Formal rankings are published to guide investors along INTRODUCTION Country

Formal rankings are published to guide investors

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within regions or countries. Formal rankings are published to guide investors along INTRODUCTION Country risk analysis Examines the chances of non-market events (political, social, and economic) causing financial, strategic, or personnel losses to a firm following FDI in a specific country market PEST framework Examines the political, economic, socio-cultural, and technological conditions in particular country markets Find more at
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466 PART FOUR FUNCTIONAL AREA STRATEGIES the same lines as insurance assessors (see related discussions later in this chapter). Such analyses also map out the key political constituencies, central and regional agencies, key ministers and bureaucrats, as well as changing forms of legislation in different countries as an input into MNE strategy and implementation (for example, aiding the development of personal contacts and networks in target countries). Economic analyses cover everything from national-level to industry-sector or market- specific trends. Companies compiling return on investment (ROI) projections need to know something about productivity levels that can be expected in would-be plants, encompassing data on employees, technologies, support industries, local utilities, and so on. Any investment that relies on some element of local financing will need data on local interest rate trends, lending conditions, and the general stability of domestic capital markets, for example. Social trends analyses are relevant for firms looking to market new products and services in new countries. Mapping patterns of disposable income, customer prefer- ences, and regional differences in these requires a combination of quantitative and qualitative analyses. Statistical overviews covering demographics, buying patterns, and market research need to be complemented with insights into socio-cultural norms and changing patterns of expectations if advertising messages are to be pitched correctly. 2 Add foresight. Arguably the most difficult challenge facing any decision maker is to pre- dict the future. The complexity that results from the variety of factors managers need to consider when making international business decisions adds immeasurably to this uncertainty. Accurate scenario building is central to the strategic planning and future success of any firm and can be done using the PEST framework as a starting point. Rather than creating grandiose visions of the future, managers need to extrapolate accu- rately and objectively from the past and current trends across all the PEST dimensions to map out the likelihood of different futures and the implications of these for particular global strategies. Figure 15.2 PEST framework for country analysis Technological Government R&D S&T infrastructure Technology transfer channels Technological capabilities National “system of innovation” Population demographics Income distribution Social mobility Lifestyle Attitudes toward work Leisure Education Socio-cultural S Political/legal FDI, trade regulations/incentives Monopolies legislation
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