Transcript International Business

Analyzing International
Opportunities
13-1
Choosing Marketing and Production Sites
and Geographic Strategy
• Companies must determine where to
market and where to produce

Decisions on market and production
locations may be highly interdependent
• Process of determining overall
geographic strategy must be flexible
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Country conditions change
Plan must allow company to:
• respond to new opportunities
• withdraw from less-profitable operations
Choosing New Locations
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Scan for alternatives
Choose and weight variables
• Opportunities
• Market size
• Ease and compatibility
• Cost and resource availability
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Collect and analyze data for variables
Use tools to compare variables and
narrow alternatives
13-4
Screening Markets and Sites
Step 1
Step 2
Step 3
Step 4
Identify
basic appeal
Assess national
business
environments
Measure market
or site potential
Select the
market or site
Business Constraints
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Companies lack the resources to take
advantage of all international
opportunities
Companies must determine the order
of country entry
Companies must set the rates of
resource allocation among countries
13-5
Country Selection
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Companies are
attracted to countries
that:
• Are located nearby
• Share the same
language
• Have market conditions
similar to those in the
home country
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Companies pare
proposals to countries
that:
• Offer size, technology,
and other factors
familiar to company
personnel
• Allow an acceptable
percentage of
ownership
• Permit sufficient profits
to be easily remitted
13-9
Potential: Industrialized Markets
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Demographics
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Competitors’ market shares
 Import/Export
volumes
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Distribution network
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Marketing approaches
 Retail
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sales levels
Income elasticity
Potential: Emerging Markets
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Market size
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Market growth rate
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Market intensity
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Market consumption
capacity
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Commercial infrastructure
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Economic freedom
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Market receptivity
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Country risk
Issues With Emerging Economies
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Advantages may be short-lived
Competitors follow leaders into lowwage areas
Little first-in advantage for this type
of production migration
Comparability problems
13-10
Issues with Emerging Economies,
con’t
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Foreign costs rise quickly due to wage
pressures and exchange rates
Extent of “red tape”
Risk and uncertainty
Lack, obsolescence, or inaccurate
data/information to base decisions on
13-11
Select the Market or Site
Field trips
• Engage in negotiations
• Gain firsthand exposure
• Contact customers/others
Competitor analysis
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Access to inputs
Competitors’ numbers/shares
Competitors’ strategies
Channel access
Customer loyalty
Market Research Difficulties
Availability
of data
Comparability
of data
Cultural
problems
Sources of Information
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Individualized reports
Specialized studies
Service companies
Government agencies
International
organizations and
agencies
Trade associations
Information service
companies
Internet
13-12
Methods of Primary Research
Trade shows and missions
Interviews and focus groups
Surveys
Environmental scanning
Making Final Country Decisions
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Make site visits
Construct detailed estimates of costs and
expenses
Decide whether to invest alone or with a
partner
Examine financial statements in detail for
acquisitions
Watch analysis constraints such as:
• Time
• costs
13-16
Allocating (operations) Among
Locations
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Analyze effects of reinvestment
versus harvesting in existing
operating locations
Appraise interdependence of
locations on performance
Examine needs for diversification
versus concentration of foreign
operations
13-7
Diversification vs Concentration
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Diversification
• Company moves rapidly into many
foreign markets, and gradually
increasing its commitment in each
market
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Concentration
• Company moves to one or a few foreign
markets until its develops a very strong
involvement and competitive position
then move to others.
Diversify or Concentrate
International Facilities
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Analyze growth rate and sales
stability in each market
Research expected lead time over
competitors
Determine what the spillover effects
are
Measure degree of need for product
and marketing localization for
different countries
13-6