Draphram Furniture Ltd: International Business Management in Sokovia

This report analyzes the international business strategy of Draphram Furniture Ltd. for entering the Sokovian market. It begins by recommending entry modes, specifically highlighting exporting and licensing, and providing justifications based on risk appetite and legal considerations. The report then defines and discusses various political risks, including cultural differences, political instability, and competitive market dynamics that Draphram Furniture would need to monitor. It also addresses currency exchange risks, such as transaction, translation, and economic risks, and suggests possible responses like forward exchange contracts and currency options. Finally, the report recommends specific approaches for managing the international business, emphasizing the importance of understanding local market conditions and adapting to political, cultural, and legal requirements.

International business
management
Contents

Question 1 Justified recommendation to Draphram Furniture Ltd. for entering mode to use in Sokovian
market..........................................................................................................................................................3
Question 2 Define and discuss various political risks that Draphram Furniture Ltd will need to monitor in
Sokovia........................................................................................................................................................4
Question 3 Define as well as discussion of various currency exchange risks which Draphram Furniture
Ltd. requires to monitor in Sokovia and possible responses to Risk............................................................6
Question 4 Justified recommendation for a specific approach towards managing an international busines7
REFERENCES............................................................................................................................................9

Question 1 Justified recommendation to Draphram Furniture Ltd. for
entering mode to use in Sokovian market.
Foreign market entry modes are said to be methods by which company could expand its
operations in nondomestic market. As there are basically two types of market entry modes which
is based on equity as well as non-equity. As non-equity consists of exports as well as contractual
agreements along with equity modes consists of joint ventures and subsidiaries. There are
generally some common entry modes of international market which are exporting, partnering,
Greenfield venturing, acquisition as well as licensing. As by selecting out licence along with
franchising it helps companies to lower down their financial risk as well as also provides control
over manufacturing for production of products as well as services in a new country.
As some of entry modes are to be explained as:
 Exporting: As it refers to marketing as well as direct sale of domestically manufactured
products as well as services in different countries. Exporting is said to be a traditional
along with best tablets method of reaching to foreign markets which is Sokovian markets.
 Licensing and franchising: As when any company wants to enter in international
markets quickly than by taking limited financial as well as legal risk licensing agreement
could be considered to be an entry mode in order to carry international business practices
where it allows foreign company to sell their products of producer or to implement in
terms of intellectual property in exchange of royalty fees.
 Partnership: This entry mode into a international business market consists of having
contractual agreements among two or more companies that stupid its as well as consists
of various parties in order to operate in a specific way a for a specific time to accomplish
their common objective.
 Acquisitions: It is set up a transaction where company gives a control of another form by
purchasing their stock along with exchanging their stock for their own. Acquisitions are
said to be appealing as they provide company a quick as well established axis in terms of
New market.
In terms of case study of Draphram furniture limited there are various entry modes that
could be used by company in order to make their entry into Sokovian markets. As by providing
various justifications to company that could be used while entering into international market
where is evaluation could be done in terms of identifying their strength and weaknesses for
carrying out business practices in Sokovian markets.

Strengths
 As by using entry modes company will be able to identify cautious risk appetite which
are related to potential international expansion for carrying out their business practices
effectively.
 Entry modes helps company in providing a sense of legal terms and conditions that could
be e approved by company in order to carry business practice effectively.
Weaknesses
 There are various political risks that could affect business practices of company in terms
of furniture which are carried entry modes.
 There are various cultural differences that could affect company’s operation in
international market of Sokovia.
 From this evaluation it is recommended to case study that company should use entry
mode of exporting as well as licensing where they could make their entry into Sokovian
markets quickly e by taking limited financial as well as legal risks.
Question 2 Define and discuss various political risks that Draphram Furniture
Ltd will need to monitor in Sokovia
Political risks are defined as a type of risk which are faced by various corporations,
investors as well as the government and suffers a lot of instability. It determines the
commencement of any type of risk due to the change in governing body of a country. Due to
change in political scenarios result into various risks like terrorism, corruption and many more.
There are various types of political risks like trade barriers, legislation, various types of taxes and
many more. With respect to Draphram Furniture Ltd., they also need to monitor different risks
like they faced many political cultural differences, language differences and many more. It is
further been explained as below:-
Strengths and Weaknesses of political risks:-
 The main strength of political risk is that it creates various economic growth
opportunities in relation with all kind of free trade agreements. Due to this the cost
burdens also gets low. On the other hand it creates the risk of currency manipulation. So,
while establishing the business in Sokovia there was a risk of currency manipulation also.
 Political risk in relation with political terrorism, violence may destroy the company assets
due to which organization may not be able to generate all operations. So, for Draphram
Furniture Ltd also it was a risk for them as their operations may get affected.

