2
4
3
5
1
2
COUNTRY OPPORTUNITIES
COUNTRY RISK ANALYSIS
COMPETITIVE ANALYSIS
ENTRY MODE
DEVELOPMENT PATHS
ORGANISATION:CONTROL6
Analysis(Assessing CountryAttractiveness)
Implementation
• External• Internal
The foreign markets entry decision-making
3
What makes a country attractive for foreign investors?
Country Industry
Size and Growth
RisksIncentivesResources Market Competition
- SociologicalFactors
- DemographicFactors
- Public PolicyFactors
- EconomicFactors
- Is the country a critical source of• Skilled Personnel• Raw materials?• Components?• Labor?• Technological innovation?• Learning?
- Quality ofInfrastructure andsupporting services- Location
-Taxes- Subsidies- Regulations- Government Contracts- Ease of
Doing Business
- Political -Economical -Competitive -Operational
Nature of the demand in this country?
- Life Cycle- Segmentation-Quality of demand
Intensity of Rivalry
-Entry barriers- Bargaining Power of Suppliers and Customers
4
Countries’ growth life cycle
-2,00%
0,00%
2,00%
4,00%
6,00%
8,00%
10,00%
12,00%
-1000 9000 19000 29000 39000 49000
Russia
USA
China
Singapore
Korea
UKGermany
Australia
France
IndiaMalaysia
Chile
Philippines
Indonesia
Mexico
Hong Kong
Brazil
South Africa
GDP/ Cap US$ 2009(Circles are proportional to GDP)
Aver
age
Gro
wth
Rat
e 19
90-2
009
7
Telephones
36%
605%
143%
79%
68%
158%
0% 100% 200% 300% 400% 500% 600% 700%
GNP/per cap
Televisions
Refrigerators
Washing machines
Middle Class effect in China
Source: : World Bank & EIU
VCRs
Growth 1990-1995
8
8
0%
10%
20%
30%
40%
50%
60%
0 100 200 300 400 500 600 700 800 900 1000
Low Middle Class“Seekers” ( 200000-500000 Rp)
(4400-11000Us$)
Middle Class“Strivers” (500000-1000000Rp)
(11000-21000US$)
“Global”Above 1000000Rp>21000US$
“Aspirers”(90000-200000Rp)(2000-4400US$)Deprived
Below 90000Rp<2000US$
Thousand RupiahPer Household1US$=45.7Rp)
2025
20152005
Middle Class in IndiaMcKinsey Survey2007
Source: McKinsey: The 'Bird of Gold': The Rise of India's Consumer Market,2007
9
Source: McKinsey: The 'Bird of Gold': The Rise of India's Consumer Market,2007
Household size:
Urban Population %:
Total Population :
# of Urban household in Middle class
Urban Middle Class Population:
1090 M 1400 M1250 M
30% 35% 40%
8 9449
5.4 55.1
43.2 249 470
Middle Class in India McKinsey Survey2007
10
Value Keptby
Customer
Internal Costs
Purchased Supplies
Cost ofCreating Value
>
Value for Shareholders,Community (Taxes) , Employees (Bonuses)
Price
ValueCaptured
Is the business profitable in this country?
>Costs
CompetitiveForces
Customer Value
Factor CostsTechnology
Management
Volume
11
Profitability Drivers
Industry andCountry Attractiveness
Demand
CompetitiveForces
Risks
Customer Value
Innovation
Company Competitive Advantages
Sustainable Differentition
Costs Advantages
SociologicalFactors
DemographicFactors
Public PolicyFactors
EconomicGrowth
Economic Value
12
Is the business profitable?Porter’s Five Forces
NewEntrants
Substitutes
Suppliers Buyers
Barriers to Entry• Legal: licenses• Partnering• Distribution• Complexity of Competitive
Context
Intensity ofRivalry andCompetition
The sixth force: Government
Source: Michael E. Porter
• Imitative behaviour: when a business is perceived as lucrative many competitors
jump at it
Leading to:
– Overcapacity– Undifferentiated competitive
approaches– Price based competition– Protected local firms– Intricated networks
• Local Content requirements create monopolies
• Protected suppliers gives them high bargaining power
• Protectionism• Import Substitution• Strong regulation
• Price conscious
1515
Relationship between country risksand Foreign Direct Investments
Source: UNCTAD for FDI and Global Insight for Risks
16
Assessing Country RisksMethods: Grand Tour
Banks Consultants Trade Commissions Ratings Intelligence building
Availability of data Reliability of data Bias Cultures
Issues:
Lessons:
Don’t rely on one single source Don’t delegate the interpretation to third parties Invest in intelligence Look at operational issues
17
Ease of Doing BusinessEconomy
Ease of Doing
Business Rank
Starting a Business
Dealing with Construction Permits
Getting Electricity
Registering Property
Getting Credit
Protecting Investors
Paying Taxes
Trading Across Borders
Enforcing Contracts
Resolving Insolvency
Singapore 1 4 3 5 14 8 2 4 1 12 2
Hong Kong 2 5 1 4 57 4 3 3 2 5 16Korea, Rep. 8 24 26 11 71 8 79 38 4 2 13
Japan 20 107 63 26 58 24 17 120 16 34 1
Taiwan 25 16 87 3 33 67 79 71 23 88 14
Denmark 5 31 10 13 11 24 29 14 7 32 9
Norway 6 41 60 12 8 48 24 27 9 4 4United Kingdom 7 19 22 60 68 1 10 24 13 21 6
Sweden 14 46 23 8 19 48 29 50 8 54 19
Germany 19 98 15 2 77 24 97 89 12 8 36Switzerland 26 85 46 6 14 24 166 12 41 23 43
France 29 25 30 62 149 48 79 58 24 6 46
South Africa 35 44 31 124 76 1 10 44 144 81 77
China 91 151 179 115 40 67 97 122 60 16 75
Russia 120 111 178 183 45 98 111 105 160 13 60
Brazil 126 120 127 51 114 98 79 150 121 118 136
India 132 166 181 98 97 40 46 147 109 182 128Source: Woldd Bank, http://www.doingbusiness.org/EconomyRankings/