Country Evaluation and Selection

Because companies do not have sufficient resources to exploit all opportunities apparent to them, two major considerations facing companies are which mar­kets to serve and where to locate the production to serve those markets. Market-and production-location decisions are often highly interdependent be­cause markets often need to be served from local production, because firms seek nearby outlets for excess capacity, and because firms may be unwilling to invest in th ose production locations necessary to serve a desired market. Scanning techniques aid decision makers in considering alternatives that might o therwise be overlooked. They also help limit the final detailed feasibility stud­i es to a manageable number of those that appear most promising. The ranking of countries is useful for determining the order of entry into po­tent ial markets and for setting the allocation of resources and rate of expan­sion to different markets. Because each company has unique competitive capabilities and objectives, the fac tors affecting the geographic expansion pattern will be slightly different for e ach. Nevertheless, certain variables that have been shown to influence most comp anies are the relative size of country markets, the ease of operating in the spe cific countries, the availability and cost of resources, and the perceived rela­ti ve risk and uncertainty of operations in one country versus another. The amount, accuracy, and timeliness of published data vary substantially among countries. A researcher should be particularly aware of different definitions of terms, different collection methods, and different base years for re­ports, as we ll as misleading responses. Sources of published data on international business include consulting firms, go vernmental agencies, international agencies, and organizations that serve intern ational businesses. The cost and specificity of these publications vary widely Some tools frequently used to compare opportunities in various countries are gri ds that rate country projects according to a number of separate dimensions and m atrices on which companies may plot one attribute on a vertical axis and another on the horizontal axis, such as risk and opportunity or country attractiveness and company strength. Using a similar amount of internal resources, a company may choose initially to move rapidly into many foreign markets with only a small commitment in each (a d iversification strategy) or to pursue a strong involvement and commitment in one or a few locations (a concentration strategy). The major variables a company should consider when deciding whether to diversify or concentrate are the sales response to incremental increases in marketing exp enditure, the growth rate and sales stability in each market, the expected lead time over competitors, the degree of need for product and marketing adaptation i n different countries, the need to maintain control of the expansion program, an d the internal and external constraints the company faces ROI figures alone do not reveal the full impact of a specific foreign investment on total corporate performance. Companies must assess such factors as effects o n earnings in other countries. Once a feasibility study is complete, most companies do not rank investment alte rnatives but rather set some minimum-threshold criteria and either accept or rej ect a foreign project based on those criteria. This type of decision results bec ause multiple feasibility studies seldom are finished simultaneously and there a re pressures to act quickly. Reinvestment decisions normally are treated separately from new investment decis ions because a reinvestment may be necessary to protect existing re­sources' viabi lity and because there are people on location who can better judge the worthines s of proposals. Companies must develop locational strategies for new investments and devise mean

.s of deemphasizing certain areas and divesting if necessary.

Master your semester with Scribd & The New York Times

Special offer for students: Only $4.99/month.

Master your semester with Scribd & The New York Times

Cancel anytime.