The International Business Simulation: Market Entry

Although there are many simulation games in which learners manage a global company and make a wide range of decisions, only few simulations focus specifically on the internationalisation process of companies and the related challenges and opportunities. In response, Sim Institute published the International Business Simulation: Market Entry in September 2023. This Newsletter describes the features and uses of the simulation in both higher education and in business planning.

International Business challenges

The internationalization process of a company is a unique challenge that brings with it important questions such as:

• Which markets are the most attractive for the company to enter.
• Which entry modes to use for each individual market (e.g., franchising, joint venture, wholly owned subsidiary).
• What is the appropriate speed of internationalization when the company does not have much experience in international markets.
• Is it better to concentrate on a few promising markets or to have a smaller presence in a larger number of countries.
• Within each market, what are the right marketing and operational decisions to make, including the extent of product adaptation to local preferences, pricing, promotion expenditure and sourcing.
• How to deal with economic and pollical risk in countries with different risk profiles.
• At what point should a company exit from a market, if performance is poor.

In general management and strategy simulation games, these topics are presented alongside a range of other decisions that are not central to the question of internationalization (e.g. dividend policy, R&D expenditure). As a result, people taking courses in international business or planning corporate internationalization strategies have few tools available for them to engage in simulation based experiential learning. The International Business Simulation: Market Entry has been designed to address this. In this simulation, learners experience the internationalization journey of a company in a rich and all-encompassing way, without being confronted with information and decisions on unrelated topics. The simulation is aligned with commonly used business school curricula and textbooks in the fields of International Business, Global Strategy, and International Marketing.

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Features and learning objectives

In the Market Entry simulation, learners manage the international operations of a chain of casual dining restaurants for a period of 6 years. Each year, learners are presented with relevant news items, before making decisions on which markets to enter, which entry modes to use and how to adapt marketing & operational strategies to local conditions. From year 2 onwards, learners can grow their presence in existing markets or exit countries if performance is poor.

There are twelve countries in the game, which represent all continents of the world and account for over half the world’s population and two-thirds of global GDP. At the start, learners choose their home country and subsequently manage all decisions for the company outside their domestic market. Learners are presented with information on each country, including data on GDP, population, political risk, trade barriers, industry rivalry and cultural distance. Trade barriers and cultural distance data are presented relative to the company’s home country and help to drive a series of decisions on country selection, entry modes, product localization and sourcing.

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As learners make decisions, they experience the challenges and opportunities related to international expansion. The facilitator can introduce several major news items and crises during the game and specify the countries in which these events take place. This feature enables facilitators to give each class or session a different experience and exposes learners to the risks of doing international business. Although these events can have a dramatic impact on player performance in the game, they are not unrealistic. For example, in countries where franchising or joint ventures are the selected entry mode, the learner may be confronted with opportunism (cheating) on the side of the local partner. Another example is the occurrence of a trade war, making the sourcing of local ingredients more attractive compared to importing them from the company’s home country.

?As learners make decisions, they see their results in a series of dashboards and get feedback from customers about their performance. Results for each country are available in US dollars as well as in each market’s local currency. At the end of the game, the facilitator can view and share the results of all learners in the group and consolidate learning through a debrief discussion.

By playing the Market Entry simulation, participants learn to:

• Carry out country analysis based on economic, demographic, cultural and political information, and make market selection and entry mode decisions based on this analysis.
• Understand the characteristics of the most commonly used market entry modes.
• Design a coherent international expansion strategy and adapt it over time based on feedback and changing circumstances.
• Make effective country selection, entry mode and local market decisions.
• Manage economic and political risks and respond to unexpected news and crises.

For learning and business planning

The simulation is designed for courses at undergraduate and graduate level that deal with international business. It is typically used towards the end of the course when different topics dealt with in class are consolidated. In some cases, it may also be used at the start of the course to introduce learners to key topics and get them to deduce their own theory and frameworks from the simulation experience.

Companies can use the simulation as a tool to build in-house skills and as a starting point of an international business planning exercise. In reality, market entry decisions are often based on a mix of rational, political and emotional factors, leading to sub-optimal or poorly accepted decisions. The simulation enables different stakeholders to discuss and challenge each other in a way that is based on data and structure, rather than personal preferences.

The Market Entry simulation (including a free trial) is available both directly from Sim Institute and from Harvard Business Publishing Education.