 Political risks are also considered as a crucial element in terms of emerging market
business strategy. Through this it was strength for Draphram Company Ltd to assess all
such political risks.
 Political cultural differences: - There are many types of political cultural differences
also like subject political culture, political sub culture and many more. In relation with
Draphram Furniture Ltd they also faced many political risks and it became important for
them to deal with such risks and properly evaluate them. In comparison with Australia
Sokovia had a community oriented culture but in Australia it was just an individual based
oriented culture (Ayakwah, Sepulveda and Lyon, 2018) .As per the case study it was seen
that the furniture market was very much competitive as there were huge number of
competitors who were there. Due to this various political risks were also getting
developed. While developing the business in terms of international context company had
to deal with many risks and the major one is associated with political risk only. In
Sokovia they have a stable political system which always keeps the standards at high
level and also the level of income gets rises. It was been evaluated that as competition
was increasing the political risks were also getting developed and the main reason behind
it was stable political system.
 Draphram Furniture would need to monitor the risk of economic crisis also. As there
were many periods of political upheaval who resulted into the period of crisis. Due to
such crisis many problems were getting arisen and it was considered as one of the major
political risk (Morozova, Popkova and Litvinova, 2019) .With respect to this the Army
was creating opposition in terms of the current government. As furniture organization and
establishing a business in international market various changes takes place and at the
same point of time political risks also get in place. It was been determined that as
establishing the business in International market new changes gets implemented due to
risks also occur.
 Draphram furniture Ltd also need to monitor the risk of appetite in terms of potential
international expansion. In context with this political risk they need to monitor the overall
risk of competitive advantage also (De Silva, Al-Tabbaa and Khan, 2019) .As all senior
executives were mainly focused towards sharing large amount of information in relation
with the logistics network. They need to monitor it because due to this fear they were
having the fear of creating competitors.
 Another political risk was with respect to the competitive market in Sokovia. While
looking at the marketplace of Sokovia, there were around 3 international companies
which are in accordance with 40 percent of overall national sales and around 10 national
companies which led to 35 percent of all national sales.
When a business enhance their company in International context there are various risks which
can lead to certain weaknesses also. Due to such political risks it is crucial for an organization to

monitor it at appropriate period of time so that after full level of development no issues should
get forward in future.
Question 3 Define as well as discussion of various currency exchange risks
which Draphram Furniture Ltd. requires to monitor in Sokovia and possible
responses to Risk.
As foreign exchange risk occurs when a company in gauges in their financial transactions
that are denominated in a currency other than currency of country where it is based. Foreign
exchange currency risk are set to be financial risk that it presents when a financial transaction is
nominated in a currency other than a domestic currency amount of company. As if a currency is
value changes of fluctuate among when contract is being signed or at delivery date it could cause
a loss of one of parties. As foreign currency exchange risk are said to be major risk that are to be
considered by companies who are carrying their business international level as well as trading in
other markets. There are basically three types of currency exchange risk that consists of
transaction, translation as well as economic risks. As these risks are explained as follows:
 Transaction risk: This risk is faced by a company when they are making their financial
transactions among jurisdictions. Transaction risk is caused due to change in exchange
rate before their transactional settlement of amount.
 Translation risk: As this race is also known as translation exposure that is termed to be a
risk which is faced by companies that are headquartered domestically but carrying their
business in foreign jurisdiction along with complete financial performance is represented
in a domestic currency.
 Economic risk: As this race is also known as forecast risk which is said to be a risk
which company’s market value is got impacted by unavoidable exposure in terms of
exchange rate fluctuation. As these types of rest is usually occurred by macroeconomic
situations.
In terms of case study of Draphram furniture limited company requires to monitor these
currency exchange rate risk in in carrying out their business practices in Sokovian markets. As
by monitoring these risk company will be able to determine various economic risk that are
present from furniture importers in terms of Sokovian markets. From this evaluation strength as
well as weakness of monitoring currency exchange risk are as follows:
Strengths:
 By determining transaction, translation as well as economic risk company will be able to
determine their operations in terms of earning for carrying out there revenues rate as well

