Michigan State University Global Online

The Structural Analysis of Industries Forces that Determine Industry Profitability Rivalry among current competitors Rivalry among substitute products Bargaining power of suppliers Bargaining power of buyers Threat of new firms

Michigan State University Global Online Sub-forces that Impact Industry Structure Economic conditions Political environment and considerations Regulatory issues Demographics Technology Business Culture

Traditional Country Risk Variables Political Stability Quality of Government Leadership Macro Economics Policy Management Participation of the Private sector in the Economy Regulatory/ Legal System Effectiveness Prospects for Economic Growth Level of External Debt and access to Foreign Capital Strength of the Domestic Financial System

Country Risk Models Mid 1970’s – Countries Don’t Fail – Focus on Political Risk and Competence of Political Leadership Late 1970’s – Macro Economic Policy – Data Gathering Early 1980’s – Country Cash Flow – External Debt Service Capacity Mid 1980’s – Comparatives Country Risk Models – Risk vs. Opportunity Assessment

Country Risk Models Late 1980’s – International Monetary Fund Seal of Approval – Sources and Uses of Capital Early 1990’s – Global Capital Markets Analysis – Structural Competitiveness Mid 1990’s – Differentiation of Countries – Financial Engineering Late 1990’s – Differentiation by Industry – Financial Deepening

Early 2000 Measures Country Risk Measures Country Opportunity Country Risk- Quantitative Measure - Index to measure an action’s capacity to service debt based upon size of external debt and short term financing requirements -Index to measure impact of economic growth, inflation, and fiscal & monetary policy on debt service capacity Economic Potential Index - Measures attractiveness of an overseas market from a macro perspective -Major variables include a country’s structural competitiveness, strength of the financial system, quality of economic policy management, stability and effectiveness of the political institutions -Market Attractiveness can be measured on an individual and comparative basis

Projected Rapid Growth in Internet Activity and E- Commerce Growing Computer Usage Rapid Infrastructure Development Dropping telephone and Access Charges Customer Base Willing to Consume Increased Number of Local Content sites Influx of New Market Entrants Technological Innovation

Tips for Successfully Establishing Business in Latin America Evaluate Risks and Opportunities in Each Market Prioritize Which Markets to Enter Be Sensitive to Local Social and Cultural Traits Form a Partnership with a Local Company Consider the Current Level of Technology Study and Closely Monitor Government Regulations Be Aware of the Competition – Current an Future Players

Traits of Successful Firms Plan Around Existing Economic Conditions Understand and Monitor the Regulatory Regime Focus on the Cultural Nuances of Each Market Be First Movers Develop Brand Name Maintain Access to Financing