Globalization requires that companies forge business relationships with parties from different countries, cultures and legal systems. All of these relationships present unique challenges and companies must be prepared respect the differences and the values of the other party as they negotiate and eventually begin to conduct a cross-border relationship. In order for this process to be successful, a careful analysis, popularly referred to as “country analysis”, should always be made of the country or countries in which the business activities will take place.
Country analysis is a holistic approach to understanding how a country, particularly its government, has acted in the past and may act in the future. A comprehensive country analysis should begin with an evaluation of environmental factors, including all relevant economic, political, legal and cultural factors. The next step is to examine the institutional framework of the “target country”, a process that focuses first on identifying the national goals and objectives of the country and the various policies the government is pursuing to achieve those targets. The analyst must then evaluate the performance of the country vis-a-vis its national goals and objectives using objective and easily verifiable measures. Other elements of a country’s institutional framework that should be considered include the financial system, human capital, legal and regulatory systems, ownership and governance practices, business-government relations and the media. The last, and most difficult, step in any country analysis is constructing scenarios that might represent the evolution and development of the country over the period of concern to the company (e.g., the term of a proposed joint venture).
Country analysis is typically discussed in the context of advising foreign investors on whether to launch or expand business activities in a particular country. In addition, however, country analysis is a valuable tool for managers of enterprises already engaged in business activities in the country since those managers will presumably want to create internal business plans and set internal performance goals and objectives and will need to make forecasts about the local environment and the actions of local institutions. While business counselors are often not directly involved in the selection of foreign markets for their clients’ business activities, it is important for them to understand all of the factors regarding a chosen country in order to be an effective advisor on selection of the form of entry into the new country and contractual arrangements with local business partners.
Chapter 260 in Business Transaction Solutions (§§260:1 et seq.) is a valuable training resource for business counselors on evaluating foreign markets and help them understand organizational practices for monitoring the environment in promising foreign markets; understand how to conduct an environmental analysis of a foreign market; define and describe the elements of a national business system; describe the dimension of the national institutional framework; understand and analyze differences in management styles and practices in foreign markets; understand techniques for forecasting and scenario planning; and understand the process of market and site selection. The first stop should be a review of the Business Counselor’s Training Materials: Evaluating Foreign Markets (§ 260:81).