11.10.

2019

Market selection and PEST

analysis

Agenda for today

• Market selection
• Legal environment
• Political environment
• Technologic environment

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Market selection

• Two methods:
– Multi- stage selection process
– Scoring model

A Multi-Stage Selection
Process
Approx. 150
countries

Markets which drop out

due to restrictions („must“
criteria)

Markets which are filtered out

based on a first set of
selection criteria

Markets which are filtered out

based on a second set of
selection criteria
Potential foreign
target markets

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A Scoring Model for

International Market Selection
1 2 3 4 5 6
SELECTION
MARKET TARIFFS NON-TARIFF PRODUCT COMPETITIVE SHIPPING RANK
CRITERIA INTENSITY SUM-
POTENTIAL BARRIERS FIT COSTS
MATED
SCORE
WEIGHTS W = 15 W=5 W = 17 W = 25 W = 22 W = 16
MAX
COUNTRIES E WxE E WxE E WxE E WxE E WxE B WxE 400 P.

DENMARK 2 30 2 10 1,5 25 3,5 87 0,5 11 3,5 56 219 4

SWEDEN 3,5 52 4 20 3,5 59 25 62 2 44 3 48 285 2

NORWAY 2 30 3 15 2 34 3,5 87 1 22 2,5 40 228 3

FINLAND 4 60 4 20 3,5 59 3 75 4 88 1,5 29 326 1

PORTUGAL 0 0 3 15 1 17 0,5 12 2 44 2 32 120 5

GERMANY

AUSTRIA

SPAIN
•
•
•
W = Weights of selection criteria
E = Estimates (0 = very bad conditions; 1 = bad conditions; 2 = acceptable conditions; 3 = favoUrable conditions: 4 = very favourable conditions)
WxE = weighted estimate

International environment
and its impact on business-
PEST analysis

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PEST analysis

• PEST analysis?
• PESTE analysis?
• PESTEL analysis?

Legal environment
• Legal system
• Control of ownership
• Ownership of properties
• Enforcement of law
• Transfer of profits
• Starting up new business
• Taxes and fiscal policy
• International treaties
– Protection of investment, double- taxation

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Political environment

•Political system and stability

•Governmental institutions and bureaucracy
•Lobbying
•Membership in international organizations
•Interest groups
•Attitude towards foreign companies
•Corruption…

Country risk classification for selected

countries (2018)

Country Rating Country Rating

Afghanistan 7 Argentina 6

Belarus 6 Bulgaria 3

Croatia 4 Czech Republic 0

Egypt 6 Iran 6

Israel 0 Korea 0

North Korea (7)- 2016 UAE 2

Taiwan (1)- 2016 Turkey 5

Romania 3 Russia 4

Source: OECD, 2018

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Corruption around the world

Source.: Transparency International (2017)

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Technologic environment
• Infrastructure:
– Logistics
– Communication
• Analysis of technological environment:
– Investments into R&D (as a % of GDP)
– Number of registered patents
– Road and rail networks
– IT infrastructure
– Number of internet, smart phone etc. users…

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Internet penetration (3/2019)

100,00%
89,10%
85,90%
90,00%

80,00%
68,00%
65,80%
70,00% 66,60%

60,00% 51,70%

50,00%
35,90%
40,00%

30,00%

20,00%

10,00%

0,00%

Source: www.internetworldstats.com

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Social and cultural

environments

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Culture

• Are „the customs and beliefs, way of life and

social organization of a particular country“
(Oxford dictionary)
• We learn the culture;
• Culture is transferred from generation to generation;
• Culture is shared;
• Culture is differentiated;
• Culture changes in time.

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Language

• Is a part of the culture:

– Germany: „sofort“ vs. „gleich“
– Japan- 7 words for „Yes“
• Translation into local language
• Body language:
– Gestures, Shaking hands, Kissing, Eye-
contact, Nodding

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Openness of the society

Open society
USA, Australia, Scandinavia

France, Germany, CEE countries

Japan, China, Arab countries

Closed society

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Maslow´s hierarchy of needs

Self- actualization
needs

Self- esteem needs

Social needs

Safety need

Physiological needs

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Hofstede´s dimensions of culture

Country Power Individualism/ Maskulinity Uncertainty Llong- term Indulgence

distance Collectivism avoidance orientation vs. restraint

USA 40 91 62 46 26 68

Russia 93 39 36 95 81 20

Japan 54 46 95 92 88 42

Sweden 31 71 5 29 53 78

Czech R. 57 58 57 74 70 29
Slovakia 104 52 110 51 77 28

Source: www.geert-hofstede.com

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Institutions

• Family
• Schools and education
• Religion and churches

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Religion
• Value structures and taboos
• Festive days and holiday
– e.i. Opening hours in Germany
• Europe vs. USA
• Protestants vs. Catholics in Europe

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Other factors

• Values
• Dress- codes
• Aesthetics

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