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International Business R. M. Joshi Chapter 10: Country Evaluationand Selection
International BusinessRakesh Mohan Joshi
Professor & Chairperson, IIFT New Delhi
1
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International Business R. M. Joshi Chapter 10: Country Evaluationand Selection
COUNTRY EVALUATIONAND SELECTION
Chapter 10
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Copyright @ Oxford University PressInternational Business R. M. Joshi Chapter 10: Country Evaluationand Selection
Learn ing Objec t ives
To explain the basic approaches tocountry evaluation and selection
To discuss the concept of international
business research To elucidate different approaches for
country evaluation
To explain various tools for countryevaluation and selection
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Copyright @ Oxford University PressInternational Business R. M. Joshi Chapter 10: Country Evaluationand Selection
Sign i f icance o f Coun try Evaluat ion & Select ion
International expansion of a firm’s activities requires identification of business opportunities across theborders, evaluating, and selecting one ora few countries for its operations. Abusiness enterprise needs to deploy itsfinite resources most gainfully in
countries where it gets optimum returnsto fulfill its goals and objectives.
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App roaches for Ident i fy ing and Evaluat ing
Bus iness Oppo rtuni t ies
Reactive approach
Systematic approach
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In ternat ional Business Research The business research conducted in more
than one country, which involves systematic
gathering, recording and analyzing of data
to resolve business problems.
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Ident i fy ing Sources of Info rmat ion
Secondary information: Since carrying outoverseas field surveys involves considerable cost
and time which is saved considerably by secondary
information
Limitation of secondary information include:
• Availability
• Reliability
• Comparability
• Validity
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Preparing Research Design
Research design is the conceptual structure
within which research is conducted; it
constitutes the blueprint for the collection,
measurement and analysis of data.
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Types of Bus iness Research
Designs
Exploratory research: To gather preliminary
information that will help better define
problems and suggest hypothesis. Descriptive research: To describe business
problems, situations, business environment or
markets
Causative research: To test hypothesis to
establish cause and effect relationship
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Col lect ing Primary In format ion Primary Information:
The information collected by the researcher for
the first time.
It may be collected by conducting field surveys,
observations or conducting experiments. Various
tools used to conduct field surveys include
telephone interviews, mail surveys, electronic
surveys and personal surveys.
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Equ ivalences in Cross-coun try
Research
Equivalences refer to whether the particular
concept being studied is understood and
interpreted in the same manner by people in
different countries.
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Construct Equivalence Whether the business/marketing constructs (that
is, product functionality, interpretation of
marketing stimuli and classification schemes)
under the study have same meaning across
countries.
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Chapter 10: Country Evaluationand Selection
Types of Cons truct Equivalence
Functional equivalence: whether the function or purpose served orperformed by a given concept or behaviour isthe same across national boundaries.
Conceptual equivalence:The extent of variation in individualinterpretation of objects, stimuli, or behaviouracross cultures.
Category equivalence: The category in which the relevant objects orother stimuli are placed.
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Chapter 10: Country Evaluationand Selection
Measurement Equivalences
Establishing equivalence in terms of procedures
used to measure concepts or attitude.
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Chapter 10: Country Evaluationand Selection
Types of Measu rement Equivalence
Calibration equivalence:
Equivalence of scale or scoring procedure and equivalence of
response to a given measure in different countries.
Translation equivalence:
Equivalence in meaning while translation of the instrument
across different languages.
Metric equivalence:Equivalence of scale or procedure to establish as measure and
equivalences of responses of given measure in different countries
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Chapter 10: Country Evaluationand Selection
Sampl ing Equ ivalence
It involves comparability of samples and
samples’ representativeness to the
population.
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Chapter 10: Country Evaluationand Selection
Equ ivalence of Data Analys is
The country–culture biases needs to be
taken into account while applying uniform
analytical techniques.
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Chapter 10: Country Evaluationand Selection
Country Evaluation
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Chapter 10: Country Evaluationand Selection
Scanning the Global Economic
Environment
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Chapter 10: Country Evaluationand Selection
Populat ion
The population of a country broadly
gives a rough estimation of availability of
work-force and market potential,
although it has to be used with some
other indicators.
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Chapter 10: Country Evaluationand Selection
Income
Consumption patterns in a country are
significantly influenced by level of income.
The Gross Domestic Product of a country
provides a better estimate of the market
size compared to its population.
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Chapter 10: Country Evaluationand Selection
Coun try Class i f icat ion
on the basis o f 2006 Per capita GNI *
Low-income countries : US $ 905 orless
Lower-middle-income countries : US$ 906-3,595
Upper-middle-income countries : US$3,596-11,115
High-income countries : US$ 11,116 ormore
*World Development Indicators, World Bank as on July, 2007
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Chapter 10: Country Evaluationand Selection
Macroeconom ic Overv iew
Distribution of resources and wealth is
highly skewed among the nations. 30
advanced countries in the world with only
15.3 per cent of world’s total population
accounts for about 52 per cent of the
world’s total GDP and 67.3 per cent of
exports of goods and services.
