Country
Evaluation
and
Selection
12-1
Copyright 2011 Pearson Education
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
international information
To understand some simplifying tools for helping decide where to
operate
To consider how companies allocate emphasis among the countries
where they operate
To comprehend why location decisions do not necessarily compare
different countries possibilities
12-2
Copyright 2011 Pearson Education
Introduction
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
12-3
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Scanning versus Detailed Analysis
Without scanning, a company may:
Overlook opportunities and risks
Examine too many or too few possibilities
12-4
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What Information is Important in
Scanning?
Opportunities
Sales Expansion
Resource Acquisition
Risks
Political Risk
Monetary Risk
Competitive Risk
12-5
Copyright 2011 Pearson Education
Examining Economic and
Demographic Variables
Obsolescence and leapfrogging of products
Prices
Income elasticity
Substitution
Income Inequality
Cultural Factors
Trading Blocs
12-6
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Cost Considerations of Resource
Acquisition
Labor
Infrastructure
Ease of Transportation and Communications
Government Incentives and Disincentives
12-7
Copyright 2011 Pearson Education
Factors to Consider in Analyzing
Risk
Companies and their managers differ in their
perceptions of what is risky.
One companys risk may be anothers
opportunity.
There are means by which companies may
reduce their risks other than avoiding locations.
There are trade-offs among risks.
12-8
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Political Risk
Analyzing Past Patterns
Analyzing Opinions
Examining Social and Economic
Conditions
12-9
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Monetary Risk
Exchange Rate Changes
Differences in the exchange rates can create
gains or losses
Mobility of Funds
Liquidity among countries varies
12-10
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Competitive Risk
Making Operations Compatible
Spreading Risk
Following Competitors of Customers
Heading Off Competition
12-11
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Collecting and Analyzing Data
Information is needed at all levels of control.
Companies should compare the cost of
information with its value.
12-12
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Problems With Research Results
and Data
Limited Resources
Misleading Data
Reliance on Legally Reported Market
Activities
Poor Research Methodology
Noncomparable Information
12-13
Copyright 2011 Pearson Education
External Sources of Information
Individualized Reports
Specialized Studies
Service Companies
Government Agencies
International Organizations and Agencies
Trade Associations
12-14
Copyright 2011 Pearson Education
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 indicators
12-15
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12-16
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Opportunity- Risk Matrix
12-17
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Opportunity- Risk Matrix
12-18
Copyright 2011 Pearson Education
Allocating Among Locations
Alternative Gradual Commitments
Geographic Diversification versus
Concentration
Reinvestment and Harvesting
12-19
Copyright 2011 Pearson Education
Alternative Gradual Commitments
Companies may reduce risks from the liability of
foreignness by:
Going first to countries with characteristics similar to those
of their home countries.
Having experienced intermediaries handle operations for
them.
Operating in formats requiring commitment of fewer
resources abroad.
Moving initially to one or a few, rather than many,
foreign countries.
12-20
Copyright 2011 Pearson Education
Geographic Diversification versus
Concentration
Growth rate in each market
Sales stability in each market
Competitive lead time
Spillover Effects
Need for product, communication, and
distribution adaptation
Program control requirements
12-21
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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
12-22
Copyright 2011 Pearson Education
Noncomparative Decision Making
Most companies examine proposals one
at a time and accept them if they meet
minimum threshold criteria.
