Country Evaluation & Selection

International Business
Environments and Operations,
Country Evaluation & Selection

Learning Objectives
• Ability to evaluate and compare markets and compare different
countries for selection
Poll
Q. 1 How you will select new market for you
firm?
A.By Observation B. By Market Research
Q. 2 Market Research is a?
A. One time activity B. Regular activity
Introduction
Because all companies have limited resources,

they must be careful in making the following decisions:
1. In which countries to locate sales, production, and
administrative and auxiliary services
2. The sequence for entering different countries
3. The amount of resources and efforts to allocate to
each country where they operate
Location Decisions Affecting
International Operations
Scanning versus Detailed Analysis
Without scanning, a company may:

• Overlook opportunities and risks
• Examine too many or too few possibilities
What Information is Important in
Scanning?
• Opportunities
– Sales Expansion
– Resource Acquisition
• Risks
– Political Risk
– Monetary Risk
– Competitive Risk
Examining Economic and
Demographic Variables
• Obsolescence and leapfrogging of products
• Prices
• Income elasticity
• Substitution
• Income Inequality
• Cultural Factors
• Trading Blocs
Cost Considerations of Resource
Acquisition
• Labor
• Infrastructure
• Ease of Transportation and Communications
• Government Incentives and Disincentives
Factors to Consider in Analyzing
Risk
• Companies and their managers differ in their
perceptions of what is risky.
• One company’s risk may be another’s
opportunity.
• There are means by which companies may
reduce their risks other than avoiding
locations.
• There are trade-offs among risks.
Political Risk
• Analyzing Past Patterns

• Analyzing Opinions
• Examining Social and Economic
Conditions
Monetary Risk
• Exchange Rate Changes

– Differences in the exchange rates can
create gains or losses
• Mobility of Funds
– Liquidity among countries varies
Competitive Risk
• Making Operations Compatible

• Spreading Risk
• Following Competitors of Customers
• Heading Off Competition
Collecting and Analyzing Data
Information is needed at all levels of

control.
• Companies should compare the cost of
information with its value.
Problems With Research Results
and Data
• Limited Resources
• Misleading Data
• Reliance on Legally Reported Market
Activities
• Poor Research Methodology
• Noncomparable Information
External Sources of Information
• Individualized Reports
• Specialized Studies
• Service Companies
• Government Agencies
• International Organizations and Agencies
• Trade Associations
Country Comparison Tools
• Grids
– May depict acceptable or unacceptable conditions
– Rank countries by important variables
• Matrices allow companies to:

– Decide on indicators and weight them
– Evaluate each country on the weighted indicators
• External Sources of Information
• Both the specificity and cost of information will vary by source.
• 1. Individualized Reports. Market research and business
consulting firms conduct country studies for a fee. The fact that a firm can
specify the information it wants may make the cost worthwhile.
• 2. Specialized Studies. Certain research organizations generate
specific studies about countries, regions, industries, issues, etc., that they
make available for general purchase. The price is much lower than for an
individualized study.
• 3. Service Companies. Most international service-related firms
publish reports that are usually geared toward either the conduct of business in
a given country or region or about some specific subject of general interest,
such as tax or trademark legislation.
• 4. Government Agencies. Governments and their agencies
publish tomes of information designed to stimulate business activity both
at home and abroad.
• 5. International Organizations and Agencies. The United
Nations, the World Trade Organization, the International Monetary Fund,
the World Bank (IBRD) and the Organization for Economic Cooperation
and Development are but a few of the multilateral organizations and
agencies that collect and disseminate data. Many of the international
development banks even help fund investment feasibility studies.
• 6. Trade Associations. Many trade associations collect,
evaluate and disseminate a wide variety of data dealing with competitive
and technical factors in their industries. Their reports may or may not be
available to non-members. .
• 7. Information Service Companies. Certain companies
offer information-retrieval services; they maintain
databases from hundreds of sources from which they will
access data for a fee.
• 8. The Internet. The quantity of information
available via the Internet is increasingly extensive. As with
other sources, a researcher must be concerned about the
reliability and validity of information gathered from
Internet sources
Allocating Among Locations
• Alternative Gradual Commitments

• Geographic Diversification versus
Concentration
• Reinvestment and Harvesting
Alternative Gradual Commitments
Companies may reduce risks from the liability of

foreignness by:
• Going first to countries with characteristics similar to
those of their home countries.
• Having experienced intermediaries handle operations
for them.
• Operating in formats requiring commitment of fewer
resources abroad.
• Moving initially to one or a few, rather than many,
foreign countries.
Geographic Diversification versus
Concentration
• Growth rate in each market
• Sales stability in each market
• Competitive lead time
• Spillover Effects
• Need for product, communication, and
distribution adaptation
• Program control requirements
Reinvestment and Harvesting
• FDI-financial and human capital invested

abroad
• Depending on the success of the investment,
the company may reinvest or consider using
the capital elsewhere
Noncomparative Decision Making
Most companies examine proposals one

at a time and accept them if they meet
minimum threshold criteria.
Future: Will Prime Locations
Change?
• Future growth rates will have
implications for locations of markets and
labor forces
• Technological innovation allows for new
trends in urbanization as more people
are able to work from locations of their
choosing

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International Business

Environments and Operations,

Country Evaluation & Selection

Because all companies have limited resources,

Without scanning, a company may:

• Analyzing Past Patterns

• Exchange Rate Changes

• Making Operations Compatible

Information is needed at all levels of

• Matrices allow companies to:

• Alternative Gradual Commitments

Companies may reduce risks from the liability of

• FDI-financial and human capital invested

Most companies examine proposals one

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