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Chapter 10: Country Evaluationand Selection
Assess ing Market Poten t ial
Countries with high marketing potential
are often preferred locations for business
operations.
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Chapter 10: Country Evaluationand Selection
Evaluating Coun try Compet it iveness Competitiveness not only affects country’s
economic growth and long-term prosperity but
also significantly influences the business
prospects for an international firm.
Competitiveness of a nation is referred to a set of
institutions, policies, and factors that determine
the level of productivity of a country.
F t I f l i C t
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Chapter 10: Country Evaluationand Selection
Facto rs Inf luenc ing Country
Compet i t iveness Institutions
Infrastructure
Macro-economic stability
Health and primary education
Higher education and training
Goods market efficiency
Labour market efficiency
Financial market sophistication
Technological readiness Market size
Business sophistication
Innovation
St f D l t d C t
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Chapter 10: Country Evaluationand Selection
Stages of Development and Coun try
Compet i t iveness
Factor-driven economies: Such countries principally
compete based on their factor endowments, primarilyunskilled labour, and natural resources.
Efficiency-driven economies: Wages rise as a resultof economic growth and countries are required todevelop more efficient production processes, therebymoving into the efficiency-driven stage of development.
Innovation-driven economies: As the countriesmove to the innovation-driven stage, higher wages and
associated standard of living can be sustained only if their businesses are able to compete with new andunique products.
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Chapter 10: Country Evaluationand Selection
Global Competitive Index (GCI)
Provides a useful comprehensive tool to measuredifferent aspects of doing business in a particular
country, such as costs of dealing with
bureaucracy, costs of poor infrastructure, costs of
an uneducated and unhealthy workforce, costs of
dealing with violence, costs of hiring and firing
workers, costs of not having access to an efficient
financial sector, costs of not having suppliers ornetworks, costs of not being able to rely on
universities, costs of not having the best available
technology, etc.
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Chapter 10: Country Evaluation
and Selection
Business Competitiveness Index
(BCI)
Brought out by the World Economic Forum, BCI
provides a conceptual framework to rank business
competitiveness across countries. The BCI is
based on two sub-indices:
Company operation and strategy
National business environment
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International Business R. M. Joshi
Chapter 10: Country Evaluation
and Selection
Assess ing Bus iness Env i ronment A cross–country comparison of business
environment facilitates international
managers not only in country selection
but also in development of business
strategy across countries.
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International Business R. M. Joshi
Chapter 10: Country Evaluation
and Selection
Facto rs A ffect ing Ease of Doing
Business Starting a business
Dealing with licenses
Employing workers
Registering property
Getting credit
Protecting investors
Paying taxes
Trading across borders
Enforcing contracts
Closing a business
A i O l l E f D i
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International Business R. M. Joshi
Chapter 10: Country Evaluation
and Selection
Assess ing Overal l Ease of Doing
Business Singapore is the friendliest place for doing
business, followed by New Zealand, United
States, Hong Kong, Denmark, United Kingdom,
and Canada whereas Japan ranks at 12th, China
at 83rd, Russia at 106th, India at 120th, and
Brazil at 122nd place.
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International Business R. M. Joshi
Chapter 10: Country Evaluation
and Selection
Country Evaluat ion fo r Serv ices
Locat ion
In order to strategically choose global
locations, the decisions should be based
on maximising the long-term benefits of
offshoring while offsetting rising wages
and other developments.
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International Business R. M. Joshi
Chapter 10: Country Evaluation
and Selection
Too ls for Country Evaluat ion and
Selection
Trade analysis and analogy methods
Market size = Production + Imports – Exports
In the analogy method, a country at similar stage of
economic development and comparable consumer
behaviour is selected whose market size is known.
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International Business R. M. Joshi
Chapter 10: Country Evaluation
and Selection
Oppo rtuni ty-Risk Analys is
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International Business R. M. Joshi
Chapter 10: Country Evaluation
and Selection
Products - Country Matr ix Strategy
With an objective to examine market and
commodity diversification, the product-country
matrix strategy is employed. Under this
approach, previous trade statistics are analysed
to identify the major markets and major
products, based on which a suitable marketing
strategy is developed.
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International Business R. M. Joshi
Chapter 10: Country Evaluation
and Selection
Market Focus Strateg ies
In view of market potential of a region, market
focus strategies can be formulated. Under this
technique, the market potential, generally on a
regional basis is determined and major product
groups that needs to be focused are identified.
Subsequently, strategies for increasing exports
to the identified markets can be formulated.
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International Business R. M. Joshi
Chapter 10: Country Evaluation
and Selection
Grow th -Share ( BCG) Matrix
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Inte national B siness R M Joshi
Chapter 10: Country Evaluation
and Selection
Country A ttract iveness -Company Streng th
Matrix
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