intern-pestele

Many times the internationalization of a company to a certain country has its origin in some random occurrence and not in a systematic approach. As a result later on with the passing of time problems occur that put the enterprise in serious difficulties and give rise to regrets.

The purpose of this article is to show that the choice of a foreign country with which a company will start its internationalization can be constructively made by following a methodical approach based, in some way, on quantitative criteria and should not be left to chance events.

In addressing the issue, we developed a “Country Comparison Calculator” presented here. This calculator entails the selection of appropriate criteria which it then quantifies and categorizes into two groups: (a) Opportunities & Strengths and (b) Risks & Weaknesses. We viewed Economics from the angle of Opportunities and Strengths while from the angle of Risks and Weaknesses we viewed the rest categorizing them in line with the PESTELE, the extra E is for Ethics, into Politics, Society, Technology, Environment, Law and Ethics.

The selected criteria are shown in the tabular form that follows. We especially note that some criteria are company purpose-specific (Foreign market sector specific entry in the table).

Each of the criteria is made up of a number of sub-criteria. For these sub-criteria, there exist data from published sources. The data collected are then used to fill in the cells for each sub-criterion in the comparison table for each country (not shown here). When all the data for all sub-criteria are completed, the interested party, on the basis of the quantitative picture of the relevant part of the table, evaluates quantitatively each criterion, say on a scale 1 to 10, as in the example of the table below:

             COUNTRIES UNDER CONSIDERATION

Home

Country

Country:

AA

BB

CC

DD

EE

     ECONOMIC DIMENSION
     General-Market dimensions (1.1.1 of table)

6

9

10

7

3

8

     Prosperity-Buying power indexes (1.1.2)

8

9

10

8

3

7

     Long-term Economic Stability (1.1.3)

4

7

10

8

6

6

Economic Goodness dimension

18

25

30

23

12

21

     FOREIGN MARKET SECTOR SPECIFICS
     Prospective client firms  (1.2.1)

6

8

9

10

4

10

     Business activity level in the country (1.2.2)

7

8

10

9

4

8

Foreign market sector specifics on goodness dimension

13

16

19

19

8

18

ECONOMIC OPPORTUNITIES

31

41

49

42

20

39

              WEAKNESSES – RISKS:
Political weakness overall distance (2.1)

3

1

1

4

7

4

Social weakness overall distance (2.2)

4

3

2

4

6

6

Other social factors weakness distance (2.3)

3

1

2

3

4

3

Legal system and enforcement weakness (2.4)

3

1

2

4

5

5

Ethical weakness overall distance (2.5)

3

2

2

3

4

5

Environmental weakness overall distance (2.6)

3

1

1

6

5

6

Communications weakness overall distance (2.7)

3

1

1

3

5

3

Infrastructure weakness overall distance (2.8)

2

1

1

2

4

2

OVERALL RISK FACTOR

24

11

12

29

40

34

The evaluation, in this way, can be performed quantitatively and as such, it can also be presented in charts that tell more readily the story, as shown below:

Comparison of foreign countries by multidimensional criteria (left: Opportunities, right: Risks)

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Comparison of foreign countries by the sum total of Opportunities vs Risks

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The final choice, however, does not end here. The Country Comparison Calculator, though important, is a first tool. It must be followed by other analytical tools like the PORTER, CAGE, SWOT, SCENARIOS, and MARKT RESEARCH, both indirect and direct, for a most successful outcome.  The fact, however, that most of these other tools start on the basis of the results of the country selection makes the Country Comparison Calculator’ s role fundamental.

The Country Comparison Calculator with its quantitative tabular form and its associated charts constitutes a useful tool. It offers a systematic and practical methodology that provides a comparative evaluation of foreign countries in numbers and in pictures, thus enabling a company to search and give some first answers to the very important question of which country to go to in its internationalization ventures.

 

To those with further interest in the topic or in management services: Panikos Sardos is the Managing Director of P&E Sardos Business Solutions Int., a management consulting firm that offers advisory services, coaching and training and can be reached by email: psardos@sardossolutions.com, telephones: +357 99640912, +357 24400884, www.sardossolutions.com