trade

2 agreements are also taken into account to assess the potential risks of doing business in other countries. Qualitative Factors Political Environment 1. Stability and predictability of government policies in the US vs. the foreign country. “People around the world see both strengths and flaws in the United States, but they generally view the U.S. positively (Pewresearch 2023)”. 2. Regulatory frameworks and potential barriers to entry or operation. Barriers to entry may be financial (high cost to enter a market), regulatory (laws restricting trade), or operational (trying to attract loyal customers or inaccessibility of trade channels) (Investopedia 2023)”. 3. Political stability and potential risks of political instability or conflicts. “Political risk is generally defined as the risk to business interests resulting from political instability or political change (WSU 2023)”. Economic Environment 1. Economic growth prospects and market conditions in the US vs. the foreign country. “Global growth prospects are weak, especially for emerging market and developing economies (Gourinchas 2023)”. 2. Currency exchange rates and potential impacts on investment returns. “Impact of exchange rates and their fluctuations extends much more broadly and deeper in ways that affect several of the most important aspects of our economic lives—like how long it takes to get a job, where we can afford to live, and when we can retire (Investopedia 2021)”.

3 3. Business infrastructure and ease of doing business in each location. Socio-cultural Factors 1. Cultural differences and consumer preferences in the target market. “Cultural values act as a guiding force in consumer decision making, influencing preferences, attitudes, and behaviors (Fastercapital 2024)”. 2. Labor market dynamics, including availability of skilled workforce and wage levels. Labor market plays a major role in any economy. 3. Social and environmental considerations, including corporate social responsibility practices and sustainability initiatives. “CSR initiatives are well-planned for the long term, with the aim of creating enduring positive effects on society and the company itself. This contrasts with short- sighted, profit-centric strategies, ensuring that actions contribute to long-term advantages and enduring success (Charity miles 2023)”. Quantitative Factors Financial Considerations 1. Cost of investment in each location, including capital expenditure, operating costs, and taxes. 2. Revenue potential and market size in the US vs. the foreign country. 3. Profitability projections and expected return on investment (ROI) over the short and long term. Risk Assessment 1. Risk analysis, including country-specific risks such as currency risk, political risk, and economic risk. 2. Sensitivity analysis to assess the impact of potential changes in key variables on investment outcomes.

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4 3. Evaluation of risk mitigation strategies, including diversification and insurance options. Strategic Alignment 1. Alignment of the investment decision with the company's overall strategic objectives and growth plans. 2. Integration with existing product lines and potential synergies with other business units. 3. Assessment of competitive positioning and market differentiation strategies in each location. Similarities and Differences Between Investing in the US and Foreign Country Similarities 1. Consideration of political, economic, and socio-cultural factors in both locations. 2. Evaluation of financial metrics and risk analysis to assess investment feasibility. 3. Importance of strategic alignment with company objectives and growth strategy. Differences 1. Variation in regulatory frameworks, tax policies, and business environment between the US and foreign country. 2. Currency exchange rate considerations and potential currency risk associated with overseas investment. 3. Cultural differences and market dynamics influencing consumer behavior and competitive landscape. Conclusion In conclusion, financial feasibility analysis plays a crucial role in new product development. Understanding the various factors that influence the decision-making process when investing in a foreign country is very important for companies. Through case studies of successful financially

5 feasible product developments, we can understand the practical application and benefits of financial feasibility analysis. “By conducting comprehensive cost analysis, assessing revenue potential and market demand, evaluating product pricing, analyzing production costs, budgeting and financial forecasting, exploring funding options, managing financial risks, measuring ROI and profitability, and incorporating financial feasibility into the decision-making process, businesses can optimize resource allocation, minimize financial risks, and achieve sustainable growth (Faster capital 2024)”. References 1. Pewresearch (2023) https://www.pewresearch.org/short-reads/2023/06/27/how- americans-views-of-the-us-compare-with-international-views-of-the-us/ 2. Investopedia (2023) https://www.investopedia.com/terms/f/feasibility-study.asp

6 3. WSU (2023) https://opentext.wsu.edu/mktg360/chapter/4-9-political-risk/ 4. IMF Blog (2023) https://www.imf.org/en/Blogs/Articles/2023/10/10/resilient-global- economy-still-limping-along-with-growing-divergences 5. Investopedia (2021) https://www.investopedia.com/articles/forex/053115/understand- indirect-effects-exchange-rates.asp 6. Fastercapital (2024) https://fastercapital.com/content/Culture--Culture-Clash--How- Cultural-Factors-Influence-Consumer-Behavior.html 7. Charity miles (2023) https://charitymiles.org/corporate-social-responsibility-definition/ #:~:text=Environmental%20Sustainability%3A%20Companies%20should %20minimize,and%20respect%20for%20workers'%20rights.

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