12-23
Copyright 2011 Pearson Education
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
12-24
Copyright 2011 Pearson Education
PESTLE Analysis
2-25
Copyright 2011 Pearson Education
5 Forces
2-26
Copyright 2011 Pearson Education
Cultural Considerations
To understand methods for learning about
cultural environments
To analyze the major causes of cultural
difference and change
To discuss behavioral factors influencing
countries business practices
To understand cultural guidelines for companies
that operate internationally
2-27
Copyright 2011 Pearson Education
Culture
Learned norms based on values,
attitudes, and beliefs of a group of
people
2-28
Copyright 2011 Pearson Education
Cultural Diversity
A means of gaining global
competitive advantage by bringing
together people of diverse
backgrounds and experience
2-29
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Cultural Collision
Occurs in international business when:
A company implements practices that are less
effective
Employees encounter distress because of
difficulty in accepting or adjusting to foreign
behaviors
2-30
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Hofstedes Study
Cultural Dimensions
2-31
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Cultural Matrix 1
2-33
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Cultural Matrix 2
2-34
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The Idea of a Nation Delineating
Cultures
The nation is a useful definition of society
because:
Similarity among people is a cause and an effect
of national boundaries
Laws apply primarily along national lines
2-35
Copyright 2011 Pearson Education
The Nation as a Cultural Mediator
A national culture must be flexible enough to
accommodate the diversity of various
subcultures, ethnic groups, races, and classes
Yet every nation boasts certain human,
demographic, and behavioral characteristics that
constitute its national identity
2-36
Copyright 2011 Pearson Education
Country-By-Country Analysis
Managers find this difficult to implement
because:
Subcultures exist within nations
Similarities link groups from different countries
2-37
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How Cultures Form and Change
Change by Choice
Reaction to social and economic situations
Change by Imposition
Imposed introduction into a culture of certain
elements from an alien culture
2-38
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Language as Both a Diffuser and
Stabilizer of Culture
A common language within a
country is a unifying force
2-39
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Major Language Groups: Population and
Output
2-40
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Religion As A Cultural Stabilizer
Centuries of profound religious
influence continue to play a major
role in shaping cultural values
and behavior
2-41
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Behavioral Practices Affecting Business
Issues in Social Stratification
Social ranking is determined by:
Factors pertaining to you as an individual
Factors pertaining to your affiliation with
certain groups
2-42
Copyright 2011 Pearson Education
Group Affiliations Can Be:
Ascribed or Acquired
Include those based on gender, family, age,
caste, ethnic, racial, or national origin
A reflection of class and status
Include those based on religion, political
affiliation, and professional and other
associations
2-43
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Social Stratification and Employment
Practices
Performance Orientation
Open and Closed Societies
Gender-Based Groups
Age-Based Groups
Family-Based Groups
2-44
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Work Motivation
Materialism and Motivation
Expectation of Success and Reward
Performance and Achievement: The Masculinity-
Femininity Index
Hierarchies of Needs
2-45
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Hierarchy of Needs
2-46
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Relationship Preferences
Power Distance
Individualism Versus Collectivism
2-47
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Risk-Taking Behavior
Uncertainty Avoidance
Trust
Future Orientation
Fatalism
2-48
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Information and Task Processing
Perception of Cues
Obtaining Information: Low Context versus High
Context Cultures
Information Processing
Monochronic Versus Polychronic Cultures
Idealism Versus Pragmatism
2-49
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Communication
Spoken and Written Language
Silent Language
Distance
Time and Punctuality
Body Language
Prestige
2-50
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Body Language Is Not A Universal
Language
2-51
Copyright 2011 Pearson Education
Degree of Cultural Differences
Cultural Distance
When a company moves within a cluster of
culturally similar countries, it should expect to
encounter fewer cultural differences and to face
fewer cultural adjustments.
Cultural Friction
A business interaction may be viewed negatively
because of possible changes in power
relationships and the sovereignty that sets
countries apart.
2-52
Copyright 2011 Pearson Education
Company and Management Orientations
Polycentrism
belief that business units in different countries should
act like local companies
Ethnocentrism
conviction that ones own culture is superior to that of
other countries
Geocentrism
requires companies to balance knowledge of their
own organizational cultures with both home and host
country needs, capabilities, and constraints
2-53
Copyright 2011 Pearson Education
Strategies for Instituting Change
Value Systems
Cost-Benefit Analysis of change
Resistance to too much change
Participation
Reward Sharing
Opinion Leadership
Timing
Learning Abroad
2-54
Copyright 2011 Pearson Education
Cross Cultural Competence
2-55
Copyright 2011 Pearson Education
