The document discusses methods for assessing international business opportunities and risks when choosing between country options. It describes several tools for analyzing political, economic, social, technological, environmental and legal factors - including PESTEL analysis and the Harvard country analysis model. The document provides examples of how to choose and weight relevant variables, collect necessary data from sources like the CIA Factbook and World Bank, and use tools like grids and matrices to compare variables and narrow alternatives for market entry.
2. Overview
• How to assess Market opportunities and risks?
• Access to data.
• Choosing between different country options.
3. ASSESSING IB OPPORTUNITIES &
RISKS
• Choose and weight variables
– PESTEL Analysis
– The Harvard Country Analysis Model
– The Economist Model of Country Analysis
– Market Potential Index
– Risk analysis
• Collect and analyse data for variables
• Use tools to compare variables and narrow alternatives
– Grids
– Matrix
Source: Daniels, J. D., Radebaugh, L. H. and Sullivan, D. P. (2001), Globalisation and Business, New Jersey, Prentice Hall.
4. CHOOSE AND WEIGHT
VARIABLES
• General variables
• Popular tools
– PESTEL Analysis
– The Harvard Country Analysis Model
– The Economist Model of Country Analysis
– Market Potential Index
– Risk analysis
5. GENERAL VARIABLES FOR ASSESSING
OPPORTUNITIES & RISKS
Opportunities Risks
Market size Competitive risk
Ease and compatibility of
operations
Monetary risk
Costs and resource availability Political risk
6. THE PESTEL ANALYSIS
• P – Political
• E – Economic
• S – Social
• T – Technological
• E – Environment
• L – Legal.
9. DATA FOR APPLICATION OF THE MODEL
Strategy Context Performance
Goals:
Higher per-capita income level and
growth, equality of income, stability,
autonomy, defence, etc.
Policies
Fiscal, monetary policies
Exchange rate policies
Trade and investment policies
Sectoral policies
Industrial policies
Social policies
Constitutional reforms
National
Resources
Labour, capital, natural resources,
technology, geography
Players in the Game
Firms
Government actors
Non-state organisations
Unions, employer associations, religious
groups, political parties, etc.
Rules of the game
Formal rules – economic (eg. Property
rights, contract laws), political (eg.
Federal system, separation of powers),
treaties.
Informal rules – conventions, culture,
religious beliefs, ideology.
Economic
GNP
National income accounts
Prices (wages, interest rates)
Inflation
Unemployment, etc.
Social
Income distribution
Fertility, mortality, literacy, etc.
Political
Political stability, political
freedom, etc.
International
Balance of payments
Exchange rates
Tariffs, quotas.
International
Location
International organisations
Treaties on trade and investment,
international monetary system.
10. Where to get data from?
• CIA Factbook
• WTO website
• Austrade and DFAT websites
• Doing Business (World Bank) website
• World Investment Reports
33. MARKET PENETRATION GRID
• A grid may be used to compare countries on whatever factors
are deemed important.
• Both the variables and the weights will vary by product and
company.
• Grids rank countries by important variables
34. MARKET PENETRATION GRID
Country
Variable Weight I II III IV V
1. Acceptable (A), Unacceptable (U)
a. Allows 100% ownership
b. Allows licensing to majority owned subsidiary
--
--
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, 0 – 2 years
g. Market share 3 – 10 years
Total
0-5
0-3
0-2
0-5
0-3
0-2
0-2
--
--
--
--
--
--
--
4
3
2
3
2
2
2
18
3
1
1
2
1
1
1
10
3
2
2
4
3
2
2
18
3
2
2
1
1
1
0
10
3. Risk (lower number = preferred rating)
a. Market loss, 3 – 10 years (if no present penetration)
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
--
--
--
--
--
2
0
0
1
0
3
1
0
1
0
1
3
3
3
2
4
2
14
2
3
3
3
2
13
