peer response 71

/in /by

please respond to the 2 peers

The Pitfalls of Globalization

In Prichard’s article in this week’s materials, he quotes Robert Salomon, a professor of international management. Salomon says: “The problem is that managers systematically overestimate the benefits of globalization and underestimate its costs.” With this comment in mind, think about your company and the overseas country you chose to research in this course.

Imagine that your company’s executive team has decided to expand to the target country that you researched, whether you recommended this course of action or not. Then respond to the prompts below:

  • Remind your peers what company and product, and which overseas country you chose for your assignments
  • Will your company’s existing business model work in the overseas target country? Why or why not?
  • What are the major differences between the culture of your home country and your overseas target country?
  • Why might it take longer to establish your business in the overseas target country than your managers expect?
  • What advice would you give to the project lead on how to prepare for expansion into this overseas market?

peer #1

Remind your peers what company and product, and which overseas country you chose for your assignments.

Wells Fargo Home Mortgage is looking to provide residential mortgage in Mexico. Wells Fargo has a worldwide presence, and currently operates in Mexico for commercial, corporate and institutional customers. Wells Fargo does not have offices outside of the U.S. that provide services to consumer or small business customers.

Will your company’s existing business model work in the overseas target country? Why or why not?

I believe that the current sales business model will work in Mexico. The challenge will be on the fulfillment side. It will be dependent on availability of credit reporting agencies, along with understanding how to accurately assess income and ability to repay. Property valuation may also be a challenge.

What are the major differences between the culture of your home country and your overseas target country?

One major difference in the cultures of the United States and Mexico is the propensity to save. Mexicans save on average about 21% and carry very little debt, while Americans save around 8% of their paycheck. It is difficult to gage the impact of the culture on housing demand. Unlike the U.S. generations of Mexican families tend to reside together and pass down the real estate to the younger generation. This will certainly have an impact on first time homebuyers deciding whether or not to leave the nest

Why might it take longer to establish your business in the overseas target country than your managers expect?.

Establishing a mortgage division in Mexico may not go as quickly as expected. Management must understand the cultural and legal challenges that the company will face. The Mexican culture is slower paced, and trust will need to be established over time. A large investment will be required to set up the legal requirements to properly secure the real estate, and establish credit and underwriting policies. Cost of funds will also need to be considered, as this pool of mortgages will most likely not quality to be sold on the secondary market. Relationships will need to be built with service providers that can be trusted to provide title insurance, appraisals, and closing services. As with any large financial transaction, extra precautions will be needed to avoid being a victim of fraud or corruption. Due to these potential complications, I would advise management to proceed cautiously and set a realistic timeline for success.

What advice would you give to the project lead on how to prepare for expansion into this overseas market?

I would advise the project lead to thoroughly prepare prior to launching this initiative. It would be wise to explore an acquisition or partnership with a company that is already in the market. This market has not been exposed to low interest, low down payment financing to purchase a home. It will be important to properly utilize a price skimming strategy to recover sunk costs quickly before the competition steps in and lowers the market price. This will also curb demand somewhat and allow staffing and processes to ramp up. Finally, I would stress the importance of connecting with builders.

Sources

https://www.skipprichard.com/how-companies-can-overcome-the-pitfalls-of-globalization/

https://www.relbanks.com/usa/wells-fargo/locations

Trading Economics. (2020). Retrieved from https://tradingeconomics.com/

https://en.wikipedia.org/wiki/Price_skimming

https://www.relbanks.com/usa/wells-fargo/locations

peer #2

  • Remind your peers what company and product, and which overseas country you chose for your assignments.
    • My company is SEI and I’m exploring the idea of expanding to Canada.
  • Will your company’s existing business model work in the overseas target country? Why or why not?
    • The business model in general will likely be a success, as Canada places a lower emphasis on the traditional “college” experience indicating a good market for online education (1). One facet of the business model we’ll need to adjust is the pricing strategy, as consumers typically pay less for a degree in Canada than they do in the U.S. (1).
  • What are the major differences between the culture of your home country and your overseas target country?
    • One major cultural difference between the US and Canada is that Canadians view education as a right rather than a privilege, likely explaining the cost differences mentioned above (1).
    • There’s also a higher emphasis on independence in Canada’s traditional college experience – while students in the US are sometimes required to live on-campus, in Canada, students typically sign leases for apartments after their first year.
    • There’s a higher significance placed on school reputation in the U.S. – for example, there is no equivalent to Ivy League schools in Canada (1). This is an indication that Strayer may be successful in the market.
    • Canada is listed as one of the top ten smartest countries in the world, based on identifiers like (2).
  • Why might it take longer to establish your business in the overseas target country than your managers expect?
    • It could take longer than expected to establish the business in Canada, as the team will need to develop relationships with business partners on the Canada side, especially if we choose to set up brick and mortar campus centers (3).
  • What advice would you give to the project lead on how to prepare for expansion into this overseas market?
    • The expansion project lead should work with the pricing team to determine an equilibrium price for our degrees that takes into account the cultural discrepancies of our Canadian market. This strategy should also take into account how many enrollments the university needs to make a profit, accounting for tariffs and other exchange rates (3).
  1. https://www.insider.com/college-canada-us-differences-2018-11#college-is-much-pricier-in-the-us-than-in-canada-2
  2. https://www.thetravel.com/10-major-cultural-differences-between-america-and-canada-10-things-oddly-similar/
  3. https://www.skipprichard.com/how-companies-can-overcome-the-pitfalls-of-globalization/