International business environment and operations 13e pearson chapter 12

Chapter Objectives• To grasp company strategies for sequencing the penetration of countries • To see how scanning techniques can help managers both limit geographic alternatives and co

International Business Environments and Operations, 13/

e

Part 5 Global Strategy, Structure, and

Implementation

Chapter 12

Country Evaluation

and Selection

Chapter Objectives

• To grasp company strategies for sequencing the penetration of

countries

• To see how scanning techniques can help managers both limit

geographic alternatives and consider otherwise overlooked areas

• To discern the major opportunity and risk variables a company should consider when deciding whether and where to expand abroad

• To know the methods and problems of collecting and comparing

Because all companies have limited resources,

they must be careful in making the following decisions:

1 In which countries to locate sales, production, and

administrative and auxiliary services

2 The sequence for entering different countries

3 The amount of resources and efforts to allocate to

each country where they operate

Location Decisions Affecting

International Operations

Scanning versus Detailed Analysis

Without scanning, a company may:

• Overlook opportunities and risks

• Examine too many or too few possibilities

What Information is Important in

Examining Economic and Demographic Variables

• Obsolescence and leapfrogging of products

Cost Considerations of Resource

Acquisition

• Labor

• Infrastructure

• Ease of Transportation and Communications

• Government Incentives and Disincentives

Factors to Consider in Analyzing

Monetary Risk

• Exchange Rate Changes

– Differences in the exchange rates can

create gains or losses

• Mobility of Funds

– Liquidity among countries varies

Competitive Risk

• Making Operations Compatible

• Spreading Risk

• Following Competitors of Customers

• Heading Off Competition

Collecting and Analyzing Data

Information is needed at all levels of

control.

• Companies should compare the cost of information with its value.

Problems With Research Results

External Sources of Information

Country Comparison Tools

• Grids

– May depict acceptable or unacceptable

conditions

– Rank countries by important variables

• Matrices allow companies to:

– Decide on indicators and weight them

– Evaluate each country on the weighted

Allocating Among Locations

• Alternative Gradual Commitments

• Geographic Diversification versus

Concentration

• Reinvestment and Harvesting

Alternative Gradual Commitments

Companies may reduce risks from the liability of

Geographic Diversification versus

Concentration

• Growth rate in each market

• Sales stability in each market

• Competitive lead time

Reinvestment and Harvesting

• FDI-financial and human capital invested

abroad

• Depending on the success of the investment, the company may reinvest or consider using the capital elsewhere

Noncomparative Decision Making

Most companies examine proposals one

at a time and accept them if they meet

minimum threshold criteria.

Future: Will Prime Locations

Change?

• Future growth rates will have

implications for locations of markets and labor forces

• Technological innovation allows for new trends in urbanization as more people

are able to work from locations of their choosing

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