1. Chapter 6 Assessing Countries’
Attractiveness

2. The foreign markets entry decision-making1
COUNTRY OPPORTUNITIES
Analysis
(Assessing Country
Attractiveness)
COUNTRY RISK ANALYSIS 2
External
Internal 3
COMPETITIVE ANALYSIS 4
ENTRY MODE
Implementation 5
DEVELOPMENT PATHS 6
ORGANISATION:CONTROL

3. What makes a country attractive for foreign investors?
Industry
Resources
Market
Competition
Size and
Growth
Incentives
Risks
- Is the country
a critical source of
Nature of the
demand in
this country?
Intensity of Rivalry
-Entry barriers
- Bargaining Power of
Suppliers and
Customers
-Taxes - Subsidies
- Regulations
- Government
Contracts
Ease of Doing
Business
- Political
-Economical
-Competitive
-Operational
- Economic
Factors
Skilled Personnel
Raw materials?
Components?
Labor?
Technological
innovation?
Learning?
Life Cycle
Segmentation
-Quality of demand
- Demographic
Factors
- Public Policy
Factors
- Sociological
Factors
- Quality of
Infrastructure and
supporting services
- Location

4. (Circles are proportional to GDP)
Countries’ growth life cycle
Average Growth Rate
GDP/ Cap US$ 2009
(Circles are proportional to GDP)

5. Quality of markets: Segmentation

6. Middle class effect in emerging countries

7. Middle Class effect in China
158%
VCRs
68%
Washing machines
79%
Refrigerators
Growth
143%
Televisions
605%
Telephones
GNP/per cap
36% 0%
100%
200%
300%
400%
500%
600%
700%
Source: : World Bank & EIU

8. Middle Class in India McKinsey Survey2007 0% 10% 20% 30% 40% 50% 60%
100
200
300
400
500
600
700
800
900
1000
Low Middle Class
“Seekers” ( Rp)
( Us$)
Middle Class
“Strivers” ( Rp)
( US$)
“Global”
Above Rp
>21000US$
“Aspirers”
( Rp)
( US$)
Deprived
Below 90000Rp
<2000US$
Thousand Rupiah
Per Household
1US$=45.7Rp)
2025
2015
2005
Source: McKinsey: The 'Bird of Gold': The Rise of India's Consumer Market,2007 8

9. Middle Class in India McKinsey Survey2007 Total Population :
Urban Population %:
30%
35%
40%
# of Urban household in Middle class 8 49 94
Household size:
5.4
5.1 5
Urban Middle Class Population:
Source: McKinsey: The 'Bird of Gold':
The Rise of India's Consumer Market,2007
43.2
249
470

10. Value for Shareholders,
Is the business profitable in this country?
Customer
Value
Value Kept by
Customer
Price
>
Competitive Forces
Value for Shareholders,
Community (Taxes) ,
Employees (Bonuses)
Value
Captured
Costs
>
Internal Costs
Factor Costs
Technology
Management
Cost of
Creating Value
Purchased Supplies
Volume

11. Profitability Drivers
Sociological
Factors
Demand
Economic
Value
Demographic
Factors
Industry and
Country
Attractiveness
Competitive
Forces
Public Policy
Factors
Risks
Economic
Growth
Company Competitive Advantages
Sustainable Differentition
Costs
Advantages
Customer
Value
Innovation

12. Is the business profitable?
Porter’s Five Forces
Imitative behaviour: when a business is perceived as lucrative many competitors
jump at it
New
Entrants
Barriers to Entry
Legal: licenses
Partnering
Distribution
Complexity of Competitive Context
Overcapacity
Undifferentiated competitive approaches
Price based competition
Protected local firms
Intricated networks
Leading to:
Intensity of
Rivalry and
Competition
Suppliers
Buyers
Price conscious
Local Content requirements create monopolies
Protected suppliers gives
them high bargaining power
The sixth force: Government
Protectionism
Import Substitution
Strong regulation
Substitutes
Source: Michael E. Porter

13. Is the business risky?
ISD 6

14. Countries’ Risks
Source: Global Insight, 2010 14

15. Relationship between country risks and Foreign Direct Investments
Source:
UNCTAD for FDI and Global Insight for Risks 15

16. Assessing Country Risks
Methods:
Grand Tour
Banks
Consultants
Trade Commissions
Ratings
Intelligence building
Availability of data
Reliability of data
Bias
Cultures
Issues:
Don’t rely on one single source
Don’t delegate the interpretation to third parties
Invest in intelligence
Look at operational issues
Lessons:

17. Ease of Doing Business
Economy
Ease of Doing Business Rank
Starting a Business
Dealing with Construction Permits
Getting Electricity
Registering Property
Getting Credit
Protecting Investors
Paying Taxes
Trading Across Borders
Enforcing Contracts
Resolving Insolvency
Singapore 1 4 3 5 14 8 2 12
Hong Kong 57 16
Korea, Rep. 24 26 11 71 79 38 13
Japan 20
107 63 58 17
120 34
Taiwan 25 87 33 67 23 88
Denmark 31 10 29 7 32 9
Norway 6 41 60 48 27
United Kingdom 19 22 68 21
Sweden 46 50 54
Germany 98 15 77 97 89 36
Switzerland 85
166 43
France 30 62
149
South Africa 35 44
124 76
144 81
China 91
151
179
115 40
122 75
Russia
111
178
183 45
105
160
Brazil
126
127 51
114
150
121
118
136
India
132
181
147
109
182
128
Source: Woldd Bank, 2