Analyzing International Opportunities Explain market-and site-screening processes Analyze international market research Learn to evaluate new investment projects Study issues that are important to evaluating investment proposals

Screening Potential Markets and Sites

Identify Basic Appeal Basic Demand Availability of Resources

The National Business Environment Cultural Political and Legal Economic and Financial Transporting Materials Image of the Country

Measure Market Potential Industrialized Markets Measure Market Potential Emerging Markets

Measure Site Potential Quality of Local Resources Investment of Time and Money Stability of Local Infrastructure

Simplified Grid to Compare Countries for Market Penetration VARIABLE WEIGHT I II III IV V 1. Acceptable (A), Unacceptable (U) factors -- a. Allows 100% ownership -- U A A A A b. Allows licensing to majority-owned subsidiary -- A A A A A 2. Return (higher number = preferred rating) a. Size of investment needed 0-5 -- 4 3 3 3 b. Direct costs 0-3 -- 3 1 2 2 c. Tax rate 0-2 -- 2 1 2 2 d. Market size, present 0-4 -- 3 2 4 1 e. Market size, 3–10 years 0-3 -- 2 1 3 1 f. Market share, immediate potential (0–2 years) 0-2 -- 2 1 2 1 g. Market share, 3–10 years 0-2 -- 2 1 2 0 TOTAL 18 10 18 10 3. Risk (lower number = preferred rating) a. Market loss, 3–10 years 0-4 -- 2 1 3 2 b. Exchange problems 0-3 -- 0 0 3 3 c. Political-unrest potential 0-3 -- 0 1 2 3 d. Business laws, present 0-4 -- 1 0 4 3 e. Business laws, 3–10 years 0-2 -- 0 1 2 2 TOTAL 3 3 14 13

Select the Market or Site Field Trips Competitor Analysis

Primary International Trade Shows and Trade Missions Interviews and Focus Groups Primary International Research Surveys Environmental Scanning

Evaluating Investment Proposals Estimating Future Cash Flows Present Value Return on Investment Risk and Return

Comparison of ROI Certainty ROI AS PERCENTAGE 5 10 15 20 INVESTMENT A WEIGHTED PROBABILITY VALUE .15 0 .20 1.0 .30 3.0 .20 3.0 .15 3.0 Estimated ROI 10% INVESTMENT B 0 0 .30 1.5 .40 4.0 .30 4.5 Comparison of ROI Certainty

Where the investment should be made and explain your choice. Discussion Feasibility studies showed that a $1 million investment would yield the following return for a U.S. firm after taxes: Where the investment should be made and explain your choice. Country Return The United States 7% Israel 10% Brazil 13% Zambia 16%

Evolution of the Entry Mode Decision Experience Wholly Owned Subsidiary Management Contract Joint Venture/Alliance Franchising Control Turnkey Project Licensing Exporting Risk

Strategic Factors in Selecting an Entry Mode Market size Cultural environment Political and legal environment Production and shipping costs