Country Analysis

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Country Analysis

A country analysis project must be analyzed in the context of its political, legal, economic, social, and cultural environments-the investment climate of the target country. Although sensitivity to particular factors varies from one project to another, all analyses are subject to the influence of some set of specific factors. Therefore a firm should raise three questions about a country's investment climate: (1) How the investment climate will be critical to the success of the project? (2) What is the present value of these critical issues? (3) How are these issues likely to change over the investment planning period? In making domestic investment decisions, firms should pay much attention to the relative environment, assuming that it will not remain constant or change only slowly over the investment's life. It is dangerous to extend this approach to foreign investment decisions, because in many foreign countries the relative environment is far more vibrant than at home. Furthermore, American companies are far less knowledgeable about foreign investment climates than about the U.S. climate.

The framework presents the many features of a target country's investment climate that need to be assessed by managers. The checklist is only suggestive, each firm should realign its own checklist to make certain it covers all the issues of the project.

One major fact is that all the items in the checklist depend directly or indirectly on the behavior of the political system in the host country. For that reason, changes in the investment climate will proceed mainly from changes in the behavior of the government or from general political instability. Because the future is uncertain, management's assessment of prospective political behavior in the host country can be expressed at most as probable or not probable.

Following is a fundamental framework for analyzing business and social attributes of a country. The criteria stresses that business abroad involves several aspects. That is, you must repeat certain kinds of analysis or planning at different stages before going into another country. How the evaluator weights the criteria depends on the nature of the activity the firm approaches within a given region or country. Five major factors to evaluate include, but not limited to the following:

Framework

A. General ...

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...in, the appropriate list of attributes to consider depends on the factors affecting sales performance and cost of your product.

How to Use the Matrix

Having identified relevant attributes, a company can proceed to use a decision matrix. For each attribute in each country, you should specify a raw score. Rate each item from 1 to 10, with 1 being poor and 10 being excellent. The ratings can be derived from your basic research. A company should weigh each attribute according to its significance to your company's product and operations. For each attribute, specify a number from 1 to 10 in the weighting factor column- For example, if the company is considering a major capital investment, then political stability justifies a weighting factor of 10. Similarly, the weighting factor for economic stability will vary in accordance with how much this attribute affects the firm. A rating of 10 indicates that the effect is high; a rating of 1 indicates that the effect is minimal.

The firm can use this matrix both to assess opportunities and to establish target.

Bibliography:

Charles F. Valentine, “International Management consulting Group,” John Wiley & Sons, Inc., 1998

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