You are on page 1of 13

CHAPTER TWELVE COUNTRY EVALUATION AND SELECTION

OBJECTIVES
To grasp company strategies for sequencing the penetration of countries To see how scanning techniques can help managers both limit geographic alternatives and consider otherwise overlooked areas To discern the major opportunity and risk variables a company should consider when deciding whether and where to expand abroad To know the methods and problems when collecting and comparing information internationally To understand some simplifying tools for helping to decide where to operate To consider how companies allocate emphasis among the countries where they operate To comprehend why location decisions do not necessarily compare different countries possibilities

CHAPTER OVERVIEW
The country evaluation and selection process determines the geographical opportunities firms choose to pursue. Chapter Twelve first discusses the challenges of marketing and production site location. t goes on to carefully examine the process by describing the choice and weighting of variables used for opportunity and risk analysis as well as the inherent problems associated with data collection and analysis. The chapter then introduces the use of grids and matrices for country comparison purposes! discusses resource allocation possibilities! and concludes by noting the different factors considered as part of start"up! acquisition! and expansion decisions.

CHAPTER OUTLINE
OPENING CASE: Carrefour [See Figure 12.1, Map 12.1] This case explores the location! pattern! and reasons for Carrefours international operations. Carrefour opened its first store in #$%& and is now the largest retailer in 'urope and (atin )merica and the second largest worldwide. ts stores depend on food items for nearly %& percent of sales and on a wide variety of non"food items for the remainder. Carrefour plans to accelerate its growth between *&&% and *&&+ after opening one million square meters of new space in *&&,. -orldwide Carrefour has five different types of outlets. hypermarkets! supermarkets! hard discount stores! cash"and"carry stores and convenience stores. Country selection criteria include a countrys economic evolution! sufficient si/e to justify additional store locations and the availability of a

#0,

viable partner. )side from financial resources! Carrefour brings to a partnership expertise on store layout! clout in dealing with global suppliers! highly efficient direct e"mail links with suppliers and the ability to export unique bargain items from one country to another. Carrefour also considers whether a country or regional location within a country can justify sufficient additional store expansion to gain economies of scale in buying and distribution. 1ecently! Carrefour has used acquisition as a way to capture additional scale economies. Carrefour depends primarily on locally produced goods but also engages in global purchasing when capable suppliers are found. -hether Carrefour can ultimately succeed as a global competitor without a significant presence in the 2nited 3tates and the 2nited 4ingdom remains to be seen. Teachi ! Ti": 1eview the 5ower5oint slides for Chapter Twelve and select those you find most useful for enhancing your lecture and class discussion. 6or additional visual summaries of key chapter points! review the figures and tables in the text. I. INTRODUCTION 7ecause companies lack the resources to take advantage of all international opportunities they identify! they must determine both the order of country entry as well as the rates of resource allocation across countries. n choosing geographic sites! a firm must determine both where to market and where to produce. The answer can be one and the same place if transportation costs are high and8or government regulations make local production a necessity. n many industries! facilities must be located near foreign customers9 in others! market and production sites are continents away. :eveloping a site location strategy that helps a firm maximi/e its resources and competitive position is very challenging! given that many estimates and assumptions about factors such as future costs and prices and competitors reactions must be made. 6igure #*.0 shows the major steps international business managers must take in making these decisions.

II# SCANNING AND DETAILED E$A%INATION CO%PARED 3canning is useful insofar as a company might otherwise consider either too few or too many possibilities. Through the use of scanning! decision makers can perform a detailed analysis of a manageable number of geographic locations. ;anagers can usually complete the scanning process without having to incur the expense of visiting foreign countries. nstead they rely on analy/ing information found on the nternet and other publicly available sources! as well as communicating with people familiar with the foreign countries they are interested in. The more time and money companies invest in examining an alternative! the more likely they are to accept it regardless of its merits<a phenomenon known as escalation of commitment. Companies should be careful about taking forced actions based on peer and8or media pressure and should instead carefully weigh important variables when comparing countries of interest.

