International Business
Environment & Strategy
MOD001148
Determinants of national advantage
– and where in the world to locate
Market entry
© Robert Jones 2010 - 2014
Objectives:
1.) To identify factors in national advantage
Which nations are the best for business?
2.) To consider factors in international strategy formulation
How do senior managers decide which nation to expand to?
Market entry considerations
Porter, M. (1990) Competitive Advantage of Nations,
Macmillan
Ellis, J. & Williams D. (1995)
International Business Strategy, Pitman
http://www.bbc.co.uk/news/business-15573991#tooltip19
04nov2011
Porter’s Diamond
The Determinants of National Advantage
Firm strategy,
structure &
rivalry
Chance
Factor conditions
skills, resources
technological base
infrastructure
Related &
supporting industries
Porter M.E. (1990)
Competitive Advantage of Nations,
MacMillan
Demand
conditions
Govt
policies
International research data sources - 2014
© Robert Jones 2011 - 2014
http://www3.weforum.org/docs/WEF_GlobalCompetitivenessReport_2012-13.pdf
WEF
Global Competitiveness
http://www.weforum.org/issues/global-competitiveness
http://www3.weforum.org/docs/WEF_GlobalCompetitivenessReport_2012-13.pdf
144 nations
http://www3.weforum.org/docs/WEF_GlobalCompetitiv
enessReport_2012-13.pdf
Which are the most competitive nations?
Which are the top 3 competitive nations?
Hint: they all begin with an ‘S’
http://www3.weforum.org/docs/WEF_GlobalCompetitiv
enessReport_2012-13.pdf
http://www3.weforum.org/docs/WEF_GlobalCompetitivenessR
eport_2014-15.pdf
The BRIC nations
The BRIC nations
The BRICS nations
The BRICS nations
WEF
GCR
rank 2014
57 (56)
53 (64)
71 (59)
28 (29)
South Africa
56 (53)
The MINT nations 2014
WEF
GCR
rank 2014
Mexico
61
(55)
Indonesia 34
(38)
Nigeria
127 (120)
Turkey
45
(44)
http://www3.weforum.org/docs/WEF_GlobalCompetitivenessReport_2012-13.pdf
Example: competitive ranking of Canada
Example: competitive ranking of Canada
http://www3.weforum.org/docs/WEF_GlobalCompetitivenessReport_2012-13.pdf
Page 25
http://www.youtube.com/watch?v=kzn9-M2umFQ
http://www.doingbusiness.org/~/
media/GIAWB/Doing%20Busines
s/Documents/AnnualReports/English/DB14-FullReport.pdf
189 nations compared
Doing Business 2014
http://www.doingbusiness.org/~/media/
GIAWB/Doing%20Business/Document
s/Annual-Reports/English/DB14-FullReport.pdf
The BRICs
Doing
Business
Rank 2014
116
92
134
96
South Africa
41
Doing Business 2011
Doing Business 2014
Risks in entering new nations
Emerging Markets - Balancing Risk & Reward
The PricewaterhouseCoopers EM20 Index
2009 Interim Update
PwC EM20 Index: 2009 Interim Update
http://www.pwc.co.uk/eng/publications/0309_em20_podcast.html
Emerging Markets - Balancing Risk & Reward
The PricewaterhouseCoopers EM20 Index
2009 Interim Update
PwC EM20 Index: 2009 Interim Update
http://www.pwc.co.uk/eng/publications/0309_em20_podcast.html
Conditions for business around the world
http://www.internationalbusinessreport.com
/files/global%20economy%20in%202013%
20-%20final.pdf
http://www.internationalbusinessreport.com/
Tax
Who pays the most tax?
Where is the best place to do business?
http://www.pwc.com/gx/en/paying
-taxes/assets/pwc-paying-taxes2013-full-report.pdf
Total tax rate
http://www.doingbusiness.org/~/media/GIAWB/Doing%20Business/Documents/SpecialReports/Paying-Taxes-2014.pdf
Time to comply
OECD 50TH ANNIVERSARY
CHALLENGES IN DESIGNING COMPETITIVE TAX SYSTEMS
Paris, 30 June 2011
Tax Reform Trends in OECD Countries
http://www.oecd.org/dataoecd/9/23/48193734.pdf
The Forbes Tax Misery Index
Overall Tax
Burden
http://www.forbes.com/global/2009/0413/03
4-tax-misery-reform-index.html
Corruption
Transparency International
http://www.transparency.org/whatwedo/publication/cpi_2013
http://www.transparency.org/whatwedo/publication/cpi_2013
http://www.transparency.org/whatwedo/publication/cpi_2013
The Economist 2nd December 2011
http://www.transparency.org/topic
Objectives:
To identify factors in national advantage
Which nations are the best for business?
