Assessing Country Attractiveness Flashcards
How are decisions of where to enter made?
- PESTLE
- Porter’s Diamond
- National competitiveness
How are decisions made of how to enter?
Non equity modes: smaller commitments, easier to reverse e.g exporting
Equity modes - substantial investments, hard to reverse, FDI
What does the scope of international entry consist of?
Export from a domestic base (increased commitment to foreign market)
Licensing/franchising overseas (higher amount of invested resources)
Joint venture overseas/wholly owned subsidiary (high exit barriers)
What is FDI?
- Occurs when a firm invests directly in facilities to produce and/or market a product in a foreign country
- Significant equity stake in (10%+) in a foreign business entity
- FDI gives the holder a degree of ownership and control of that entity
- Includes joint ventures and wholly owned subsidiaries (greenfield and brownfield)
What is the difference between an international firm and a multinational firm?
International firms mainly do importing and exporting.
Once a firm engages in FDI, it becomes a multinational enterprise (MNE)
What do MNEs do FDI and not exporting or licensing?
The limitations of exportingL
- Geographic distance (E.g delivery risks)
- Low value to weight ratio (E.g cement, beer, newspapers)
Limitations of licensing/franchising:
- Limited control
- Tacit knowledge
What are the motives for internationalisation/FDI?
- Market seeking: limited domestic capacity, delivery/service assurance, following customers
- Resource seeking: access to national resources
- Efficiency seeking: factor costs
- Innovation seeking: knowledge
What are the basic assumptions of the Uppsala Model of Internationalisation?
- Firms develop in domestic home market first
- Largest obstacle to internationalisation is lack of knowledge and resources
- Overcome this obstacle by incremental decision making and learning
- Start with small commitment, increase over time
- Firm most likely to enter psychically class foreign market
What states do firms go through on the Uppsala model?
- License
- Export via agent or distributor
- Export through own sales representative or sales subsidiary
- Local packaging and/or assembly
- FDI
What are the criticisms of the Uppsala model?
Firms don’t all follow this sequential model of levels of commitment and psychic distance
They may engage several modes simultaneously, even in the same nation
Some firms follow lead firms e.g services companies, suppliers
What are born global firms?
Business organisations that seek superior international performance from the application of knowledge based resources to the sale of outputs in multiple countries
What does Rennie (1993) say about born global firms?
“BGs compete on quality and value with the latter created through innovative technology and product design at a competitive price”
What are examples of born global firms?
- Skype
- Logitech
- Beats audio
What is the process for assessing country attractiveness?
Initial screening: shortlist potential countries
Assess general market or site potential: market size economic growth, factor inputs
Assess general business environment: PESTLE
Product/service/production site assessment: change in business climate
Undertake risk assessment: change in business climate
Select market or site: settle on a country
What does product/service market assessment entail?
- Size and growth rate of market; population, demographics, income, wealth
- Local standards and regulations: contents, packaging, quality etc
- Tariffs and other trade/economic regulations: FDI barriers, tax laws
- Local socio-cultural factors: lifestyles, values, religion, customs, unemployment
- Politics and policy: internal political developments - links to the market
- Social and ecological movements: advocacy and campaigns - links to the market
