External Environment and Cross-Border Markets

Where we left Judy, and this week's question

In Week 3 you compared three possible directions for Judy's company and wrote a decision memo. Each direction depended on assumptions. Some of those assumptions were about the company itself: its people, its time and its money. Others were about people and rules outside the company. A partner will pay on time. A performer is allowed to work at an event. A platform will keep showing the videos. This week is about that second group of assumptions.

Here is what the public record shows. Judy runs a public YouTube channel under the handle @judy777 and publishes videos in Korean. Taipei East, a professional volleyball team in Taipei, has published material about Tokki Cutie, a cheerleading collaboration that it describes as involving OM Entertainment, a company it presents as led by Judy. So Judy's work already sits between two languages, two sets of partners and at least two sets of rules. That position may be valuable. It may also create work that nobody sees at first.

To make the questions concrete, this chapter follows one practice scenario. It is invented for learning.

Practice scenario. In Week 3, the home team asked Judy's company to bring cheer performers to its games next season, and Judy's staff recommended answering with a smaller, conditional offer. Judy made that offer. The home team has now replied with a narrower request: bring one Korean performer to two of its home games next season. The idea is simple and attractive. The work around it is not. Someone has to decide which company signs the agreement, which language version of the agreement counts, who approves the performer's photos and schedule, how travel and payment work, and what happens if the home team and the performer understand the promise differently.

The creative idea travels easily across the border. The work does not. This week's question is: why can the same opportunity look attractive in one market and fragile in another, and how can a manager find out before making a promise?

Where this week fits

Week 4 takes the decision memo from Week 3 and asks which of its assumptions depend on conditions outside the company. The result is an environment map, which you will use in Week 5 to write goals that name the outside conditions they depend on.

Start from one activity, not one country

The external environment is everything outside the company that can change whether a planned activity succeeds: rules, partners, customers, technology and people's expectations. Defined this broadly, it includes almost everything, so it cannot guide a decision. A manager makes it useful by attaching it to one activity and one period of time. A company planning a performance service needs a different map from a company selling an online course or importing food.

Compare two ways of stating the plan. "Going cross-border between Korea and Taiwan" names two countries but hides the work. Nobody knows what to check first. "Arranging two home-game appearances in Taiwan for one Korean performer next season, with translation support" names the customer, the service and the coordination problem. With the second statement, a manager can start asking useful questions. It is still only a plan to test, but it is a plan someone can test.

Once the activity is clear, the outside conditions become easier to see. They usually fall into four groups.

• Rules. These include work permission, tax, image rights, privacy and platform policies. In the practice scenario, the key question is whether the performer is allowed to be paid for appearing at a game in Taiwan. A student does not need to know the answer. A manager does need to know which authority or adviser can answer it before anyone signs.
• Relationships. These are the partners and contacts who hold information or permission. Does the home team's staff member who made the request have the authority to sign? Does the company have a translator it trusts?
• Technology. Platforms, translation tools and shared calendars can make work faster. None of them decides who owns the promise. A video platform can help fans discover the performer, but it does not sign the agreement or pay the performer.
• Expectations. The home team may think "international performer" means extra promotion work is included. The performer may think the fee covers rehearsal time. These expectations are guesses until someone asks.

A useful environment map asks six practical questions about the activity:

1. What outside condition could change?
2. What effect would that change have on the activity?
3. Who controls the condition?
4. Who has information about it?
5. What response is available to us?
6. What would make that response unsafe, illegal, too expensive or impossible to reverse?

These six questions turn a country label into a list of things to check and people to ask. When you write your answers on one page for one activity, that page is your environment map.

Three questions about an outside condition

Managers often say "it is uncertain" when they mean three different things. Frances Milliken (1987) separated them, and the separation tells a manager what to do next.

• State uncertainty is not knowing what the condition is, or whether it will change. Example: we do not know which kind of permission the performer needs to be paid for a game appearance. The next step is to find the right source and check it.
• Effect uncertainty is knowing the condition but not knowing what it would do to our activity. Example: we know that the permission takes some weeks to arrange, but we do not know whether that would only move the date or cancel the first game. The next step is to trace how the condition reaches our schedule, cost and promises.
• Response uncertainty is knowing the problem but not knowing what we can do about it. Example: if the permission is late, could the performer appear at the second game only, or should the home team be offered a different format? The next step is to compare possible responses, including their cost and whether they can be undone.

The three kinds often appear together, but each needs a different question. "Working across Korea and Taiwan is risky" mixes all three and answers none. Splitting it tells Judy's staff what to ask first.