#0%

III# WHAT IN&OR%ATION IS I%PORTANT' Environmental climate<the external conditions in a host country that could significantly affect an enterprises success or failure<reveals both opportunities and risk whose combination should determine what actions to take. A# O""or(u i(ie) =pportunities are determined by competitiveness and profitability factors. >ariables weighing heavily on the selection of market and production sites would include market si/e! ease and compatibility of operations! costs! resource availability and red tape. *# %ar+e( Si,e# ;arket si/e is determined by sales potential. n some instances! past and current sales for either an existing product or a similar or complementary product are available on a country"by"country basis. n addition! data such as ?@5! per capita income! population! income distribution! economic growth rates! and levels of economic development will also be useful. =ther important economic variables pertaining to market si/e include. Obsolescence and leapfrogging of products. Consumers in some emerging economies skip entire generations of technology in favor of more recent technologies! such as Chinese consumers going from having no telephones to using cellular phones almost exclusively. Prices. The relative prices of essential and non"essential good can have a significant impact on consumption patterns. Aigher prices for necessary goods leave less discretionary income for non"essentials. Income elasticity. ;arket potential can be calculated by dividing the percentage of change in product demand by the percentage of change in income in a give country. ncome elasticity varies by product and income level! with demand for necessities being less elastic than demand for luxuries. Substitution. :epending on local conditions! consumers in some countries may be more willing to substitute some products or services for others. 6or example! people in high population density areas typically substitute mass transit for automobiles. Income inequality. 'ven in areas where per capita incomes are low! there may be middle" and upper"income people with substantial income to spend due to income inequality. Cultural factors and taste. Countries with similar income levels may exhibit different demand patterns based on differences in cultural values and tastes. Existence of trading blocs. Countries with small populations and8or low per capita incomes may have a much larger market due to participation in a regional trading block. -# Ea)e a . Co/"a(i0i1i(2 of O"era(io )# Companies are naturally attracted to countries that are located nearby! share the same language and offer market conditions similar to those in their home countries. 7eyond that! proposals may then be limited to those countries that offer! among other factors! the appropriate plant si/e! the local availability of resources!

#0B

an acceptable percentage of ownership and the sufficient repatriation of profits. 3# Co)() a . Re)ource A4ai1a0i1i(2. Costs are a critical factor in production"location decisions. 5roductivity"related factors include the cost of labor! the cost of inputs! tax rates! and available capital! utilities! real estate! and transportation. -hen companies move into emerging economies because of labor cost differences alone! their advantages may be short"lived. Competitors often follow leaders into low"wage areas! there is little first"in advantage for low"labor cost production migration! and the costs can rise quickly as a result of pressure on wage or exchange rates. The quality of a countrys infrastructure can be very important in location decisions. 6irms often need to locate in an area that will allow them to move supplies and finished products very efficiently. f a given production site will be used to serve multiple markets! the cost and ease of moving materials and products in and out the country will be especially important. 5# Re. Ta"e a . Corru"(io # 1ed tape includes the difficulty of getting permission to operate! bringing in expatriate personnel! obtaining licenses to produce and market goods and satisfying government agencies on matters such as taxes! labor conditions and environmental compliance. ?overnment corruption may include requirements of payments to win a contract or receive government services! such as mail delivery or visa issuance. )lthough not always a directly measurable cost! red tape and corruption increase the cost of doing business. B# Ri)+) s it ever rational for a firm to invest in a country with high economic and political risk ratingsC 3uch questions must be carefully weighed when making international capital"investment decisions. *# Ri)+ a . U cer(ai (2# 6irms usually experience higher risk and uncertainty when they operate abroad. 6irms use a variety of financial techniques to compare potential investments! including discounted cash flows! economic value added! payback period! net present value! return on sales! return on equity! return on assets employed! internal rate of return and the accounting rate of return. ?iven the same expected return! most decision makers prefer a more certain outcome to a less certain one. Companies may reduce risk or uncertainty by insuring! however! insuring against things such as nonconvertibility of funds or expropriation is likely to be costly. )s part of a feasibility study! the degree of acceptable risk should be determined so a firm does not incur unacceptable costs. -# Lia0i1i(2 of &orei! e))# The liability of foreignness refers to the fact that foreign firms have a lower rate of survival than local firms for the initial years after the start of operations. Aowever! those foreign firms that manage to overcome their initial problems have long"term survival rates comparable to those of local firms. 3# Co/"e(i(i4e Ri)+# ) firms innovative advantage may be short" lived. -hen pursuing a strategy known as imitation lag, a firm moves first to those countries most likely to adapt and catch up to the advantage. n

