Country Screening Essay ⋆ Business Essay Examples ⋆ EssayEmpire

Country screening is the process of scanning international markets, with the intention of identifying and assessing opportunities for expansion. This process can be carried out through both primary and secondary research. Its main purpose is to answer three questions: Should we enter the country or not? Is there sales potential for our products or services? Where can we best leverage our core competencies? The country screening stage normally precedes the country selection stage and is the first step in the international planning process.

There are around 200 countries in the world. Even large multinational corporations will have problems entering all and every one of these countries. Thus, international markets will have to be screened to remove those that do not offer adequate potential. The criteria used in preliminary and secondary screening are relatively broad and include mainly economic and social data (e.g., income per capita or population) that should be available for most countries and allow for intercountry comparisons. In order to decide if further research may be worthwhile, potential markets have to fulfill three criteria: accessibility, profitability, and market size/growth potential. If a company is unable to enter a market, due to tariffs and non-tariff barriers or legal restrictions, or to reach the customers by means of communication or distribution, if the market is unable to return a profit, sometimes due to exchange regulations, or if its actual and future size is small, then there is no point for the company to pursue this venture.

When information regarding one specific country is sparse, mainly in latent and incipient markets, a company may have to rely on comparative research, between the target country and some other country, normally one that is at a more advanced economic level or that belongs to the same geo-economics group. Some of the key techniques used are demand pattern analysis, multiple factor indexes, analogy estimation, regression analysis, and macro-surveys.

When screening a country, uncertainty and risk factors are the most pertinent ones and cannot be ignored. Risks can be political, commercial, industrial, or financial, can be evident or latent, and can be spread along a risk scale. Over the past years a range of risk indexes have been developed. The largest country and political risk consultancies are Business

Environment Risk Intelligence (BERI), Business Monitor International, The Economist Intelligence Unit, Global Insight/World Markets Research, and Political Risk Services/International Country Risk Guide. These indexes cover different environment factors such as political stability, taxation, infrastructure, and security. They normally come to a score, indicating how the country ranks regarding risk type and level. For example in BERI’s operation risk index a score of 55–41 points means “high risk, bad business climate for foreign investors.” In their Business Environment Ratings Report for 2006, Switzerland, Singapore, Netherlands, Japan, and Norway were the five least risky countries in the world. The Economist Intelligence Unit’s Country Risk service assesses credit risk (based on currency risk, sovereign debt risk, and banking risk) across 120 countries. The latest findings (May 2007) ranked Singapore, Hong Kong, and Chile as the least risky, and Iraq, Zimbabwe, and Myanmar as the riskiest countries.

To facilitate a proper screening process, companies need to follow a methodical approach. One of the most widely used frameworks is the 12C environmental analysis. The twelve Cs are country, concentration, culture/consumer behavior, choices, consumption, contractual obligations, commitment, channels, communication, capacity to pay, currency, and caveats. Some of the elements analyzed comprise SCLEPTE (social, cultural, legal, economical, political, technological, and environmental) factors, structure of the market segments, characteristics of competitors, growth patterns, business practices, trade barriers and incentives, logistics and media infrastructures, and currency stability, among others. The information obtained will help to design a profile for each considered country, including major threats and opportunities, degree of country attractiveness and company competitive advantage, and the most suitable entry mode.

In order to obtain country-related information there are a variety of secondary sources that can be used such as international chambers of commerce, trade organizations, embassies, export councils, or trading companies. With the advent of the internet, online databases have become a good source of information, for example Kompass, Textline, Comtrade, Eurostat, Euromonitor, or Mintel. Web sites of the United Nations, European Union, World Bank, or the World Trade Organization are also very useful sources.

When using secondary data to screen a country, companies must be aware of some of its pitfalls: availability, accessibility, quality, and regency. However, and despite these problems, secondary data may be the only kind available for small and medium-sized companies or even for larger companies in very distant markets. When all secondary data has been collected, companies may need to gather primary data to attain the information considered necessary. Unknown cultures and countries make international data collection a difficult task and key decisions when undergoing it are linked to organizational factors: Should we do it with our own resources (in-house) or through a market research company and, in this case, should it be a domestic agency (from our own country), a local agency (from the host country), or a major global agency? Availability of resources, market/country characteristics, budget, and urgency of the data will determine the final choice.

Bibliography:

John Daniels, Lee Radebaugh, and Daniel Sullivan, International Business, 12th ed. (Pearson, 2009);
Isobel Doole and Robin Lowe, International Marketing Strategy (South Western, 2008);
Office of Fossil Energy/ Argonne National Laboratory, Potential Markets for Small Coal-Fired Combustors in OECD Countries Country Screening/United States (U.S. Department of Energy, Office of Fossil Energy, 1988).

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