Chapter 12 Country Evaluation and Selection Copyright 2015

Chapter 12 Country Evaluation and Selection Copyright © 2015 Pearson Education, Inc. 13 -1

Learning Objectives Grasp company strategies for sequencing the penetration of countries p See how scanning techniques can help managers both limit geographic alternatives and consider otherwise overlooked areas p Discern the major opportunity and risk variables to consider in deciding whether and where to expand abroad p Know the methods and problems of collecting and comparing international information p Copyright © 2015 Pearson Education, Inc. 13 -2

Learning Objectives Understand some simplifying tools for helping decide where to operate p Consider how companies allocate emphasis among the countries where they operate p Comprehend why location decisions do not necessarily compare different countries’ possibilities p Fathom the conditions that may cause prime business locations to change in the future p Copyright © 2015 Pearson Education, Inc. 13 -3

Introduction p When making country selection decisions companies must consider Where to locate sales, production, and administrative and auxiliary services n The sequence for entering different countries n The portion of resources and efforts to allocate to each country where they operate n Copyright © 2015 Pearson Education, Inc. 13 -4

Introduction The Location – Decision Process Copyright © 2015 Pearson Education, Inc. 13 -5

How Does Scanning Work? p Step 1: n p Scanning p comparing country information that is readily available, inexpensive, and fairly comparable Step 2: n Onsite visits Copyright © 2015 Pearson Education, Inc. 13 -6

What Information Is Important in Scanning? p Opportunities n n Sales expansion p obsolescence and leapfrogging of products, prices, income elasticity, substitution, income equality, cultural factors and taste, existence of a trading bloc Cost consideration p labor, infrastructure, ease of transportation and communications, governmental incentives and disincentives Copyright © 2015 Pearson Education, Inc. 13 -7

What Information Is Important in Scanning? p Risks n Political risk p analyzing past patterns, analyzing opinions, examining social and economic conditions n Foreign exchange risk p exchange rate changes, mobility of funds n Competitive risk p making operations compatible, spreading risk, following competitors of customers, heading off competition Copyright © 2015 Pearson Education, Inc. 13 -8

Collecting and Analyzing Data p Problems with data n Inaccurate information n Non-comparability n Limited resources n Misleading data n Reliance on only legal and reported market activities n Poor research methodology Copyright © 2015 Pearson Education, Inc. 13 -9

Collecting and Analyzing Data p Where can companies collect data? n Sources of information p External § government agencies, specialized services, and trade associations p Internal § Observation and questionnaires Copyright © 2015 Pearson Education, Inc. 13 -10

Country Comparison Tools p Analyzing data n Grids p may depict acceptable or unacceptable conditions p rank countries by important variables n Matrices p decide on indicators and weight them p evaluate each country on the weighted indicators Copyright © 2015 Pearson Education, Inc. 13 -11

Country Comparison Tools Simplified Market-Penetration Grid Copyright © 2015 Pearson Education, Inc. 13 -12

Country Comparison Tools Opportunity-Risk Matrix Copyright © 2015 Pearson Education, Inc. 13 -13

Allocating Among Locations p Allocating n Alternative gradual commitments n Geographic diversification versus concentration n Reinvestment versus harvesting Copyright © 2015 Pearson Education, Inc. 13 -14

Alternative Gradual Commitments The Usual Patterns of Internationalization Copyright © 2015 Pearson Education, Inc. 13 -15

Geographic Diversification versus Concentration p Diversification strategy n p Concentration strategy n p go to many markets fast and then build up slowly in each go to one or a few markets and build up fast before going to others A hybrid of the above two Copyright © 2015 Pearson Education, Inc. 13 -16

Geographic Diversification versus Concentration Diversify or Concentrate: The Role of Product and Market Forces Copyright © 2015 Pearson Education, Inc. 13 -17

Reinvestment and Harvesting p Reinvestment n p making new commitments to maintain competitiveness Harvesting n reducing commitments because they do not fit the overall strategy or because there are more attractive alternatives Copyright © 2015 Pearson Education, Inc. 13 -18