Transcript Analyzing International Opportunities - UAH

Analyzing International Opportunities
• Explain market-and site-screening processes
• Analyze international market research
• Learn to evaluate new investment projects
• Study issues that are important to evaluating
investment proposals
Screening
Potential Markets
and Sites
Identify Basic Appeal
Basic
Demand
Availability
of Resources
The National Business
Environment
Cultural
Economic
and Financial
Political
and Legal
Transporting
Materials
Image of
the Country
Industrialized
Markets
Emerging
Markets
Measure
Market
Potential
Measure Site Potential
Quality of Local Resources
Investment of Time and Money
Stability of Local Infrastructure
Simplified Grid to Compare Countries for Market Penetration
VARIABLE
1. Acceptable (A), Unacceptable (U) factors
a. Allows 100% ownership
b. Allows licensing to majority-owned subsidiary
WEIGHT
----
I
II
III
IV
V
U
A
A
A
A
A
A
A
A
A
2. Return (higher number = preferred rating)
a. Size of investment needed
b. Direct costs
c. Tax rate
d. Market size, present
e. Market size, 3–10 years
f. Market share, immediate potential (0–2 years)
g. Market share, 3–10 years
0-5
0-3
0-2
0-4
0-3
0-2
0-2
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4
3
2
3
2
2
2
3
1
1
2
1
1
1
3
2
2
4
3
2
2
3
2
2
1
1
1
0
18
10
18
10
2
0
0
1
0
1
0
1
0
1
3
3
2
4
2
2
3
3
3
2
3
3
14
13
TOTAL
3. Risk (lower number = preferred rating)
a. Market loss, 3–10 years
b. Exchange problems
c. Political-unrest potential
d. Business laws, present
e. Business laws, 3–10 years
TOTAL
0-4
0-3
0-3
0-4
0-2
------
Select the
Market
or Site
Field
Trips
Competitor
Analysis
Trade Shows
and Trade Missions
Interviews and
Focus Groups
Primary International
Research
Surveys
Environmental
Scanning
Evaluating Investment Proposals
Estimating Future Cash Flows
Present Value
Return on Investment
Risk and Return
Comparison of ROI Certainty
INVESTMENT A
ROI AS
PERCENTAGE
0
5
10
15
20
WEIGHTED
PROBABILITY VALUE
.15
0
.20
1.0
.30
3.0
.20
3.0
.15
3.0
Estimated ROI
10%
INVESTMENT B
WEIGHTED
PROBABILITY VALUE
0
0
.30
1.5
.40
4.0
.30
4.5
0
0
10%
Discussion
Feasibility studies showed that a $1 million investment would yield
the following return for a U.S. firm after taxes:
Country
The United States
Israel
Brazil
Zambia
Return
7%
10%
13%
16%
Where the investment should be made and explain your choice.
Evolution of the Entry Mode Decision
Experience
Wholly Owned
Subsidiary
Control
Management Contract
 Joint Venture/Alliance
Franchising
 Turnkey Project
Licensing
 Exporting
Risk
Strategic Factors in Selecting an Entry Mode
• Market size
• Cultural environment
• Political and legal environment
• Production and shipping costs