1. International Business Environments & Operations
Daniels ● Radebaugh ● Sullivan
International Business Environments and Operations 15e by Daniels, Radebaugh, and Sullivan
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2. Country Evaluation and Selection
Chapter 13
Country Evaluation and Selection
Chapter 13: Country Evaluation and Selection
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3. Copyright © 2015 Pearson Education, Inc.
Learning Objectives
Comprehend company strategies for entering countries and resource allocation
Understand the use of scanning techniques in strategy development
Know the methods and problems of collecting and comparing international information
Understand some simplifying tools for helping decide where to operate
Comprehend and compare location decisions of companies
The Learning Objectives for this chapter are
To grasp company strategies for sequencing the penetration of countries
To see how scanning techniques can help managers both limit geographic alternatives and consider otherwise overlooked areas
To discern the major opportunity and risk variables a company should consider when deciding whether and where to expand abroad
To know the methods and problems of collecting and comparing international information
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4. Rationale for Country Evaluation
Concept of country scanning and evaluation: scanning vs. detailed analysis
Because firms lack sufficient resources to pursue all opportunities, they must:
determine the order of country entry
establish the resource allocation across countries
find specific geographic locations to produce or market their products
take a portfolio approach in investment

5. Location Decision Process
The Location – Decision Process
This Figure shows the different steps in the location decision process.
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6. Country Evaluation/Research-1
In country research/scanning we collect information on opportunities, risk, operations etc.
Opportunities
Sales expansion: obsolescence and leapfrogging of products, prices, income elasticity, substitution, income equality, cultural factors and taste, existence of a trading bloc
Cost consideration: labor, infrastructure, ease of transportation and communications, governmental incentives and disincentives
When scanning, managers need to use information that can reveal opportunities and risks. They might consider economic and demographic data such as income levels or population density to reveal sales potential in a market.
Managers also need to consider other variables like the potential for a product to become obsolete or even leapfrog another product.
Similarly, a firm looking at producing in foreign markets needs to consider the costs involved in doing so by exploring wage rates and differences in infrastructure that could cause operating costs to increase, and so on.
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7. Country Evaluation/Research-2
Risks
Political risk
analyzing past patterns, analyzing opinions, examining social and economic conditions
Foreign exchange risk
exchange rate changes, mobility of funds
Competitive risk
making operations compatible, spreading risk, following competitors of customers, heading off competition
Just because production costs are low or sales potential is high in a given country does not automatically mean it makes sense. Managers also need to factor risk into their decisions.
Keep in mind that companies and managers have different perceptions of what constitutes risk, that one company’s risk may be another’s opportunity, that companies can minimize risk in other ways than simply avoiding certain locations, and that all risks have trade-offs.
Risks that should be considered include political risk, foreign exchange risk, and competitive risk. When considering political risk, note that using past patterns of risk can be problematic. In fact, it’s important to consider risk as it applies to a specific company or industry. Managers should also consider the opinions of several individuals and explore social and economic conditions to gauge the potential for social uprisings.
Managers need to consider exchange rate changes and the mobility of funds when exploring foreign exchange risk. Depending on the particular situation, companies may want to ensure that they have highly liquid assets for at least some of their holdings even if it means earning a lower return.
Finally, managers should consider four factors when analyzing competitive risk: making operations compatible, spreading risk, following competitors or customers, and heading off competition.
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8. Country Evaluation/Research-3
The Distance Sensitivity of Industries: Indicators
This Table shows attributes that indicate similarity and dissimilarity between countries. Typically companies prefer to operate in environments that are similar to their home country.
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9. International Business Research
Business Research: Primary vs. Secondary
Problems with primary data: cost, availability, risk
Problems with secondary data: scarcity, accuracy, reliability, comparability, and how recent
Common Secondary Sources
Government Sources
International Organizations
Chamber of Commerce
Trade Associations
Professional Services: consultants
Country Research and Internet

10. Country Comparison Tools
Analyzing data
Grids
may depict acceptable or unacceptable conditions
rank countries by important variables
Matrices
decide on indicators and weight them
evaluate each country on the weighted indicators
After data has been collected, it needs to be analyzed. Two common tools for analyzing data are grids and matrices.
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11. Country Comparison Tools
Simplified Market-Penetration Grid
This Table shows a market penetration grid. Grids can be used to depict acceptable and unacceptable conditions and for ranking countries according to certain variables.
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12. Country Comparison Tools
Opportunity-Risk Matrix
This Figure shows the relationship between opportunity and risk. When using the matrices, managers can identify certain indicators, assign weights to them, and then evaluate each country based on the weighted indicator.
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13. Allocating Among Locations
Complementary strategies for international expansion
Alternative gradual commitments
Geographic diversification versus concentration
Reinvestment versus harvesting
At this point, companies are ready to start making decisions about how to allocate resources. Three alternative strategies are alternative gradual commitments, geographic diversification versus concentration, and reinvestment versus harvesting.
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14. Alternative Gradual Commitments
The Usual Patterns of Internationalization
This Figure shows the alternative options a firm has. Notice that a firm can minimize risk by entering countries that are most similar to the home country first and by choosing experienced intermediaries. Firms can also minimize risk by using strategies that require smaller resource commitments and by committing to only a few markets.
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15. Geographic Diversification versus Concentration
Diversification strategy
go to many markets fast and then build up slowly in each
Concentration strategy
go to one or a few markets and build up fast before going to others
A hybrid of the above two
Companies can enter markets using a diversification strategy, using a concentration strategy, or some hybrid of the two.
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16. Geographic Diversification versus Concentration
Diversify or Concentrate: The Role of Product and Market Forces
This Table shows the major variables a firm should consider when choosing its strategy.
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17. Chapter 13: Discussion Questions
What factors should we consider to scan and evaluate a country? Explain.
What problems do companies face with international business research and data collection? Explain.
What are the common sources for collecting international data? Explain.
What is country evaluation grid and opportunity-risk matrix? Explain how they help company strategy.

18. Copyright © 2015 Pearson Education, Inc.
All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America.
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