Country Screening

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 geoeconomic 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 [Page 430]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.

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