#0+

some instances firms may seek those countries where they are least likely to confront significant competition9 in others they may gain advantages by moving into countries where competitors are already present. 7y being the first major competitor in a market! companies can more easily gain the best partners! best locations! and best suppliers<a strategy to gain first mover advantage. Companies may also reduce risk by avoiding overcrowded markets! or conversely! they may purposely crowd a market to prevent competitors from gaining advantages therein that they can use to improve their competitive positions elsewhere! a situation known as oligopolistic reaction. 6irms may also seek DclustersE like 3ilicon >alley that attract multiple suppliers! customers and highly trained personnel in order to gain access to new products! technologies! and markets. 5# %o e(ar2 Ri)+# f a firms expansion occurs through foreign"direct investment! foreign"exchange rates and access to investment capital and earnings are key considerations. Liquidity preference refers to the theory investors want some of the holdings to be in highly liquid assets on which they are willing to take a lower return. 6irms must carefully evaluate a countrys present capital controls! recent exchange"rate stability! balance" of"payments account! inflation rate! and level of government spending. 6# Po1i(ica1 Ri)+# 5olitical risk reflects the expectation the political climate in a given country will change in such a way that a firms operating position will deteriorate. t relates to changes in political leaders opinions and policies! civil disorder! and animosity between a home and host country. -hen evaluating political risk! decision makers refer to past patterns in a given country! expert opinions and country analysts. They also look for economic and social conditions that could lead to political instability! but there is no consensus as to what constitutes dangerous instability or how it can be predicted. DOES GEOGRAPHY %ATTER' Do 7( &oo1 8i(h %o(her Na(ure

@atural disasters have a huge impact on people and property every year! often hitting the poorest nations of the world hardest. Companies should take the risk of natural disasters and their potential impact into account when choosing locations for doing business. The 2nited @ations :evelopment 5rogramme is developing a :isaster 1isk ndex that could be used as a tool for companies to compare and prepare for disaster risk. @atural disasters can also trigger outbreaks of disease! which should also be considered when choosing locations for global operations.

#0$

IV# COLLECT AND ANALY9E DATA 6irms perform research to reduce uncertainties in their decision processes! to expand or narrow the alternatives they consider and to assess the merits of their existing programs. The costs of data collection should always be weighed against the probable payoffs in terms of revenue gains or cost savings. A# Pro01e/) 8i(h Re)earch Re)u1() a . Da(a @umerous countries have agreed to standards for collecting and publishing various categories of national data. Aowever! the lack! obsolescence and inaccuracy of data on other countries can make research difficult and expensive to undertake. 6urther! data discrepancies further increase uncertainty in decision"making. *# Rea)o ) for I accuracie)# 6or the most part! incomplete or inaccurate data result from the inability of governments to collect the needed information. 7oth economic and educational factors will affect the quantity and quality of available data. =f equal concern! however! is the publication of false or purposely misleading information! as well as the non" reporting or under"reporting of information people wish to hide or distort. -# Co/"ara0i1i(2 Pro01e/)# Comparability problems result from definitional differences across countries Fe.g.! family categories! literacy levels! accounting rulesG! differences in base years! distortions in foreign currency conversions! the measurement of investment flows! the presence of black market activities! etc. B# E:(er a1 Source) of I for/a(io 7oth the specificity and cost of information will vary by source. *# I .i4i.ua1i,e. Re"or()# ;arket research and business consulting firms conduct country studies for a fee. The fact that a firm can specify the information it wants may make the cost worthwhile. -# S"ecia1i,e. S(u.ie)# Certain research organi/ations generate specific studies about countries! regions! industries! issues! etc.! that they make available for general purchase. The price is much lower than for an individuali/ed study. 3# Ser4ice Co/"a ie)# ;ost international service"related firms publish reports that are usually geared toward either the conduct of business in a given country or region or about some specific subject of general interest! such as tax or trademark legislation. 5# Go4er /e ( A!e cie)# ?overnments and their agencies publish tomes of information designed to stimulate business activity both at home and abroad. 6# I (er a(io a1 Or!a i,a(io ) a . A!e cie)# The 2@! the -T=! the ;6! the ='C:! and the '2 are but a few of the multilateral organi/ations and agencies that collect and disseminate data. ;any of the international development banks even help fund investment feasibility studies.

#H&

;# Tra.e A))ocia(io )# ;any trade associations collect! evaluate! and disseminate a wide variety of data dealing with competitive and technical factors in their industries. Their reports may or may not be available to non" members. <# I for/a(io Ser4ice Co/"a ie)# Certain companies offer information"retrieval services9 they maintain databases from hundreds of sources from which they will access data for a fee! or sometimes for free at public libraries.

