SCANNING FOR ALTERNATIVES
SCANNING FOR ALTERNATIVES
In the opening case, Ford used scanning techniques so that decision makers could perform a much more detailed analysis among a manageable number of geographic alternatives that looked most promising. This is a useful exercise because otherwise a company might consider too few or too many possibilities.
Risk of Overlooking Opportunities
As a company tries to optimize its sales or minimize its costs, it easily can overlook or disregard some promising options. Rather than being rejected, potential projects in many countries may not be carried out simply because managers never think of them. A U.S. manager pondering foreign operations may consider countries such as Canada, Japan, and Germany while overlooking some very small countries that actually may offer better opportunities.
Even if they are considered, certain locales may be eliminated almost immediately before they are sufficiently examined for expansion possibilities. Whole groups of countries are sometimes lumped together and rejected. For instance, Zambia might not be considered because "Africa is too risky."3 Or a country may or may not be eliminated because of conditions in a nearby country. For instance, apprehension toward investment in Latin America increased after the Cuban revolution, but other Mid-East areas were not negatively affected by the Iranian Revolution or the Iran-Iraq war.4
Risk of Examining Too Many
A detailed analysis of every alternative might result in maximized sales or the pinpointing of a least-cost location; however, the cost of so many studies would erode profits. For a company with 1000 products that might locate in any of 100 countries, there are 100,000 different situations to be analyzed. Within each of these situations are other alternatives as well, such as whether to export or to set up a foreign production unit. If there are conditions that would greatly enhance the probability of making or not making an investment, a firm should examine those first, before completing a more detailed feasibility study.
The Environmental Climate
In the Ford case at the beginning of the chapter, certain potential investments were discarded because Ford could not gain sufficient control of the operation. Decision makers' perceptions of environmental climate will determine whether a detailed feasibility study will be undertaken and the terms under which a project will or will not be initiated. The environmental climate refers to those external conditions in host countries that could significantly affect the success or failure of a foreign business enterprise. Certain variables are commonly considered important in many firms' foreign expansion decisions. The environmental analysis is key in limiting alternatives to a manageable number.
In the opening case, Ford used scanning techniques so that decision makers could perform a much more detailed analysis among a manageable number of geographic alternatives that looked most promising. This is a useful exercise because otherwise a company might consider too few or too many possibilities.
Risk of Overlooking Opportunities
As a company tries to optimize its sales or minimize its costs, it easily can overlook or disregard some promising options. Rather than being rejected, potential projects in many countries may not be carried out simply because managers never think of them. A U.S. manager pondering foreign operations may consider countries such as Canada, Japan, and Germany while overlooking some very small countries that actually may offer better opportunities.
Even if they are considered, certain locales may be eliminated almost immediately before they are sufficiently examined for expansion possibilities. Whole groups of countries are sometimes lumped together and rejected. For instance, Zambia might not be considered because "Africa is too risky."3 Or a country may or may not be eliminated because of conditions in a nearby country. For instance, apprehension toward investment in Latin America increased after the Cuban revolution, but other Mid-East areas were not negatively affected by the Iranian Revolution or the Iran-Iraq war.4
Risk of Examining Too Many
A detailed analysis of every alternative might result in maximized sales or the pinpointing of a least-cost location; however, the cost of so many studies would erode profits. For a company with 1000 products that might locate in any of 100 countries, there are 100,000 different situations to be analyzed. Within each of these situations are other alternatives as well, such as whether to export or to set up a foreign production unit. If there are conditions that would greatly enhance the probability of making or not making an investment, a firm should examine those first, before completing a more detailed feasibility study.
The Environmental Climate
In the Ford case at the beginning of the chapter, certain potential investments were discarded because Ford could not gain sufficient control of the operation. Decision makers' perceptions of environmental climate will determine whether a detailed feasibility study will be undertaken and the terms under which a project will or will not be initiated. The environmental climate refers to those external conditions in host countries that could significantly affect the success or failure of a foreign business enterprise. Certain variables are commonly considered important in many firms' foreign expansion decisions. The environmental analysis is key in limiting alternatives to a manageable number.
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