Developing scoring models for the internationalisation strategies of
expanding companies
Companies that aim to break into emerging markets as part of their strategy of internationalisation are often
faced with the question which countries in the target region (e.g. Africa, MENA, Latin America) are
particularly well-suited for a successful market entry.
Scoring models are a suitable instrument of selection that assist companies in identifying and choosing the
most attractive markets, tailored to their branch or product.
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Case Example
Client:
A globally operating industrial company in the field of transport infrastructure
Objective:
Against the background of its internationalization strategy, the company intends to
expand its activities in certain markets, for example in Africa. It therefore wants to
know which countries in this region are most suitable for market entry with regard to
his products and services. In a further step, detailed market potential analyses with a
particular focus on the construction and maintenance of rail infrastructure should be
conducted for the countries of interest.
To that effect, research is carried out in two stages:
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The aim of the first stage is to provide the client with an adequate selection
instrument that helps to identify and choose the most attractive markets
among the different African countries. To this end, a scoring model is
developed, taking into account a set of international benchmarking indicators
(for details, see item 2). The scoring model serves as a basis for a country
ranking that supports the decision-making process concerning the entry into
new markets. The results of the model are displayed in separate country fact
sheets and analysed in the context of country- and sector-specific
determinants, such as national infrastructure programmes, regulations and
mobility trends.
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In the second stage, the market for construction and maintenance of rail
infrastructure in countries prioritised by the client is analysed in detail, both
with regard to the competitors and clients as well as to the assessment of
market potential. Those projects which currently appear most suitable for a
market entry are pointed out. Market opportunities as well as the concomitant
challenges are highlighted and, moreover, strategic considerations from the
client’s perspective are formulated.
Services:
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Development of a two-stage approach according to the client’s complex
requirements
Comprehensive research of recent data and information from various sources,
including public authorities, specialised data providers, regional experts and
market participants (on the country level or in the form of a detailed analysis
with regard to the rail infrastructure in each country); evaluation and
structuring of said data
Development of a scoring model that allows the identification of particularly
attractive markets within the country sample; selection and weighting of
indicators included in the scoring model along with their standardisation and
evaluation; usability tests; compilation of a country ranking and visualisation of
the results in the form of country fact sheets
On-site surveys among companies and interviews with market experts. In the
run-up to the survey: identification of a sample of interviewees and
development of an interview guide; evaluation and structuring of practical
input and market information
Screening of project databases and specialized data pools
Finally, on the basis of the findings: conducting a compact market potential
analysis with specific strategic considerations for the client’s successful
market entry
Presentation of the results of phases 1 and 2 in workshops
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The scoring model in detail
2.1
Indicators
To begin with, a number of internationally comparable indicators are gathered and selected. These indicators
serve as a basis for evaluating the general attractiveness of entering the individual national markets within a
region (e.g. Africa, MENA, Latin America). For this purpose, both macroeconomic and industry-specific
indicators are included in the model.
The indicators cover four basic areas:
1. Population (indicating both market size and market development)
2. Economic development (depending on the issue at hand, common economic indicators may be
supplemented with more specific indicators – e.g. if the evaluation is commissioned by the
government, national accounts will be looked at more closely)
3. Industry-specific indicators (primarily illustrating aspects of supply and demand)
4. Investment environment (indicating how attractive or difficult it is for foreign direct investors to
operate in a certain country)
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2.2
Methodology
2.2.1
Standardising values
Given that the various indicators used in the model tend to have different characteristics and dimensions,
the first step is to normalise the data (i.e. the standardisation of measuring units). The value range for each
indicator is set between 1 and 0, meaning that the country showing the most favourable characteristic in
certain category is assigned the value 1 whereas the country with the least favourable characteristic is
attributed the value 0.
2.2.2
Weighting indicators
The next step is to weight the individual indicators, which would otherwise all have the exact same impact on
the outcome of the scoring process. For instance, the weight of indicators with a strong positive correlation
can be adjusted (reduced) accordingly. Besides, the weighting can be adapted specifically to the issue at
hand (e.g. by putting a stronger emphasis on the political risk).
2.2.3
Deriving weighted averages
Having normalised the data and weighted the indicators, average values are calculated for each of the basic
categories (market size and development, economic environment, etc.). These values determine a country’s
position in each category. By summing up the results across all categories, an overall value is obtained
which determines a country’s final position within the evaluation model - the higher the overall value, the
better the final result. As a result, the scoring model shows a clear-cut ranking of the countries in question.
2.2.4
Applying knock-out criteria
By defining knock-out criteria (e.g. a minimum level of political stability in the country) it is possible to
exclude those countries from an ensuing in-depth analysis which are considered too risky for a market entry.
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Result
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The result of the scoring model is a country ranking that serves as a sound basis for decisionmaking with regard to a regional market strategy. In other words, the countries are ranked in terms
of their attractiveness for the client’s market entry.
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Moreover, country fact sheets are elaborated for each market, displaying the result of the scoring
model as well as sector- and country-specific peculiarities (e.g. national infrastructure programmes,
regulations, mobility trends).
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In a next step, an in-depth analysis of market potential with a particular focus on the customer
structure and competitive situation is prepared for each shortlisted country. Furthermore, those
projects which currently appear most suitable for a market entry are pointed out. Last but not least,
market opportunities as well as the associated challenges are highlighted and, what is more,
strategic considerations from the client’s perspective are formulated.
Fields of application
Scoring models can be used across a wide range of regions and industries in which a company operates. The
same degree of flexibility applies to the selection of indicators (which is only restricted by the availability and
international comparability of data), the weighting of the selected indicators and the definition of knock-out
criteria.
If requested, OeKB Research Services provides the client not only with the results of the analysis but also
with the model itself (i.e. content and methodology). This allows clients, for instance, to adapt the weighting
of individual indicators if the underlying circumstances in a country or region change (e.g. if political factors
demand more attention due to current events).
Your contact:
Mag. Wolfgang Lueghammer
Manager Research Services
Mag. Jutta Leitner
Marketing & Corporate Communications
Tel.: +43 1 531 27 – 2568
wolfgang.lueghammer@oekb.at
Tel.: +43 1 531 27 - 2311
jutta.leitner@oekb.at
http://www.oekb.at/en/research-services/
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