Question

Assume that you wanted to expand your Learning English business to other non-U.S. countries where some individuals may want to speak English.
a.    Explain why you might be able to stabilize the profits of your total business in this manner. Review the motives for direct foreign investment. Which of these motives are most important?  
b.   Why would a city such as Montreal be a less desirable site for your business than a city such as Mexico City?
c.   Describe the conditions in which your total business would experience weak effects even if the business was spread across 3 or 4 countries.
d.   What factors affect the probability of these conditions occurring? (In other words, explain why the conditions could occur in one set of countries, but not another set of countries).
e.   What data would you review to assess the probability of these conditions occurring?
f.    Consider that the prevailing service you offer is teaching individuals in Mexico to speak English, and your business has already created some supplemental pamphlets and CDs that translate common Spanish terms into English. How could you expand your business in a manner that may allow you to benefit from economies of scale (and perhaps even benefit from your existing business reputation)? When you attempt to benefit from economies of scale, do you forgo diversification benefits? Explain.
g.   How would you come to a decision on whether to pursue business expansion that capitalizes on economies of scale even if it would forgo diversification benefits? Do you think economies of scale would be more important or less important than diversification for your business?
h.   Is there any way to achieve economies of scale and yet still achieve diversification benefits?

Answer 1

a) First,you must be capable of training the individuals,so it would be easier if you already knew the language.Regarding the motives mentioned in the statement ,a key factor is that there must be a demand for your service.Also,it's better to be in a country where you may already have some monopoly power or atleast being able to provide a better service than the competitors.

b) The demand would not be sufficient as there are many people in Montreal who already speaks english so diversification is better because if anything happens due to which the demand in Mexico declines,the business may still be strong in other non english speaking countries.

c) The total business would be weak if all the countries in which the business is running experiences weak economic conditions simultaneously which may happen due to political and economic reasons which results in people not being able to afford the services.

d)The probability that all the countries where the business is experiencing weak economic conditions simultaneously is affected by the correlation of their economies over time.