Chapter 12

Country Evaluation
and Selection

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Introduction
The Location Decision Process

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How Does Scanning Work?
Scanning techniques can help managers
both limit geographic alternatives and
consider otherwise overlooked areas

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 How Does Scanning Work?
Step 1:
Scanning
comparing country information that is

readily available, inexpensive, and fairly

comparable
Step 2:
Onsite visits

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 What Information Is
Important in Scanning?
Recognizing the major opportunity and
risk variables in deciding whether and
where to expand abroad

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 What Information Is
Important in Scanning?
Opportunities
Sales expansion
obsolescence and leapfrogging of products,

prices, income elasticity, substitution,

income equality, cultural factors and taste,
existence of a trading bloc
Cost consideration
labor, infrastructure, ease of transportation

and communications, governmental

incentives and disincentives

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 What Information Is
Important in Scanning?
Risks
Political risk
analyzing past patterns, analyzing opinions,

examining social and economic conditions

Foreign exchange risk
exchange rate changes, mobility of funds

Competitive risk
making operations compatible, spreading

risk, following competitors of customers,

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Country Comparison Tools
Understand some simplifying tools for
helping decide where to operate

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 Country Comparison Tools
Analyzing data
Grids
may depict acceptable or unacceptable

conditions
rank countries by important variables

Matrices
decide on indicators and weight them

evaluate each country on the weighted

indicators
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Country Comparison Tools
Simplified Market-Penetration Grid

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Country Comparison Tools
Opportunity-Risk Matrix

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Allocating Among Locations
Learning Objective:
Consider how companies allocate
emphasis among the countries where they
operate

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Allocating Among Locations
Allocating
Complementary strategies for
international expansion
Alternative gradual commitments
Geographic diversification versus
concentration
Reinvestment versus harvesting

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Alternative Gradual
Commitments
The Usual Patterns of Internationalization

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 Geographic Diversification
versus Concentration
Diversification strategy
go to many markets fast and then build up
slowly in each
Concentration strategy
go to one or a few markets and build up fast
before going to others
A hybrid of the above two

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 Geographic Diversification
versus Concentration
Diversify or Concentrate: The Role of Product and Market Forces

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Reinvestment and Harvesting
Reinvestment
making new commitments to maintain
competitiveness
Harvesting
reducing commitments because they do not fit
the overall strategy or because there are more
attractive alternatives

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 Non-Comparative
Decision Making
Learning Objective:
Comprehend why location decisions do not
necessarily compare different countries
possibilities

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 Non-Comparative
Decision Making
Go-no-go decisions
need to respond quickly
interdependent operations

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