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Country selection and evaluation
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- 5. COUNTRY SELECTION AND EVALUATION Thisprocess determines the geographical opportunities firms choose to pursue and the challenges of marketing and production site location. It goes on to carefully examine the process by describing the choice and weighing of variables used for opportunity and risk analysis as well as the inherent problems associated with data collection and analysis of a particular country.
- 6. OBJECTIVES To grasp companystrategies 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.
- 7. CONTD.. To know themethods and problems when collecting and comparing information internationally. To understand some simplifying tools for helping to decide where to operate.
- 8. STEPS REQUIRED INCOUNTRY SELECTION AND EVALUATION
- 9. SCANNING Through the useof scanning, decision makers can perform a detailed analysis of a manageable number of geographic locations.
- 10. IDENTIFICATION OF IMPORTANT FACTORSAFFECTING COUNTRY SELECTION AND EVALUATION The Environmental climate of the host country could significantly affect an enterprise’s success or failure, therefore the combination of the two factors that determine what actions should be taken should be kept in mind:
- 11. OPPORTUNITIES Opportunities are determinedby competitiveness and profitability factors. These includes:
- 12. MARKET SIZE Market sizeis determined by sales potential. Data such as GNP, per capita income, population, income distribution, economic growth rates, and levels of economic development will also be useful.
- 13. EASE AND COMPATIBILITY OF OPERATIONSCompaniesare naturally attracted to countries that are located nearby, share the same language and offer market conditions similar to those in their home countries. Beyond that, proposals may then be limited to those countries that offer, among other factors, the appropriate plant size, the local availability of resources and the sufficient repatriation of profits.
- 14. COSTS AND RESOURCE AVAILABILITY Costsare a critical factor in production location decisions. Productivity related factors include: COST OF LABOR COST OF INPUTS TAX RATES AVAILABLE CAPITAL, REAL ESTATE AND TRANSPORTATION
- 15. CONTD.. The quality ofa country’s infrastructure can be very important in location decisions. Firms often need to locate in an area that will allow them to move supplies and finished products very efficiently.
- 16. RED TAPE AND CORRUPTION RedTape includes: unnecessary paperwork having multiple people or committees to approve a decision, and, various low-level rules that make conducting one's affairs slower, more difficult, or both.
- 17. CONTD.. It usually involvesthe difficulty of: getting permission to operate, obtaining licenses to produce and market goods and satisfying government agencies on matters such as taxes, labor conditions and environmental compliance.
- 18. CONTD.. Government corruption mayinclude requirements of payments to win a contract or receive government services, such as visa issuance. Although not always a directly measurable cost, red tape and corruption increase the cost of doing business.
- 19. RISK Firms usually experiencehigher risk and uncertainty when they operate abroad. Given the same expected return, most decision makers prefer a more certain outcome to a less certain one. As part of a feasibility study, the degree of acceptable risk should be determined so a firm does not incur unacceptable costs.
- 20. TYPES OF RISKS LIABILITYOF FOREIGNNESS COMPETITIVE RISK MONETARY RISK POLITICAL RISK
- 21. COLLECTION AND ANALYSIS OFDATA Firms perform research to reduce uncertainties in their decision processes, to expand or narrow the alternatives they consider and to assess the merits of their existing programs.
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- 23. GRIDS Here country comparisonis done on the basis of potential returns and perceived risks present in the country. Countries are ranked in order of these factors. The present situation and objectives of different firms can be determined through this ranking.
- 24. MATRICES Here the countriesare arranged by managers in the: Order of perceived value of opportunity offered by the country, and Order of expected level of risk associated with operating in that country. Weights and scores are given and on those basis country is selected.
- 25. ALLOCATING AMONG LOCATIONS Over time,most of the value of a firm’s FDI comes from reinvestment. Thus, in deciding where to invest, firms must consider whether to reinvest or harvest, to what degree there is interdependence among their locations and whether they should diversify or concentrate their activities.
- 26. NON COMPARATIVE DECISION MAKING Companiesoften examine one opportunity at a time rather than ranking a set of foreign operating proposals using predetermined criteria. Companies need to respond to opportunities as they arise. Decision makers often need to react quickly for both offensive and defensive motives.
- 27. MAKING FINAL COUNTRY SELECTIONS Fornew investments companies develop detailed estimates of all costs and expenses and consider whether to enter a particular venture alone or with a partner. For acquisitions, firms will need to examine financial statements in great detail. To maximize expected gains, decisions must be made in a timely fashion.
- 28. SELECTION AND EVALUATION PROCESS FOROUTSOURCING IN I.T. BUSINESS
- 29. CONTD.. SELECTION When considering offshoreoperations firms have to look at, what is called, in the context of offshore outsourcing, low cost countries. These types of countries are usually developing countries, countries in transition, third world countries or emerging economies.
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- 34. CONTD.. EVALUATION After reviewing countryresources and pre- selecting a number of prospective outsourcing destinations it is time to evaluate those countries more in detail. Before constructing the country evaluation grid a good inventory of resources is created.
- 35. CONTD.. The resource inventoryinclude: General country information, references and research, Third party sector research, Web resources, Trade and industry association, and Government resources.
- 36. ADVANTAGES Country Selection andEvaluation helps in determining: the geographical opportunities, challenges of marketing and production site location, the order of country entry, the rates of resource allocation across countries,
- 37. CONTD.. Where to marketand where to produce.
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- 40. CONTD.. Ford Motor Companyis an American multinational corporation and the world's fourth largest automaker based on worldwide vehicle sales. It emphasised on 100% control over foreign expansion.
- 41. CONTD.. While Fordattained international status in1904 with the founding of Ford of Canada, it was in 1911 the company began to rapidly expand overseas. By the end of 1919, Ford was producing 50% of all cars in the United States, and 40% of all British ones By 1920, half of all cars in the U.S. were Model Ts.
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- 43. CONTD.. Soon there wasopening of assembly plants in England and France, followed by Denmark (1923), Germany (1925), Austria (1925) and Argentina (1925)and also in South Africa (1924) and Australia (1925) as subsidiaries of Ford of Canada due to preferential tariff rules for Commonwealth countries.
- 44. CONTD.. By 1930Ford was manufacturing or assembling automobiles in 20 foreign countries. By 1998, Ford sold in over 200 countries and territories and had production in 30 different countries.
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- 46. CONCLUSION It helps indetermining the geographical opportunities firms choose to pursue. It helps in determining challenges of marketing and production. It helps in determining site location. Both the order of country entry as well as the rates of resource allocation across countries can be determined through this process.
- 47. CONTD.. It is dueto this process that careful examination is done by describing the choice and weighing of variables used for opportunity and risk analysis. Decisions regarding whether to continue investing in a particular operation or to harvest the earnings (and possibly divest the assets) and use them elsewhere are taken with the help of country evaluation.
- 48. CONTD.. It promotes crossborder transactions of goods, services, resources between two or more nations. It helps in the transaction of economic resources including capital, skills, people etc. for international production of physical goods and services.
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