Chapter6-Assessing countries attractiveness

Report
Chapter 6
Assessing Countries’
Attractiveness
1
1
The foreign markets entry decision-making
1
Analysis
(Assessing Country
Attractiveness)
COUNTRY OPPORTUNITIES
2
COUNTRY RISK ANALYSIS
3
COMPETITIVE ANALYSIS
4
Implementation
• External
• Internal
ENTRY MODE
DEVELOPMENT PATHS
5
6
2
ORGANISATION:CONTROL
What makes a country attractive for foreign investors?
Country
Size and
Growth
- Economic
Factors
- Demographic
Factors
- Public Policy
Factors
- Sociological
Factors
Resources
Incentives
- Is the country
a critical source
of
• Skilled Personnel
• Raw materials?
• Components?
• Labor?
• Technological
innovation?
• Learning?
-Taxes
- Subsidies
- Regulations
- Government
Contracts
- Ease of Doing
Business
Industry
Risks
- Political
-Economical
-Competitive
-Operational
- Quality of
Infrastructure and
supporting services
- Location
3
Market
Nature of the
demand in
this country?
-Life Cycle
-Segmentation
-Quality of
demand
Competition
Intensity
of Rivalry
-Entry barriers
- Bargaining Power
of
Suppliers and
Customers
Countries’ growth life cycle
12,00%
China
10,00%
Average Growth Rate 1990-2009
8,00%
India
M alaysia
6,00%
Singapore
Korea
Chile
4,00%
Hong Kong
Indonesia
Australia
Philippines
M exico
South
2,00% Africa Brazil
Russia
0,00%
-1000
9000
USA
France GermanyUK
19000
29000
-2,00%
GDP/ Cap US$ 2009
(Circles are proportional to GDP)
4
39000
49000
Quality of markets: Segmentation
5
Middle class effect in emerging countries
6
Middle Class effect in China
158%
VCRs
68%
Washing machines
79%
Refrigerators
Growth
1990-1995
143%
Televisions
605%
Telephones
36%
GNP/per cap
0%
100%
200%
300%
400%
Source: : World Bank & EIU
7
500%
600%
700%
Middle Class in India
McKinsey Survey2007
60%
50%
2005
40%
2015
2025
30%
20%
10%
0%
Thousand Rupiah
Per Household
1US$=45.7Rp)
0
100
Deprived
Below 90000Rp
<2000US$
200
“Aspirers”
(90000-200000Rp)
(2000-4400US$)
300
400
500
600
Low Middle Class
“Seekers” ( 200000-500000 Rp)
(4400-11000Us$)
700
800
Middle Class
“Strivers” (500000-1000000Rp)
(11000-21000US$)
900
1000
“Global”
Above 1000000Rp
>21000US$
Source: McKinsey: The 'Bird of Gold': The Rise of India's Consumer Market,2007
8
8
Middle Class in India
McKinsey Survey2007
Total Population :
Urban Population %:
# of Urban household
in Middle class
Household size:
Urban Middle Class
Population:
1090 M
1250 M
1400 M
30%
35%
40%
8
49
94
5.4
5.1
5
43.2
249
470
9
Source: McKinsey: The 'Bird of Gold':
The Rise of India's Consumer Market,2007
Is the business profitable in this country?
Customer
Value
Competitive
Forces
Value Kept
by
Customer
Price
Value for Shareholders,
Community (Taxes) ,
Employees (Bonuses)
Costs
Factor Costs
Technology
Management
>
Cost of
Creating Value
>
Internal Costs
Purchased Supplies
Volume
10
Value
Captured
Profitability Drivers
Sociological
Factors
Demographic
Factors
Demand
Competitive
Forces
Public Policy
Factors
Economic
Value
Industry and
Country
Attractiveness
Risks
Economic
Growth
Company Competitive Advantages
Sustainable Differentition
Costs
Advantages
11
Customer
Value
Innovation
Is the business profitable?
Porter’s Five Forces
• Imitative behaviour:
Barriers to Entry
• Legal: licenses
• Partnering
• Distribution
• Complexity of Competitive
Context
Suppliers
New
Entrants
– Overcapacity
Leading to: – Undifferentiated competitive
approaches
– Price based competition
– Protected local firms
– Intricated networks
Intensity of
Rivalry and
Competition
• Local Content requirements
create monopolies
Buyers
• Price
conscious
The sixth force: Government
• Protected suppliers gives
them high bargaining power
Source: Michael E. Porter
when a business is perceived
as lucrative many competitors
jump at it
Substitutes
12
• Protectionism
• Import Substitution
• Strong regulation
Is the business risky?
ISD 6
13
Countries’ Risks
Source: Global Insight, 2010
14
14
Relationship between country risks
and Foreign Direct Investments
Source:
UNCTAD for FDI and
Global Insight for Risks
15
15
Assessing Country Risks
Methods:
Issues:
Lessons:
 Grand Tour
 Banks
 Consultants
 Trade Commissions
 Ratings
 Intelligence building
 Availability of data
 Reliability of data
 Bias
 Cultures
 Don’t rely on one single source
 Don’t delegate the interpretation to third parties
 Invest in intelligence
 Look at operational issues
16
Ease of Doing Business
Economy
Ease of Doing
Business
Rank
Dealing with
Construction
Permits
Starting a
Business
Singapore
1
4
Hong Kong
2
5
Korea, Rep.
8
24
Japan
20
107
Taiwan
25
Denmark
Norway
United
Kingdom
Sweden
Germany
Switzerland
Getting
Electricity
3
Registering
Property
Getting Credit
5
14
8
1
4
57
4
26
11
71
8
63
26
58
24
16
87
3
33
5
31
10
13
6
41
60
12
7
19
22
60
14
46
23
8
19
98
15
26
85
46
France
29
25
South Africa
35
China
91
Russia
120
Brazil
126
India
132
Protecting
Investors
Paying Taxes
Enforcing
Contracts
Resolving
Insolvency
4
1
12
2
3
3
2
5
16
79
38
4
2
13
17
120
16
34
1
67
79
71
23
88
14
11
24
29
14
7
32
9
8
48
24
27
9
4
4
68
1
10
24
13
21
6
19
48
29
50
8
54
19
2
77
24
97
89
12
8
36
6
14
24
166
12
41
23
43
30
62
149
48
79
58
24
6
46
44
31
124
76
1
10
44
144
81
77
151
179
115
40
67
97
122
60
16
75
111
178
183
45
98
111
105
160
13
60
120
127
51
114
98
79
150
121
118
136
166
181
98
97
40
46
147
109
182
128
Source: Woldd Bank, http://www.doingbusiness.org/EconomyRankings/
17
2
Trading
Across
Borders

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