Geographic Distance

Geographic distance
Farther the distance of a country, harder
to conduct the business
It also includes:
Within country distances to borders
Access to waterways and the ocean
Topography
Countrys transportation &
communications

Geographic Distance
Affects on various businesses
Low value to weight or bulk ratio products
Affected by costs increasing as transportation
distance increases
Intangible goods
Affected by the telephone traffic and number of
branches of multinational banks
Eg: equity flows
Direct investment not feasible in target country as
information and transportation will still be a problem

Economic Distance
Investment by companies should be,
In similar countries if:
Reliance is more on experience, scale
and standardization
Eg: Walmart
In dissimilar countries if:
Exploitation of cost and price difference
has to be done
Eg: Garment, footwear

Economic Distance
Disparities in supply chains and
distribution channels
Eg: Distribution within U.S. costs more than
international transportation costs involved
Cross country complexity and change make
company less agile and responsive w.r.t.
Local companies
Eg: Maytag gives better ROI to its investors
than Whirlpool and Electrolux