#H#

C# I (er a1 Ge era(io of Da(a -hen firms have to conduct studies in foreign countries! they may find traditional data gathering and analytical methods do not reveal critical insights. n that case! a researcher must be extremely imaginative and observant. n some instances! useful information may be found by analy/ing indirect or complementary indicators. POINT=COUNTERPOINT: Shou1. Co/"a ie) &ore!o Direc( I 4e)(/e () i Vio1e ( Area)' POINT: ;@'s should not make investments in violent areas because it puts ;@' personnel at risk. ;@'s are visible and therefore vulnerable to attack by anti" globali/ation groups! kidnappers! groups opposed to foreigners! as well as others. t is unethical to put employees in excessively dangerous situations. 'mployees who will take dangerous assignments are usually either difficult to control! excessively naIve! or addicted to the thrill of danger. )ny country subject to extreme violence is not the kind of country to do business in. COUNTERPOINT: -here theres risk! there are usually rewards. Companies need to take risks! as they have in the past! to develop markets. >iolence is only one of many risks and should not be looked at in isolation. 1isks from activities such as terrorism are the same whether you are in (ondon! ;adrid! Caracas! or @ew Jork. )ll areas have their risks! and many countries traditionally viewed as risky may actually be less risky than the 2nited 3tates or 7ritain. 3ome industries! such as petroleum! have to operate in violent areas because that is where the resources are. ;@'s should operate anywhere there are opportunities! and develop plans to manage and react to risks as effectively as possible.

V#

COUNTRY CO%PARISON TOOLS Two common tools for analy/ing information collected via scanning are grids and matrices. )lso! once a firm commits to a location! it will need continuous updates regarding external conditions that might affect its operations there. A. Grids K3ee Table #*.*L ) grid can be used to make country comparisons according to a wide variety of relevant factors! such as ownership rules! potential returns! and perceived risk. >ariables can be ranked and weighted according to specific criteria that reflect a firms situation and objectives. )lthough useful for establishing minimum scores and for ranking countries! grids often obscure interrelationships among countries. B. Matrices K3ee 6igure #*.BL =ne matrix frequently used when doing country comparisons is the opportunityrisk matrix. -hen using this matrix! the manager plots a country according to

#H*

the perceived value of the opportunity the country offers! on the one hand! and the expected level of risk associated with operating in that country on the other. -hich factors are good indicators of risk and opportunity and the weight assigned to each must be identified and assigned by the firm. =nce scores are determined for each country being considered! they can be plotted and reviewed from a comparative perspective. ) useful application of this technique is to develop both present and future scores for countries Fe.g.! five years henceG because a significant shift in a score in the future could have serious implications with respect to the country selection process. VI. ALL !A"I#G AM #G L !A"I #$ =ver time! most of the value of a firms 6: comes from reinvestment. Thus! in deciding where to invest! firms must consider whether to reinvest or harvest! to what degree there is interdependence among their locations and whether they should diversify or concentrate their activities. A# Rei 4e)(/e ( 4er)u) Har4e)(i ! =nce a firm makes an initial investment! it will then need to decide whether to continue investing in that operation or to harvest the earnings Fand possibly divest the assetsG and use them elsewhere. *# Rei 4e)(/e ( Deci)io )# 1einvestment refers to the use of retained earnings to replace depreciated assets or to add to a firms existing stock of capital. )side from competitive factors! a company may need several years of almost total reinvestment Fand often allocation of additional fundsG in order to reali/e its objectives at a given location. -# Har4e)(i !# %arvesting or divesting refers to the reduction in the amount of an investment9 a firm may choose to simply harvest the earnings of an operation or divest the assets there as well. f an operation no longer fits a companys overall strategy! or if better opportunities exist elsewhere! it must determine how to exit that operation. -hen selling or closing facilities! firms must consider possible government performance contracts as well as potential adverse publicity! plus the possible difficulty in re" establishing operations in that country in the future. B# I (er.e"e .e ce of Loca(io ) t is often difficult to assess the true impact a particular foreign subsidiary has on other operations within an ;@' if several operations are interdependent. n the case of intra"firm sales! transfer pricing strategy will definitely affect the relative profitability of one unit as compared to another. (ikewise! the net value of a particular operation may be similarly distorted for corporate profit maximi/ation purposes. C# Geo!ra"hic Di4er)ifica(io 4er)u) Co ce (ra(io ) firm may take different paths en route to gaining a si/able presence in most countries. )t one end of the spectrum is a diversification strategy, whereby a firm moves rapidly into many foreign countries and then gradually builds its presence in each. )t the other end of the spectrum is a concentration strategy, whereby a firm moves into a limited number of countries and develops a strong competitive position there before moving into others. -hen deciding which

