WAVES Inc. is a US-based firm that specializes in the manufacturing of high-end surfboards. They are debating whether to continue exporting to the UK or possibly licensing the technology to a London firm that has expressed some interest in manufacturing the product in the UK. Currently, Waves return on investment from their domestic market is 35% with a net profit of $5 million from $20 million in sales.  Labor is roughly 50% of total expenses and 20% cheaper in the UK than the US. Costs other than labor in the UK are roughly same as US.  Should WAVES license or continue to export? If they license, what should the royalty rate be?  (Make any assumptions but list them)

Answer : 

There are two distinct parts to the question. Let us first attempt to respond to the first part - how to take your company global, subject to the fact that you already have tested the culture, tastes & preferences across UK, Japan and coastal African regions, in which the socio-economic variations are well exhibited. Generally, to go global, or to even simply go overseas, for that matter, we are to keep the following in strict stipulations and make sure we are in the know how of them: 
 

1. We are assuming here that research has already been undertaken and zeroing in on where the possible markets would be have been taken into account. 

2. As mentioned earlier, we are to become well versed in the culture, habits and tastes of the locales, so that we do not end up like Kelloggs, who went to UK without understanding that the Brits like their bread and meat for breakfast, not serials. You can rush yourselves though, but then you have to have very deep pockets to sustain losses and still stand fast, which Kelloggs did and ultimately got success. 

3. Therefore, we are to take in local help to understand the local customer base well and easily mingle with them. 

4. Thereafter, it is just about setting up your internal system to take care of the language to communicate, logistics and supply chain to cope up with the demand and the other infrastructure essentials to maintain sanity and sanctity of the international business transactions. 
 

It is a well known fact that China dressed up as the world's production floor and made sure the FD1s, or Foreign Direct Investments, become catalytic to their economic reforms.They, from gradually opening up to attract FDI in the 1980s and 1990s, became the centre of international business by early 2000. With thousands of foreign companies investing in China, the country is on the verge of opening up its core sectors of Services, like telecommunications to the foreign investors. As such, Chinese government makes sure the foreign company does not have to run from pillar to post to get his investments approved, but sometimes, this system of decentralized approvals may have corruption creeping into the system. The decentralized system is meant for efficiency, and is supposed to foster convenience for the investor and a healthy competition in the market, but should be kept on tight leash to see statutory guidelines are not flouted, else investments could be at risk. Language can become a major barrier when you are venturing global, but China is now well geared up and very efficient translators can be easily found to facilitate effective communication with locals. Just need to be vigilant not to fall prey to malicious intent when you do not understand a single syllable of the language and in case you do not have anyone trustworthy knowledgeable of the Cantonese language. Although this could be the case for any non-english speaking country, but we are specifically concerned about securing our investments in China.