To consider factors in international strategy formulation
How do senior managers decide which nation to expand to?
Market entry considerations
Porter, M. (1990) Competitive Advantage of Nations,
Macmillan
Ellis, J. & Williams D. (1995)
International Business Strategy, Pitman
Market Entry Mode grid
Adapted from:- Ellis, J. & Williams D. (1995)
Market entry
Key factors – take care
whether positive or negative
Opportunities available
Skills availability
Resource availability
Degree of control req’d
Investment required
Level of risk Political
Level of risk Economic
Level of risk Social
Level of risk Tech
Speed to implement
Expected return
Total weighted score
Rank order
Weight
1-10
[1]
International Business Strategy, Pitman
Entry to nation A
Entry to nation B
Entry to nation C
Value
1-5
[2]
Value 1-5
[3]
Value 1-5
[4]
Weighted
score
[1]x[2]
Weighted
score
[1]x[3]
Weighted
score
[1]x[4]
Macroenvironment – PESTEL
Economic
Political
• Government stability
• Taxation policy
• Foreign trade
regulations
• Social welfare
policies
Exhibit 2.2
•
•
•
•
•
•
•
Business cycles
GNP trends
Interest rates
Money supply
Inflation
Unemployment
Disposable income
Macroenvironment – PESTEL
Sociocultural
Technological
• Population
demographics
• Income distribution
• Social mobility
• Lifestyle changes
• Attitudes to work and
leisure
• Consumerism
• Levels of education
• Government spending on
research
• Government and industry
focus on technological
effort
• New discoveries
/developments
• Speed of technology
transfer
• Rates of obsolescence
Exhibit 2.2
Macroenvironment – PESTEL
Environmental
• Environmental
protection laws
• Waste disposal
• Energy consumption
Exhibit 2.2
Legal
•
•
•
•
Competition law
Employment law
Health and safety
Product safety
Key Aspects of PESTEL
Analysis
• Not just a list of influences
• Need to understand key drivers of change
• Drivers of change have differential impact
on industries, markets, and organisations
• Focus is on future impact of environmental
factors
• Combined effect of some of the factors
likely to be most important
Control Risks
RiskMap 2011
RiskMap 2011 provides a critical assessment of global, regional
political, security and business issues that will prove a challenge
in 2011 and beyond
http://www.control-risks.com/pdf/Control_Risks_RiskMap2011.pdf
(04nov2011)
Recap:
1.) Where in the world to locate in your international strategy:
Porter Diamond logic
WEF GCR report 2014
World Bank Doing Business report 2014
Etc
2.) Market entry analysis:
Market entry grid (Ellis and Willams)
Opportunities
Degree of control
Risk analysis
Market Entry Mode grid
Adapted from:- Ellis, J. & Williams D. (1995)
Market entry
Key factors – take care
whether positive or negative
Opportunities available
Skills availability
Resource availability
Degree of control req’d
Investment required
Level of risk Political
Level of risk Economic
Level of risk Social
Level of risk Tech
Speed to implement
Expected return
Total weighted score
Rank order
Weight
1-10
[1]
International Business Strategy, Pitman
Entry to nation A
Entry to nation B
Entry to nation C
Value
1-5
[2]
Value 1-5
[3]
Value 1-5
[4]
Weighted
score
[1]x[2]
Weighted
score
[1]x[3]
Weighted
score
[1]x[4]
Porter, M. (1990) Competitive Advantage of Nations,
Macmillan
Ellis, J. & Williams D. (1995)
International Business Strategy, Pitman
World Bank
Doing Business 2014
http://www.doingbusiness.org/~/media/GIAWB/Doing%20Business/Documents/
Annual-Reports/English/DB14-Full-Report.pdf
World Economic Forum WEF
The Global Competitiveness Report 2012-2013
http://www3.weforum.org/docs/WEF_GlobalCompetitivenessReport_2012-13.pdf
Grant Thornton
IBR2013
International Business Report
http://www.internationalbusinessreport.com/files/global%20economy%20in%202013%20-%20final.pdf
Control Risks
http://www.control-risks.com/pdf/Control_Risks_RiskMap2011.pdf
Emerging Markets - Balancing Risk & Reward
The PricewaterhouseCoopers EM20 Index 2009 Interim Update
http://www.pwc.co.uk/eng/publications/0309_em20_podcast.html
Paying Taxes 2014 – the Global Picture
http://www.pwc.com/gx/en/paying-taxes/assets/pwc-paying-taxes-2013-full-report.