#H0

strategy! or perhaps some hybrid of the two! is desirable! a firm must consider a number of variables Fsee Table #*.0G. *# Gro8(h Ra(e i Each %ar+e(# -hen the growth rate in each market is high! a firm will likely concentrate on a few markets because of the cost of keeping up with market expansion. -# Sa1e) S(a0i1i(2 i Each %ar+e(# The more stable sales and profits are within a single market! the less advantageous a diversification strategy will be. 3# Co/"e(i(i4e Lea. Ti/e# 3equential entry into multiple markets is more common than simultaneous entry. f a firm has a long lead time before competitors can copy or supercede its advantages! then it may be able to follow a concentration strategy and still beat competitors to other markets. 5# S"i11o4er Effec()# $pillover effects represent situations in which a marketing program in one country results in the awareness of a product in other countries. -hen a single marketing program can reach many countries Fvia cross"country media! for exampleG! a diversification strategy is advantageous. 6# Nee. for Pro.uc(> Co//u ica(io > a . Di)(ri0u(io A.a"(a(io # -hen companies find it necessary to alter products! promotion and8or distribution strategies in foreign markets! a concentration strategy will be advantageous because the associated costs cannot be spread over sales in other countries to capture economies of scale. ;# Pro!ra/ Co (ro1 Re?uire/e ()# The more a company needs control over a foreign operation! the more appropriate a concentration strategy because additional resources will be required to maintain that control. <# E:(e ( of Co )(rai ()# -hen a firm is constrained by limited resources! it will likely follow a concentration strategy because spreading resources too thinly can be a recipe for failure. VII# NONCO%PARATIVE DECISION %A@ING Companies often examine one opportunity at a time rather than ranking a set of foreign operating proposals using predetermined criteria. This sequential process leads to go-no-go decisions and is often necessary due to the speed with which companies need to respond to opportunities as they arise. :ecision makers often need to react quickly for both offensive and defensive motives. The cost of conducting an extensive analysis of multiple opportunities simultaneously can also sometimes be prohibitive. VIII# %A@ING &INAL COUNTRY SELECTIONS )t some point! firms must make resource allocation decisions. 6or new investments they will need to develop detailed estimates of all costs and expenses and consider whether to enter a particular venture alone or with a partner. 6or acquisitions! firms will need to examine financial statements in great detail. 6or expansion within countries where they are already operating! country managers will most likely submit

#HH

capital budget requests that include details of expected returns. To maximi/e expected gains! decisions must be made in a timely fashion. LOO@ING TO THE &UTURE: Wi11 (he Pri/e Loca(io ) Cha !e' There are several important demographic shifts that are expected to occur over the next several decades. 5opulation growth in high income countries is expected to slow and populations are actually expected to decline in countries such as Mapan and taly. ;eanwhile! population growth in low"income countries is expected to be robust. 3ince there is a positive relationship between the changes in the si/e of the working"age population and per capita ?:5! the growth in per capita ?:5 should be higher in todays emerging economies than in todays high"income countries. These changes could have significant implications for the location of markets and the location of labor forces. )nother trend that could influence country selection is the propensity of innovative people to converge on places that develop reputations for facilitating creativity and innovation. 'ven with technologies that allow people to work from home or in virtual office environments! face"to"face contact will continue to be important<especially among the best and brightest.

CLOSING CASE: &DI i Sou(h Africa [See Map 12.2] ;any expected that the post"apartheid government of 3outh )frica would take revenge against the previous elites of the country! including foreign companies! and discourage new foreign investment. nstead! the new government has adopted a largely pro"business attitude and has actively courted 6: . The results of this policy have been somewhat mixed. :espite enormous opportunity! many foreign investors have been reluctant to enter the 3outh )frican market due to low economic growth rates! continued political instability! and high security risks. Aue)(io ) 1. !at are t!e costs and benefits to Sout! "frica of !a#ing more foreign direct in#estment$ Of !a#ing less$ :ue to its traditionally high unemployment rates! jobs are perhaps the biggest benefit to 3outh )frica from increases in 6: . 'conomic growth would also be increased through 6: ! especially since 3outh )fricas internal savings and investment rates have been too low to finance much business expansion. 6: in state"owned enterprises could also improve the quality of goods and services produced by these companies! and competition from foreign firms could provide incentive to local firms to innovate more. 6inally! 6: would help diversify the 3outh )frican