You do not need a number for each kind of uncertainty. Sometimes the honest answer is a range, a scenario or a small test. The method should fit the evidence you actually have.

What extra work does crossing a border create?

When a company works outside the setting where its habits were formed, it often has to do extra work that a local company does not. International business research calls this the liability of foreignness. It is most useful as a practical question: what extra work does this activity create, and who will do it?

Zaheer (1995) studied foreign-exchange trading rooms of banks in New York and Tokyo and found that foreign banks faced a real disadvantage compared with local ones. It gives us a reason to look for the extra work, not a size for it.

In the practice scenario, the extra work shows up in four places:

• Information. The company may not know which rule applies or which person at the home team can really approve the agreement.
• Coordination. The schedule has to pass through two languages and two approval routines.
• Trust. The home team may not know whether the company is allowed to arrange this kind of work, or how to complain if something goes wrong.
• Correction. A small misunderstanding takes longer to fix when the two sides do not share a language or a local contact.

Hiring a local person can reduce some of this work, but it does not remove it. The company still has to decide what that person may approve, how they are paid and who they report problems to. There is also a quieter cost. Translation, checking and follow-up are often done by one bilingual person who does not appear in the public story. If the business counts only the appearance fee and the online attention, it will underestimate the work needed to deliver the service.

Who can tell you what you need to know?

Johanson and Vahlne (2009) pointed out that the bigger problem is often not being foreign but being an outsider. An outsider is a company that is not yet part of the relationships through which useful information, trust and opportunities travel. A company can know the general rules of a country and still be an outsider to the network that matters for one activity.

Being an outsider is not the same as being new. A company can work in a market for years and still be outside the network of sports teams, event organizers or talent agencies. A small newcomer can enter through one good relationship that gives it information and a credible introduction.

The Taipei East material is a good example of what a network signal can and cannot tell you. It shows that a relationship between Taipei East and OM Entertainment existed and was described in public. To plan a new activity, a manager would still need to learn who can approve the next agreement, how the work was divided last time and whether both sides would work together again. The public page starts that inquiry. It does not finish it.

Networks also contain power. The person who controls access to a venue, a contract or the performer's schedule can shape the deal. So the useful questions are practical: who can hold back information, who can approve a commitment, who pays for a mistake, and how can the person with the least power raise a concern?

Language decides who can agree and who can object

Language is often treated as a translation cost. Brannen, Piekkari and Tietze (2014) argued that it does more than that. The language arrangement decides who receives information, who can take part in a decision and which version of a promise counts.

Three effects matter most for a small company.

• Information can change in translation. A translated message can keep the main idea but lose a deadline or a condition. "We can do it" can mean "we will look into it" to one person and "we agree" to another. A simple fix is to label every important message as received, under review, approved or committed.
• The translator holds power. The person who writes the final translation shapes what the performer believes was promised. The person least confident in the meeting language will find it hardest to object. The fix is procedural: give each affected person the version they can read, allow corrections and state which version controls if the two differ.
• Identity travels with words. A joke, a nickname or a photo caption can feel different to different audiences. The person whose name and image are used should be able to see and correct the message before it is published.

Practice scenario: "Please confirm Friday"

A coordinator in Taiwan sends the same short message to a Korean-speaking performer and to the home team's event staff: "Please confirm Friday." The coordinator means "tell me whether you have reviewed the proposed schedule." The performer understands that the event date is now fixed. The event staff are still waiting for their manager to approve the translated schedule, so they cannot agree to anything yet. Because nobody objects, the coordinator tells Judy that everything is confirmed.

The problem is not anyone's nationality. It is a vague verb and an unclear approval path. The manager can fix it by separating "received" from "approved", naming who decides, sending a translated summary and asking each person to say back in their own words what they are agreeing to.

Comparing the Taiwan side and the Korea side through mechanisms

This class brings together students from many countries, and comparison is one of its strengths. A comparison is useful when it explains how something works, such as who approves, who pays or who can read the contract. It is not useful when it describes what "people in a country are like". Statements about national character cannot be checked, and they hide the mechanism a manager can actually change.

In Judy's case, the useful comparison is between the Taiwan side and the Korea side of the same cross-border activity. The appearance, the home team and the fans are in Taiwan. The performer's terms and travel start in Korea. So this course compares the two sides by holding one question constant and asking how the answer differs. The table below asks the same question of the Taiwan side and the Korea side on purpose.

Your own experience of a country, a language or an institution is real evidence about what happened to you. It becomes useful for management when you ask what arrangement produced it. What rule or expectation shaped that experience? Would the same thing happen under a different contract, partner or approval path? Those questions keep the discussion open and turn experience into something Judy's staff can check.

