Methods of country risk assessment for international market-entry decision

Abstract

Researchers and practitioners of international market entry typically have a difficult task obtaining and processing requisite information to evaluate potential opportunities and risks. Essential analysis is often confounded by inappropriate measures of input requirements, inadequately defined information categories, and the overall complex nature of the decision process. In partial response to these issues, this research introduces a three-stage guiding framework for market-entry decision and presents alternative methodologies for country risk assessment, a principal component in the final stage. A variety of discrete methods are included such as subjective interaction by deliberating experts, scoring models, the analytic hierarchy process, simulation, and statistical designs using regression or factor analysis. New analytic rule-based nondiscrete techniques utilizing fuzzy logic are also introduced. Fuzzy logic simulates natural discourse and analogical reasoning through inference about nebulous facts and inexact concepts, using rules that do not require a perfect match between input data and their antecedental values in order to fire. It provides formal mathematical structure for representing, evaluating, and interpreting linguistic context. It is especially useful for handling problematical issues such as imprecise data, ambiguous information, vague meanings of terms, and inconsistent analyses that characterize the general market-entry problem and risk assessment in particular. Numerical examples demonstrate how discrete and fuzzy models work to integrate political, social, and financial risks.

Citation

Levy, J.B. and Yoon, E. (2001), "Methods of country risk assessment for international market-entry decision", Woodside, A.G. (Ed.) Getting Better at Sensemaking (Advances in Business Marketing and Purchasing, Vol. 9), Emerald Group Publishing Limited, Leeds, pp. 287-323. https://doi.org/10.1016/S1069-0964(00)09010-4