International Business

Session five

Country Evaluation & Selection

Is it good time for IKEA to open in Qatar?

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To be covered in this session

strategy for selecting countries evaluation of country opportunities risk variables associated with going
abroad International information collection

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Choosing Where to Operate

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Choosing Where to Operate Objectives

Move into a city, country, or a region

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Choosing Where to Operate Strategy

Export, Ownership or Partnership

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Choosing Where to Operate Tactics

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

Pakistan

India
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Choosing Where to Operate Concentration Vs. Diversification

Diversification

Concentration

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.g. BLOCKBUSTER in Germany) costs and resource availability (BT in India) red tape and corruption (Global corruption
Ranking)
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Market Attractiveness
Market size, i.e., sales potential, is probably the most important market selection variable (Millionaires in India)

Market size predictors include:

past and present sales data socioeconomic data [GDP, per capita income, population size, population growth rates, etc.]

Other factors to be considered include:

the obsolescence and leapfrogging of products price levels and elasticity substitutability of products taste and other cultural factors
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Country Opportunities: Costs and Resource Availability

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

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Country Opportunities: Costs and Resource Availability

Be aware of adverse effects of reducing costs:

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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, rather than more, foreign countries

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Country Risks: Reducing associated risk Country Similarity

Kuwait

Oman

Jordan

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Country Risks: Reducing associated risk Using experienced local intermediaries

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Pattern of Internationalization

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Types of Country Risks:

Competitive Risk (e.g. Qtel effected by Vodaphone) Monetary Risk (e.g. currency depreciation)

Political Risk (war, government change

etc)

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External Sources of Information

The major types of external, secondary information
sources include:
Bradstreet

individualized reports from market research and business consulting firms [commissioned for a fee] e.g. Dunn &

specialized studies from research organizations regarding countries, regions, industries, issues, etc. e.g. CIA Country Factfile government agency socioeconomic and other reports e.g. Diabetes UK Report; US Census Bureau international organization and agency reports
[e.g. World Bank Economic Report]

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