Later weeks come back to cross-border comparison in teams, operations and marketing. They use this same method and refer back to this section.

What a platform does, and what it leaves to you

A creator can reach viewers in another country without opening an office there. That makes it cheaper to be noticed. It does not remove the local work of agreements, payment, permission and customer care. Stallkamp and Schotter (2021) explain that even for large platform companies, the advantage of having many users often stays local. A network that works well in one country does not automatically work in another.

A creator who uses YouTube is not a platform company. A platform connects several groups, such as viewers, advertisers and creators, and sets the rules between them. The creator is one of the users. In the practice scenario, several organizations each play a part:

• the platform helps fans discover the performer;
• the home team pays for the appearance;
• the performer carries the risk to her image and schedule;
• Judy's company coordinates the work.

Calling the whole route "the platform" hides who is responsible for each step.

Numbers from a platform need the same care. YouTube's help pages explain that its revenue figures cover income earned on the platform. They do not include a sponsorship paid directly by a brand or a fee paid by a team. Views, platform revenue, sponsorship income and cash in the company's bank account are four different measures. A manager should say which one a number describes before using it.

Working across the border without opening an office

An entry mode is the arrangement a company uses to work across a border, with customers, partners or people based in another country. Older textbooks describe a ladder from exporting to licensing, joint ventures and owning a local subsidiary. For a small company, the first step is often much smaller. Brouthers and colleagues (2022) describe newer forms such as a purely online presence, a network of partners, or a small team placed where new ideas appear.

Judy's company already works in Taiwan and sells to Taiwanese teams, so the home games are not a new market for it. The border it crosses is on the performer side: it brings performers from Korea without having an office there. For that side of the work, three small entry modes are realistic:

• Online presence. Content published for Korean-speaking and Taiwanese audiences.
• One project with a partner. For example, the two home games in the practice scenario, with a performer from Korea.
• A standing partner. For example, an agency in Korea that handles part of the performer-side work each time, such as her contract or travel.

Four questions help compare them.

1. How much do we commit before we learn anything?
2. Who controls the relationship with the customer and the quality of the service?
3. How connected are we to the network on the other side of the border?
4. What agreements are needed to coordinate the parties?

An online presence costs little but teaches little about delivering the service. One project is easy to stop but may not build a repeatable routine. A standing partner gives access but makes authority and revenue sharing more complicated.

This connects to reversibility from Week 3. A small entry can be stopped only if the company has not made promises that are hard to take back. Calling a project a "pilot" does not make it reversible if a performer has already turned down other work, or if the home team has already announced the event to its fans.

Local validation: check before you promise

Local validation means collecting evidence about the real rules, partners, customers and delivery conditions of one activity before the company commits to it. It is not a courtesy visit or a collection of friendly comments. It is a test of whether the plan still works once it meets the people who would carry it out.

A validation brief follows five steps.

1. State the plan narrowly. "There is demand in Taiwan for Korean cheerleaders" is too broad to test. "The home team will pay for two game appearances by one Korean performer, with translation support from our company" names the payer, the service and the relationship.
2. Find the people who know. Different people answer different questions. An adviser can explain a legal boundary. The performer can explain how a schedule or payment practice feels from her side. The home team can explain what it will actually pay for.
3. List every promise and the work behind it. Write down what the company would promise the home team, the performer and the fans. Then name who does each piece of work. A promise with no owner is a gap in capability: nobody will do the work. An owner who is not allowed to decide is a different gap: the work waits while someone looks for permission.
4. Set safeguards before testing demand. Some things must be settled before any test begins: the performer's consent to image use, who pays which cost, and who can stop the work. A test should never be the way a company finds out whether someone agreed.
5. Decide in advance what would make you continue, redesign or stop. Include more than money and attention. Delivery reliability, time to correct mistakes and whether the performer would accept a repeat arrangement matter too.

Worked example: from the environment map to a validation brief for the two home games

Suppose Mina has already answered the six questions for the two home games. Her environment map shows that the most important outside condition is whether the performer may be paid for appearances in Taiwan. This brief applies the five steps to that condition.

Notice the order of the work. The brief does not start by asking whether the idea will go viral. It first checks whether the company can make the promise honestly. It also separates learning from committing. If the home team values translation but cannot pay on the performer's timeline, that is useful to learn. It changes the service design before a larger promise is made.

Finally, write down what the test cannot show. Two successful games do not prove a service that can grow. One partner's enthusiasm does not prove a market. That note keeps Week 5 from turning a small signal into a large goal.

