LO3-4 360° View: Managerial Implications

What determines a country’s attractiveness for international business?

Its political, economic, and legal systems, plus demographics.

What must companies balance when choosing where to invest?

Long‑term benefits vs. costs and risks.

What are the main sources of benefits?

• Market size

• Consumer wealth

• Future growth potential

Why are large populations like China and India attractive?

Huge potential consumer markets, even if current incomes are low.

What is a first‑mover advantage?

Benefits gained by entering a market early (brand loyalty, experience, market knowledge).

What is a late‑mover disadvantage?

Challenges faced by firms entering a market after competitors (less loyalty, harder to compete).

: Example of early‑entry success?

Firms that invested early in South Korea or China gained major long‑term advantages.

What factors determine costs of doing business?

Political, economic, and legal conditions.

What are political costs?

Payments or bribes to powerful groups in authoritarian countries.

What are economic costs?

Poor infrastructure or undeveloped supply chains that raise operating expenses.

Example of economic cost?

McDonald’s in Moscow had to build its own farms and food‑processing plants to ensure quality.

What are legal costs?

Expenses from weak contract enforcement or poor intellectual‑property protection.

Why can developed countries also be costly?

Strict regulations and high insurance or compliance costs.

What are the three types of risk?

Political, economic, and legal.

What is political risk?

The chance that political changes or unrest will disrupt business.

• Iranian Revolution (1979): foreign assets seized

• Yugoslavia’s breakup: investments lost

• Venezuela under Hugo Chávez: government intervention

What is economic risk?

The chance that poor economic management harms business profits.

• Oil‑price collapse (2014–2015) caused inflation and recession in Russia, Saudi Arabia, and Venezuela.

What is legal risk?

Weak protection for contracts or property rights.

• 1970s India forced foreign firms into joint ventures, risking loss of intellectual property.

What is demographic risk?

Population trends that affect growth — aging or shrinking populations slow economies.

• Japan and Europe (low birthrates, aging populations). —> demographic decline

• India, Nigeria, and Vietnam. —> demographic growth

What makes a country most attractive for investment?

• Stable democracy

• Market‑based economy

• Strong property rights

• Low inflation and debt

What makes a country less attractive?

• Political instability

• Authoritarianism

• Economic mismanagement

• Weak legal systems

What is the key takeaway?

The best opportunities are in stable, democratic, market‑based nations — but developing countries offer high growth with higher risk.