International Business Chapter Twelve Country Evaluation and Selection

2 Rationale for Country Evaluation Concept of country scanning and evaluation: scanning vs. detailed analysis Concept of country scanning and evaluation: scanning vs. detailed analysis Because firms lack sufficient resources to pursue all opportunities, they must: Because firms lack sufficient resources to pursue all opportunities, they must: determine the order of country entrydetermine the order of country entry establish the resource allocation across countriesestablish the resource allocation across countries find specific geographic locations to produce or market their productsfind specific geographic locations to produce or market their products take a Portfolio approachtake a Portfolio approach

3 Country Evaluation What factors should we consider to evaluate a country? What factors should we consider to evaluate a country? Return (opportunity) Issues Return (opportunity) Issues market size [sales potential]market size [sales potential] ease and compatibility of operationease and compatibility of operation costs and resource availabilitycosts and resource availability Risk Issues Risk Issues Political RiskPolitical Risk Competitive riskCompetitive risk Monetary riskMonetary risk

4 Risks Revisited Competitive Risk Competitive Risk Imitation lagImitation lag Oligopolistic reactionOligopolistic reaction Monetary Risk Monetary Risk Liquidity preferenceLiquidity preference Capital controlsCapital controls Exchange rate stabilityExchange rate stability Balance-of-payments accountsBalance-of-payments accounts Inflation ratesInflation rates Government spendingGovernment spending Political Risk Political Risk Operational issuesOperational issues NationalizationNationalization Government PolicyGovernment Policy

5 International Business Research Business Research: Primary vs. Secondary Business Research: Primary vs. Secondary Problems with primary data: cost, availability, risk Problems with primary data: cost, availability, risk Problems with secondary data: scarcity, accuracy, reliability, comparability, and how recent Problems with secondary data: scarcity, accuracy, reliability, comparability, and how recent Common Secondary Sources Common Secondary Sources Government SourcesGovernment Sources International OrganizationsInternational Organizations Chamber of CommerceChamber of Commerce Trade AssociationsTrade Associations Professional Services: consultantsProfessional Services: consultants Country Research and Internet Country Research and Internet

6 Country Comparison Tools Grids can be used to: Grids can be used to: depict acceptable or unacceptable conditionsdepict acceptable or unacceptable conditions rank countries according to selected, weighted variablesrank countries according to selected, weighted variables Matrices can be used to: Matrices can be used to: incorporate weighted indicators of a firm’s risks and opportunities in specific countriesincorporate weighted indicators of a firm’s risks and opportunities in specific countries plot the scores to more clearly reveal respective positions for comparative purposesplot the scores to more clearly reveal respective positions for comparative purposes Strategies for resource allocation Strategies for resource allocation Commitment-reinvestment or harvestingCommitment-reinvestment or harvesting Geographic issues-diversification vs. concentrationGeographic issues-diversification vs. concentration

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8 Opportunity-Risk Matrix

9 Chapter 12: Discussion Questions 1. What factors should we consider to scan and evaluate a country? Explain. 2. What problems companies face with international business research and data collection? Explain. 3. What are the common sources for collecting international data? Explain. 4. What is country evaluation grid and opportunity-risk matrix? Explain how they evaluate a country.