IAF 605 - International Business Management

Week 9

Country Evaluation and Selection

Agenda

Review Chapter 11

Chapter 12 – Country Evaluation and Selection

Burger King Beefs Up Global Operations

Review

Chapter Objectives

To grasp company strategies 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

To know the methods and problems when collecting and comparing information internationally

To understand some simplifying tools for helping to decide where to operate

To consider how companies allocate emphasis among the countries where they operate

To comprehend why location decisions do not necessarily compare different countries’ possibilities

Companies lack resources to take advantage of all international opportunities.

Companies need to:

Determine the order of country

entry.

Set the rates of resource

allocation among countries.

In choosing geographic sites, a company must decide:

Where to sell. Where to produce.

Location, location, location

Location Decisions Affecting International Operations

Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall

Figure 12.3: The Location-Decision Process

Scanning

aids managers in considering alternatives that might otherwise be overlooked

helps limit the final detailed feasibility studies to a manageable number of those that appear most promising

Source: kltprc.net

Escalation of Commitment

Source: jnrphotography.com

Scanning for Opportunities

Sales expansion - Economic and Demographic Variables

Source: zastavki.com

Scanning for Opportunities

Resource acquisition - Cost Considerations

Source: newsdesk.si.edu

Factors to Consider in Analyzing Risk

political

monetary

competitive

natural disaster*

perceptions of risk | opportunity | how to reduce | trade-offs

* See the Disaster Risk Index: http://www.nat-hazards-earth-syst-sci.net/9/1149/2009/nhess-9-1149-2009.html

Collecting and Analyzing Data

value (revenue gains or cost savings)

costs of information

Problems

with

research

results and

data?

Some Problems with Research Results and Data

Inaccurate Info

• The amount, accuracy, and timeliness of published data vary substantially among countries

Noncomparable Info

• Managers should be particularly aware of different definitions of terms, different collection methods, and different base years for reports, as well as misleading responses

Image sources: http://aznmusic.files.wordpress.com/2008/01/chinglish.jpg; http://www.flickr.com/photos/thebusybrain/2492945625/

External Sources of Information

Individualized Reports

Specialized Studies

Service Companies

Government Agencies

International Organizations and Agencies

Trade Associations

Reminder

July 27th

group assignment

due

Country Comparison Tools – Grids and Matrices

Allocating Among Locations

Reduce the risk of liability of foreignness by moving first to countries more similar to their

home countries.

Contract with experienced companies to handle operations for them, limit the resources they

commit to foreign operations, and delay entry to many countries until they are operating

successfully in one or a few.

The Usual Pattern of Internationalization – Gradual Commitments

Geographic Diversification versus Concentration

Strategies for ultimately reaching a high level of commitment in many countries are:

• Diversification—go to many fast and then build up slowly in each.

• Concentration—go to one or a few and build up fast before going to others.

• A hybrid of the two.

To Diversify or to Concentrate: The Role of Product and Market Factors (p461)

Reinvestment Versus Harvesting (Divesting)

A company may have to make new commitments to maintain competitiveness abroad.

Companies must decide how to get out of operations if:

They no longer fit the overall strategy.

There are better alternative opportunities.

Noncomparative Decision Making - one proposal at a time

Companies may need to:

• react quickly to proposals

• respond to competitive threats

• because multiple feasibility studies seldom are finished simultaneously

Unanticipated Prospects

Proposal C

Proposal B

Proposal A

Burger King Beefs Up Global Operations (p465-470)

1. By mid-2009, Burger King was not in any of the following five countries: France, India, Nigeria, Pakistan, and South Africa. Compare these countries as possible future locations for Burger King.

2. When entering another country, discuss the advantages and disadvantages that an international restaurant company, specifically Burger King, would have in comparison with a local company in that market.

3. About two-thirds of Burger King’s restaurants and revenues are in its Americas region (United States and Canada) and one-third elsewhere. Should this relationship change? If so, why and how?

4. The case mentions that Burger King prefers to enter countries with large numbers of youth and shopping centers. Why do you think these conditions would be advantageous?

5. How has Burger King’s headquarters location influenced its international expansion? Has this location strengthened or weakened its global competitive position?

6. Evaluate Burger King’s strategy of using the Brazilian experience to guide its entries into Russia.

Homework

review Chapter 12

do quiz (Blackboard)

read Chapter 13 – Export/Import strategies

read/be prepared to discuss p499-500A Dirty Dilemma: Exporting Hazardous Waste