as overseeing other subsidiaries that are based in Sokovian markets in terms of furniture
company.
Weaknesses
 As these exchange risk could lead to have a risk of financial as well as a comic growth
that could be carried by their importers for carrying out business practices in Sokovia.
 There are also some possible responses of currency exchange risk that could be followed
by Draphram furniture limited in order to carry their business practices that are as
follows:
 Company could use forward exchange contracts India agreement under which there
business practices should agrees to buy as well as sale various amounts of foreign
currency on a particular future date in order to deal with risk.
 Currency options could be used in order to purchase as well as see the currency at a
particular rate on or prior a specific date with which could be beneficial for company in
order to deal with economic risk.
Question 4 Justified recommendation for a specific approach towards
managing an international business
There are various types of approaches like ethnocentric, polycentric and geocentric
approach which is mainly there to assure all local people that company would understand the
local market in relation with political scenarios, cultural and legal requirements and many more.
Every business organization follows different kinds of approach and with respect to this
Draphram furniture also need to apply one specific approach (Sebikari, 2019). In relation with
Ethnocentric approach it is used by those companies when they are sent to a new location from
their home country to assist due to their experience. In relation with the polycentric approach it
refers to a policy which is involved into the aspect of hiring and promoting employees. In terms
of geocentric approach it is an international recruitment policy in which the most suitable person
gets hired from whichever nationality the individual belongs to. Ethnocentric approach involves
establishing the position in foreign subsidiaries from home country. Communication becomes
easier but at the same point of time unique hurdles can also get arise. In relation with polycentric
approach companies hire host country nationals for positions in the company which is mostly
feasible in developed countries. Besides this geocentric approach it is mainly used when
companies implement a transnational orientation. So instead of maintaining the same group of
people employees are selected regardless of their nationality.
Strength and weakness of ethnocentric, polycentric and geocentric approach:-

 Ethnocentric approach is considered effective because it saves a lot of time and costs of
company as they need not to focus on unique strategies because everything is pursued in
domestic markets only while on the other hand each country is different and to become
successful it is important to make strategies in relation with International market.
 The strength of using polycentric approach is that the chances of success are more and
leads to better productivity as they have better knowledge regarding all the operations.
 Geocentric approach helps businesses to be competitive in terms of language and cultural
differences that may occur. Besides this there are certain challenges also because it
becomes difficult to hire people who can work accordingly.
In relation with Draphram Furniture Ltd, they should use geocentric approach because as in
terms of international business lot of cultural differences occur and with respect to this candidate
should be hired on the basis of that and who have full knowledge.
In context with Draphram Furniture it was recommended to that they should use geocentric
approach for their business because they were taking the business at international level and many
differences occur so it was needed to hire the best candidate which was from Australia to
Sokovia. As many language and cultural differences were getting arise due to which an effective
person was needed who can tackle such differences. Sokovia was considered as a community
oriented culture while in case of Australia they were having an individual oriented culture. It was
very important for them to use that approach which would be beneficial for the business. There
were many other approaches also but it was recommended to them that they should follow
geocentric approach. It would be better for them if they hire the most talented person from
Sokovia only because with respect to this company would not face such problems. If they will
hire the person from same country only it will be beneficial for them (Farooq, and Vij, 2018).
As a furniture company and taking the business at international level they may face many
difficulties if they just focus on ethnocentric or polycentric approach. It was been recommended
to them that they should enable such strategies regarding the approach so that they don’t face any
other problems. While looking at the phase of currency with respect to both Australia and
Sokovia, many fluctuations were getting there. It can get solved in an efficient manner only if all
they would have knowledge regarding that. So, to make it stable it was recommended that
geocentric approach would be best for them because through that all the risks would get reduced
by them.

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