What to do with missing evidence

Missing evidence should change the work plan, not produce a confident story or an automatic stop. Unknowns need different kinds of work. A fact question (which rule applies?) needs checking. A cause question (would a translation step improve delivery or only add delay?) needs observation or a small test. A value question (how much consent or payment clarity do we require?) needs a decision and a clear line, not more searching.

Every unknown also needs an owner, or it stays a note. As Week 2 showed, a person can own the investigation without having the authority to commit the company.

Outside conditions and the four management questions

In Week 1 you met the four questions this course uses to describe any business: Target (who is involved), Value (what problem is solved), Capability (what the company can do repeatedly) and Revenue Model (how value becomes money, and when). Outside conditions can change each one. Here is how they change in the practice scenario.

• Target. The home team pays, the performer does the work, the fans watch, and Mina and the translator carry much of the coordination. Each of these parties is affected by different conditions.
• Value. The home team may value reliable coordination more than the performer's fame. If translation fails, the value delivered drops even if the performance is good.
• Capability. One successful appearance shows a connection. A capability would require routines for checking terms, translating, scheduling, supporting the performer and correcting errors every time.
• Revenue Model. The fee may arrive weeks after the company has paid for travel. Week 13 studies the difference between revenue and cash. For now, note who pays, when, and who waits.

Three case options under different environmental conditions

The environment map can be applied to all three options from Week 3. None of the options is free of outside conditions. Each moves the uncertainty to a different place.

• Option A · Expansion (expand cheerleading and sports-entertainment talent management). Growth would mean more performers, more teams and more cross-border coordination. Uncertainty moves into people and delivery: permission, consent, translation, scheduling, payment and care for more people at once.
• Option B · Boutique (a small cross-border talent and advisory service for a few clients). A narrower scope makes it easier to protect quality. Uncertainty moves into a few relationships: whether a client will pay for coordination alone, and whether the company depends on one or two people's local knowledge.
• Option C · Content-centered return (return to content, advertising, food service and personal brand). Fewer performers means less cross-border coordination. Uncertainty moves into the platform and the founder: platform rules, whether attention turns into paying customers, and how much work depends on Judy herself.

The table lists, for each option, the outside conditions to check, the question an entry test would answer, and an example of a signal that should make Judy's staff stop or review.

Class practice: one activity, one outside condition

This practice is done without AI tools. Your teacher will tell you which worksheet to use and how to submit it. The thinking is the same on any worksheet.

1. Choose one option and one activity. Pick the option you are leaning toward and name one piece of work it would need in the next 12 weeks. Make it specific enough that someone could start next week. "Bring Korean cheerleaders to Taiwan" is too broad. "Bring one Korean performer to two events for a Taiwan club" is specific enough.
2. Choose one outside condition that could change that activity. The table in the previous section gives starting points for each option.
3. Answer four short questions about it.
   • What is the condition, what do you not know about it yet, and who controls it?
   • If it goes against you, what happens to your activity?
   • If it goes against you, what could you do in response, and what could you do now to learn more without making a promise you cannot take back?
   • What must you see or have before you make a bigger promise?
4. Check each other's work. Swap with a classmate. Your classmate looks for one assumption treated as a fact, one affected person missing from your answer, and one condition that another organization controls. If a difference comes up, explain it with a rule, an information path, an approval route or a work arrangement, not with nationality or personality.

The first three questions match state, effect and response uncertainty. You do not need to use those labels. You also do not need to know the answer to a legal or policy question. You need to know what to ask, and who would know. Keep your answer for Week 5.

Using the method outside the case

The six questions from the start of this chapter work far beyond Judy's company. A student club inviting a speaker from abroad may find that the key question is whether the speaker may be paid. A restaurant working with an influencer may find that the main risk is who approves health claims about the food. What travels is the questions, not the answers: each new activity and setting needs its own check.

Key points and what you bring to Week 5

• Start from one activity and one period of time, not from a country. The narrower the activity, the easier it is to see which outside conditions matter.
• Split "it is uncertain" into three questions: what the condition is, what it would do to the activity, and what the company can do about it.
• Working across a border creates extra work in information, coordination, trust and correction. Much of that work is done by people who do not appear in the public story.
• Compare countries by mechanisms that can be checked, such as who approves, who pays and who can read the terms. Do not compare them by national character.
• Check before you promise. Set safeguards before testing demand, and decide in advance what would make you continue, redesign or stop.

For Week 5. Bring your environment map, or your answers to the four questions in the class practice. In Week 5 you will choose one option to test for 12 weeks and write a goal tree. Every goal in it should name the outside condition it depends on, who will check that condition, and what would make you change the goal.