Looks at
Economy at macro level
Risk evaluation method
Country competitiveness

Can we focus on a particular country or set of countries?

Where do we start our search?

Secondary Sources

Country / Industry-specific reports

  • Economist Intelligence Unit (EIU) and World Bank reports
  • Various Development Bank reports, e.g. Asian Development Bank, African Development Bank

Various relevant publications

  • Reports of the World Bank, Asian Development Bank, African Development Bank and National Development Bank
  • Analyst firms/databanks
  • Arthur D. Little, Stanford Research Institute, the Wall Street research houses
  • Foreign missions - consular and trade
  • Government departments
  • The IRS Corporation Source Book of Statistics of Income, Bureau of Census, Census of Retail Trade, Bureau of Labour Statistics
  • Lawyers, bankers, consultants

What exactly is the type of information we are seeking ?

How do we analyse this information?

Focus on the following areas in the gathering of Information:

#1 Development of the economy on the macro level

  • Economic indicators
    - Economy size
    - Growth rate
    - Inflation rate
    - Investment levels
    - GNP/GDP
    - Per capita income
    - Stability of currency
    - Savings rate
    - Purchasing power parity

  • Global orientation
    - Trade performance
    - Investment performance
    - Levels of protectionism

#2 Government policies and attitudes

  • Policy regarding legislation
  • Policy regarding economy
  • Fiscal/monetary policy
  • Socio-political stability
  • Responsiveness to global change
  • Laws regarding competition
  • Intervention in business/bureaucratic impediments

#3 Finance

  • Efficiency/diversity of capital markets
  • Quality of financial services
  • Maturity of financial markets
  • Interest rates
  • Banking infrastructure
  • Capitalisation of stock markets
  • Availability of venture capital

# 4 Infrastructure

  • Information systems
  • Communications system
  • Transportation System
  • Ports
  • Legal system
  • Power
  • Water

Risk Evaluation Method

When seeking a joint venture abroad, consider using the following Risk Evaluation Method.

Criteria

  • Inflation
  • Interest rate
  • Economic growth
  • GNP
  • Per capita income
  • Country stability
  • Business confidence

Inflation
- Score 10 for levels of inflation up to 1.99%
- Deduct 1 point for every 2% rise in inflation thereafter

Interest rate
- Score 10 for levels of interest rate up to 1.99%
- Deduct 1 point for every 2% rise in interest rate thereafter

Economic growth
- Start at 0
- Add one point for every 1% estimated GDP growth up to 10

Country stability and business confidence
- Draw on information gathered by circulating a questionnaire to diverse groups such as bankers, lawyers, businessmen, etc.
- Score on a scale of 1 to 10 for each

Example of the above method

  
Country A
Country B
Actual Figures
%
Score
Actual Figures
%
Score
Inflation
4
9
10
6
Interest Rate
8
7
12
5
Economic Growth
5
5
4
4
Country Stability
9
8
5
5
Business Confidence
8
8
6
6
Total Score
37
26

Country A involves a lower rist than Country B.
A relatively higher score signifies lower risk.

One problem area:
- Country X with 20% inflation rates at 0
- Country Y with 30% inflation also rates at 0

Change the rate of deduction of points, e.g.
- Do not deduct 1 point for every 2 percentage points of inflation
- Deduct 1 point for say, every 5 percentage points of inflation.

Caution - negative scoring does not always work, as it
- Offsets other positive scores
- Has an adverse impact on the overall score.

Country Competitiveness Analysis

Supplement your analysis with Country Competitiveness Analysis. The factors for evaluation could be:

Management

  • Product quality
  • Competitive pricing
  • Productivity
  • Use of technology

Science and technology

  • Scientific/technological capacity
  • Development of basic/applied research
  • Government patronage in this area
  • Country's investment levels in this area
  • Integration of R & D into business

Relationship with

  • Employees
  • Consumers
  • Suppliers
  • Government

People

  • Language
  • Literacy rates
  • Types/levels of education
  • Investment in education
  • Motivation and skills of labour force
  • Attitude to work
  • Value systems / quality of life
INDONESIA'S TRANSFORMATION

Indonesia expects to transform itself into a highly industrialised economy by the year 2020, and this transformation is to be fuelled to a significant extent by:

  • foreign investment and technology
  • an orderly, well-structured and sophisticated society

Vital to the fulfilment of this objective are the government's plans in the following areas:

  • skills development
  • infrastructure development
  • growth of the Indonesian-owned private sector

This would result in:

  • improvement of the social, economic and political fields
  • decline of population growth
  • increase in job creation
  • manageable inflation rate
  • more than double the per capita income
  • cumulative annual growth of GDP of over 5% over the next 25 years.

Corporate Values

Attitude to:

  • Environmental protection
  • Social obligations
Japan: Bonding - Anational Culture

The bonding between the organisation and the individual in Japan has come to typify the country's strong people orientation and reliable workforce. The relationship is one from "womb to tomb" and even in a recession, workers are not laid off. If anything, when times are bad, workers voluntarily work long hours, take pay cuts and have fewer holidays. Pride is an important element of the Japanese psyche and deemed necessary for both quality production and national success.

Watch out for limitations in the application of methods of analysis. Remember that even if statistics do not always lie, they often do not tell the whole truth. The scenario as derived from statistics must therefore be fleshed out

Personal Observation

Delve further, find out more... visit the country yourself.

  • Interact extensively with a wide cross section of people.
  • Build up a databank of first-hand facts
  • Develop fact-based opinions and insight
  • "Live" in the society, get a "feel" of the country

Ensure that personal observation covers not only what is happening, but also what might happen.

  • First-hand is fine, subjective is not
  • Develop a "feel" that is grounded in reality
  • Do not come away with mere impressions of the personal kind

Latin America: Perceived risks

Different kinds of violence and its associated risks prevail in various Latin American countries. Some suffers from street crime and carbombs, which do not exist in other countries where white-collar crime and data theft are common. Companies here are also often hit by sabotage which results in loss of productivity.

Levi Strauss & Co.: Human Rights

Levi Strauss, the giant jeans-manufacturer takes a firm line on the human rights situation in countries where it operates. It has pulled out from manufacturing operations in both China and Myanmar on this account.

On the other hand, firms such as Coca Cola and McDonald's are pouring into China which attracted US$15 billion in foreign investment in 1993.

To recap on what we have achieved so far, our vision statement led us to defining our corporate strategy. Then we profiled our company and its SWOT in order to develop a menu of available opportunities for global growth. Towards identifying the optimum opportunity, we conducted a global survey or our industrial sector and viewed the geographical possibilities for global business open to us.

From our industry survey, we identified a potential opportunity for ourselves vis-à-vis our industry, and from the overall risk assessment of countries undertaken, we focused on a specific country.