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International Business

Session five

Country Evaluation & Selection

Is it good time for IKEA to open in Qatar? 1-2 .

To be covered in this session • strategy for selecting countries • evaluation of country opportunities • risk variables associated with going abroad • International information collection 1-3 .

Choosing Where to Operate 1-4 .

country. or a region 1-5 .Choosing Where to Operate Objectives Move into a city.

Ownership or Partnership 1-6 .Choosing Where to Operate Strategy Export.

concentration.Choosing Where to Operate Tactics In choosing markets. two issues are important: 1. case for investment. Which market to enter (Nokia Networks project) 2. Allocating of resources (e.g. diversification) 1-7 . interdependence.

Choosing Where to Operate – Harvesting and Reinvestment Pakistan India 1-8 .

Choosing Where to Operate – Concentration Vs. Diversification Diversification Concentration .

g. BLOCKBUSTER in Germany) – costs and resource availability (BT in India) – red tape and corruption (Global corruption Ranking) 1-10 .The Environmental Climate: Country Opportunities • Factors that have the greatest influence on country selection are: – market size [sales potential] – ease and compatibility of operations (e.

per capita income. etc.e.. is probably the most important market selection variable (Millionaires in India) • Market size predictors include: – past and present sales data – socioeconomic data [GDP. i. population size. sales potential.Market Attractiveness Market size.] • Other factors to be considered include: – – – – the obsolescence and leapfrogging of products price levels and elasticity substitutability of products taste and other cultural factors 1-11 . population growth rates.

– Labor costs are a particularly important factor in production location decisions. Mahindra-Renault) • Increasingly.Country Opportunities: Costs and Resource Availability • Firms go abroad to secure resources that are either unavailable or too expensive at home (e. and products and (ii) trade restrictions are minimal.g. firms need to be near customers and suppliers in locations where (i) the infrastructure permits the efficient movement of people. materials. 1-12 .

Country Opportunities: Costs and Resource Availability Be aware of ‘adverse effects’ of reducing costs: 1-13 .

Country Risks: Reducing associated risk • Firms may reduce the associated risks by: – first entering countries similar to their home countries – enlisting experienced intermediaries to handle operations for them (Al-Bahar Group for CAT) – using operational forms that require a lower commitment of foreign resources – initially moving to fewer. foreign countries 1-14 . rather than more.

Country Risks: Reducing associated risk – Country Similarity Kuwait Oman Jordan 1-15 .

Country Risks: Reducing associated risk – Using experienced local intermediaries 1-16 .

Pattern of Internationalization 1-17 .

Types of Country Risks: Competitive Risk (e. currency depreciation) Political Risk (war. government change etc) 1-18 .g. Qtel effected by Vodaphone) Monetary Risk (e.g.

industries. secondary information sources include: Bradstreet – individualized reports from market research and business consulting firms [commissioned for a fee] – e. e.External Sources of Information • The major types of external. Dunn & – specialized studies from research organizations regarding countries.g. Diabetes UK Report.g. CIA Country Factfile – government agency socioeconomic and other reports e. etc. US Census Bureau – international organization and agency reports [e. regions.g.g. issues. World Bank Economic Report] 1-19 .