International Business Research CHAPTER 11 Hao Zhuo TFSU

Learning Objectives The Composition of BOP Accounts How are the BOP Accounts Balanced The Mechanics of International Economic Crises

The Process of Business Research Setting Objectives Collecting Data and Information Making the Analysis

The Analysis on Foreign Business environment country research industry market research company research

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Four Often-used Methods The cold-and-hot evaluation Risk Index on Foreign Business Environment The Scoring Method for Assessing Foreign Business Environment The dynamic analysis attaching importance to the changes of the business environment in a foreign nation

Table 11-1: Risk Index on Foreign Business Environment Items Weight Score Political stability 2.5 0~4 Economic growth rate Currency conversion Salary and labor productivity 2 Supply of short-term loans Long-term loans and capital raising Attitudes on foreign investment and profits 1.5 Policies on state-owned enterprises Inflation Balance of payments Fulfillment of contracts Bureaucracy 1 Professional business services Source: Editorial committee on Elaboration of Harvard: The New Economy (2001), International Business, China Business United Press.

The Scoring Method for Assessing Foreign Business Environment Environmental Factors Score I. Capital Withdrawal No limit Limit on time Limit on capital withdrawal Limit on both capital withdrawal and profit remittance Many limitations Capital withdrawal is not allowed. (0-12) 12 8 6 4 2 II. Foreign Equity Permit and welcome wholly foreign-owned investment Permit but not welcome wholly foreign-owned investment Permit majority foreign ownership Foreign ownership can not exceed 50%. Only minority foreign ownership is allowed. Foreign ownership can not exceed 30%. Foreign ownership is not allowed. 10 III. Treatment and Control on Domestic firms and Foreign firms The Same Some limits, but no controls on foreign firms No limits, but some controls on foreign firms Both limits and controls on foreign firms Strict limits and strict controls on foreign firms Foreign investment is not allowed. IV. Currency Stability Freely convertible The difference between the black market and the official quote is no greater than 10%. The difference between the black market and the official quote is 10%-40%. The difference between the black market and the official quote is 40%-100%. The difference between the black market and the official quote is greater than 100%. (4-20) 20 18 14

The Scoring Method for Assessing Foreign Business Environment V. Political Stability Long-term stability Stability depends on the party in power Some political splits but still in control Influential political powers both inside and outside the country Possibility for coup d'etat, overthrow and turbulence Instability, great possibility for coup d'etat or turbulence (0-12) 12 10 8 4 2 VI. Willingness to grant tax protection Extensive tax protections Substantial tax protections, esp. on new industries Certain tax protections, mainly on new industries Little or no tax protections (2-8) 6 VII. Local Financing Developed capital market, open security exchanges Some local capital, speculative security market Limited capital market, some available foreign capital Capital deficiency, short-term capital Strict capital control High capital fleeing (0-10) VIII. Inflation in the last five years Less than 1% 1%-3% 3%-7% 7%-10% 10%-15% 15%-35% Greater than 35% (2-14) 14 Total (8-100) Source: Editorial committee on Elaboration of Harvard: The New Economy (2001), International Business, China Business United Press

Types of Research and Sources of Data Office Research Field Research: interviews, observations and surveys

The Information System An information system is a channel to facilitate the free flow of data and information. The mechanisms used include environmental scanning, Delphi studies and scenario building

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