#H,

economy. (ess foreign investment would likely mean fewer jobs! slower growth! lower quality goods and services! less innovation! and a less diverse economy. %. &o' mig!t a company try to 'eig! fairly t!e opportunities and risks of in#esting in Sout! "frica$ ;anagers need to look at a comprehensive array of economic! political! and geographic factors in assessing the suitability of 3outh )frica for investment. ;arket si/e is a positive in 3outh )frica! but economic growth has been erratic and slow at times. The political situation is relatively stable and government corruption is low! but crime rates are high! including the highest murder rate in the world. ?etting expatriates to relocate to 3outh )frica has been challenging for many foreign companies. 3till! opportunities in )frica are only likely to improve in the future and 3outh )frica could serve as an effective base for future expansion into other )frican markets. If Sout! "frica is to recei#e more foreign direct in#estment) !o' s!ould it prioriti*e policies to attract it$ The most important thing the 3outh )frican government could do in the short term would be to reduce the crime rate and improve the security situation in the country. )lso! easing restrictions and regulations that hamper 6: would help as well. 6inally! 3outh )frica needs to do a better job of marketing its investment opportunities to foreigners. )n aggressive public relations campaign on a global scale could help to raise awareness of the positive aspects of investing in 3outh )frica and improve the image of the country in the minds of foreigners. "ssume you represent a non-Sout! "frican company and are considering foreign expansion. !at factors 'ould you consider '!en comparing Sout! "frica 'it! ot!er emerging markets '!ere you mig!t locate$ !at about in terms of de#eloped markets$ !at about in terms of ot!er "frican markets$ )s a non"3outh )frican company! would look at investing in 3outh )frica from two perspectives. ;y analysis of the country would focus on the market si/e and potential demand for my products and8or services! as well as the viability of 3outh )frica as a site for those goods or services to be produced and possibly exported to other countries within )frica and beyond. The market potential of the country is large due to the relatively large population. Aigher income growth would make this market even more attractive. would also look at 3outh )frica as an attractive jumping off spot for serving other emerging markets in )frica. would be concerned! however! about the security situation and quality of life issues. would also prefer a more friendly welcome from the government! with incentives such as tax breaks and infrastructure improvements. 3outh )frica compares favorably to other )frican markets! but continues to lag behind most developed markets.

(.

+.

WEB CONNECTION Teachi ! Ti": >isit &&&.pren'all.com(daniels for additional information and links relating to the topics presented in Chapter Twelve. 7e sure to refer your

#H%

students to the online study guide! as well as the nternet exercises for Chapter Twelve. NNNNNNNNNNNNNNNNNNNNNNNNN CHAPTER TER%INOLOGY: environmental climate! p. H#+ liability of foreignness! p. H*H imitation lag! p. H*% first mover advantage! p. H*% oligopolistic reaction! p. H*% liquidity preference! p. H*B NNNNNNNNNNNNNNNNNNNNNNNNN grids! p. H0, divesting! p. H0, harvesting! p. H0B diversification strategy! p. H0+ concentration strategy! p. H0+ spillover effects! p. H0$

ADDITIONAL E$ERCISES: Cou (r2 E4a1ua(io a . Se1ec(io E)ercise *+.*. )s the phenomenon of economic integration progresses! the process of country selection takes on new dimensions. )sk students to compare and contrast the opportunities and risks associated with establishing operations in the 'uropean 2nion to those in the @)6T) region. -ould such investments be primarily resource" or market"seekingC 7e sure students explain and give examples to support their ideas. E)ercise *+.+. )sk students to compare the costs and benefits of investing in an industriali/ed economy to the costs and benefits of investing in a developing economy from the standpoint of an ;@'. Then ask the students to debate the idea that ;@'s have a responsibility to work toward developing global efficiency! i.e.! that economic considerations should be weighted more heavily than other factors in the country selection process. E)ercise *+.,. :uring the #$B&s! a number of ;@'s such as Coca"Cola and 7; made decisions to abandon operations in certain developing countries and not to enter others because of government restrictions. )sk the students to discuss the likelihood that ;@'s will face such decisions in the future! given the progress of the -T= and movements toward economic integration in many parts of the world. :o the students foresee other factors that might cause more divestments in the futureC E)ercise *+.-. Aave the students use the simplified grid to compare countries for market penetration FTable #*.*G to compare 3outh )frica! reland! and )rgentina for a possible investment. 'ncourage them to use outside data sources such as www.doingbusiness.org! www.worldbank.org! and www.nationmaster.com to gather information and make meaningful comparisons. -hich of these three countries would be most suitable for investmentC -hyC

#HB