16-03-2020

Country Evaluation & Selection

International Business

In this Session

Choosing New Locations

Allocating among
Locations

Making Final Decision

2 R Sugant
2

1
 16-03-2020

International Business

Choosing New Locations

Allocating among
Locations

Making Final Decision

3 R Sugant
3

International Business

Choosing New Location

❑ Scan for Alternatives
❑ Collect & Analyse Data
❑ Use Tools to Compare and narrow
Alternatives

4 R Sugant
4

2
 16-03-2020

International Business

Scan for Alternatives

❑ Scanning
❖ comparing country information that is readily
available, inexpensive, and fairly comparable
❖ Scanning for Opportunities
o Sales Expansion
o Resource Acquisition
❖ Risks
❑ Onsite visits

R Sugant
5

International Business
Scanning for Opportunities -
Information
❑ Sales Expansion
❖ Examining sales of complementary products
❖ Examining economic and demographic variables
o obsolescence and leapfrogging of products
o prices
o income elasticity
o Substitution
o income equality
o cultural factors and taste

R Sugant
6

3
 16-03-2020

International Business
Scanning for Opportunities -
Information
❑ Resource Acquisition
❖ Cost consideration
o Labor
o Infrastructure
o ease of transportation and communications
o governmental incentives and disincentives
o existence of a trading bloc

R Sugant
7

International Business

Important Information in Scanning

❑ Risks
❖ Political risk
o analyzing past patterns, analyzing opinions, examining
social and economic conditions
❖ Foreign exchange risk
o exchange rate changes, mobility of funds
❖ Competitive risk
o making operations compatible, spreading risk, following
competitors or customers, heading off competition

R Sugant
8

4
 16-03-2020

International Business

Collecting Data
❑ Problems with data
❖ Inaccurate information
❖ Non-comparability
❖ Limited resources
❖ Misleading data
❖ Reliance on only legal and reported market
activities
❖ Poor research methodology

R Sugant
9

International Business

Collecting Data
❑ Sources of information
❖ External
o government agencies, specialized services, and trade
associations
❖ Internal
o Observation and questionnaires

R Sugant
10

5
 16-03-2020

International Business
Analyzing data
❑ Country Comparison Tools
❖ Grids
o may depict acceptable or unacceptable conditions
o rank countries by important variables
❖ Matrices
o decide on indicators and weight them
o evaluate each country on the weighted indicators

R Sugant
11

International Business

Country Comparison Tools

Simplified Market-Penetration Grid

R Sugant
12

6
 16-03-2020

International Business

Country Comparison Tools

Opportunity-Risk Matrix

R Sugant
13

International Business

Choosing New Locations

Allocating among
Locations

Making Final Decision

14 R Sugant
14

7
 16-03-2020

International Business

Allocating Among Locations

❑ Complementary strategies for international
expansion
1. Alternative gradual commitments
2. Geographic diversification versus concentration
3. Reinvestment versus harvesting

15 R Sugant
15

International Business

Alternative Gradual Commitments

The Usual Patterns of Internationalization

R Sugant
16

8
 16-03-2020

International Business

17 R Sugant
17

International Business

Alternative Gradual Commitments

The Usual Patterns of Internationalization

• The farther a company moves outward along the

axes (A, B, C, D), the deeper its international
commitment
• Most companies move at different speeds along
different axes

R Sugant
18

9
 16-03-2020

International Business
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

R Sugant
19

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

R Sugant
20

10
 16-03-2020

International Business

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

R Sugant
21

International Business

Choosing New Locations

Allocating among
Locations

Making Final Decision

22 R Sugant
22

11
 16-03-2020

International Business

Making Final Decision

❑ Detailed Feasibility Study
❑ Company’s Financial Decision Making Tools
❑ Go-no-go decisions
❖ need to respond quickly
❖ interdependent operations

23 R Sugant
23

International Business

To recap
Choosing New Locations
• Scan for Alternatives
• Collect & Analyse Data
• Use Tools to Compare and narrow Alternatives

Allocating among Locations

• Alternative gradual commitments
• Geographic diversification versus concentration
• Reinvestment versus harvesting

Making Final Decision

• Detailed Feasibility Study
• Company’s Financial Decision Making Tools

24 R Sugant
24

12