Measuring a potential business venture has many aspects
which the international manager must be aware of in order to
convey the correct information back to the decision makers.
Being ignorant to any of the aspects can lead to a false
representation of the project, and hence an uninformed
decision being passed. In order for a business to survive it
must grow. For growth to be optimal, management must first
be able to identify the most attractive prospective leads. The
country as a whole, specifically geography, government, and
financial aspects must be looked at in order to yield the best
possible picture of the market a company wishes to enter.
Concentration should be placed on gathering reliable facts
that are backed up by more than one source. It is to be hoped
that after creating a picture of the market, management's
analysis of the potential business venture and plan of action
will be structured as to avoid losses and to find the most
profitable scenarios. The success of the multinational
corporation lies on the shoulders of it's management.
International management and organization-design expert
Henry Mintzenberg says every CEO has three essential
duties: direct supervision, development of the organization's
strategy, and management of the organization's boundary
conditions. Top management's responsibility at and beyond
the organization's boundaries is largely a communication
responsibility; however, no commonly accepted model exists
for decision, execution, and assessment of communication
opportunities. Within even some of the largest and most
venerable organizations, the process used is haphazard and
inconsistent. The Wyatt Company's survey of communications
professionals showed that just 58.1 percent agreed that their
organization's communication objectives are linked to
business objectives, and 83.3 percent reported that their
organizations conduct no formal review of return on
communications investment. CEOs must establish and
reinforce an organization's image in public by viewing each
target public as a client; by doing research, looking at trends,
and talking to experts, a CEO focuses on selling what the
client wants to buy.1 Finding a country to conduct business in
can be a very easy task depending on if the organization's top
management follows the advice of Mr. Mintzenberg. The way
a company normally discovers where to conduct research is
through leads on potential operations from outside sources.
The selection of which leads to investigate becomes the
difficult task. After sifting through the leads and finding the
right ones to investigate management must formulate an
international marketing plan. This further helps management
in locating potential markets for their products. The first step
is to use secondary research to find out what the sales
potential is in a given market. Asking the questions of need,
demand, and support gives one a starting point for research.
If we were a company that sold pants we might want to ask
the following questions. Is there a need for pants? Is it cold
enough there to wear pants? Do people that demand the
pants have money? These are the questions that one should
ask of potential markets. Table 1-located at the end of the
paper-shows the statistics that are needed for a general
market picture. After gathering the information from the
secondary research, the picture of a potential market
becomes more evident. However, to make the picture clearer,
one must conduct primary research. This research outlines
the specifics of the potential market that directly pertain to the
product. Robert Douglas' book, Penetrating the International
Market, addresses the issue of locating potential markets in
greater detail.2 mg1 After finding a lead that contains
profitable markets it is necessary to analyze the venture as a
whole. The decisions of companies must be based on the
facts of reliable sources on all investments. To gather the
information needed for investment projects, management
must organize a competent feasibility team. The members of
this team should be comprised of employees of the company,
this is so that the knowledge will stay within the company. If
the resources are not available for an employee conducted
study then outside consultants may be used, it may also be
beneficial to use a combination of the two. The first step in
conducting a study is to design it by using project objectives
as the base. During the second step the team must be staffed
with people that have the ability to solve problems in any
situation. In the third step the team should be properly placed
and instructed. In the fourth and final step the product of the
feasibility study should be properly communicated to the
decision-making management.3 Table 2-located at the end of
the paper-shows a general timeline that a company follows
through the progression of a feasibility study. The design of a
feasibility study first assumes that a company possesses the
skills and resources necessary to be competitive in the market
under analysis. Management must know the limits of its
operations abroad. The operating margin for the expense of
establishing and starting operations abroad should be easily
recoverable within a reasonable time period. The design
should also include the management's goals, which comes
down from the investors of the company. The goals of
management should be to acquire specific knowledge of the
partner, in a joint venture situation, as well as the financial
aspects, and the business-environment. The currency of the
host country along with the political situation, and the
economy are finer points of detail that the study must cover
when analyzing the business-environment.4 In a less formal
sense the design of the study should cover relevant material
so that when viewing the final report decision-makers will
know with what they are becoming involved. Staffing a
feasibility study is of major importance. Not only must the
members be competent in communication and understanding,
but the management selecting the team must be confident in
the abilities of each individual. Communication in international
affairs plays a great role for the fact that different languages
spoken and unspoken are involved. The communication
through a translator let alone person-to person
communication can be vastly misconstrued.5 The individual's
communication skills should be top-notch in order to be
selected for the team. The members of the team should also
be aware of the cultural factors that play a role in
communication. Cultural interpretation and adaptation are a
prerequisite to the comparative understanding of national and
international management practices.6 For example, during
contract negotiations with a Japanese company there are
times of long pronounced silence on the part of the Japanese.
They state that the negotiations, (will take a little longer,( and
(this is quite difficult.( From the American perspective one
would become frustrated at the slow pace of the negotiations.
From the Japanese point of view the negotiations are
proceeding quite well. Differences such as the one illustrated
must be kept in mind at all times while communicating to any
foreign counterpart.7 The placement of the team is dependent
upon the profession of the individual. The accountants
obviously speak and gather their information from the
counterpart's accounting offices, and so on. Concerning
placement, their daily schedule should allow time for team
meetings. During the meetings, progress and the experiences
of each member should be shared. This sharing of information
can bring the team closer together and also allow the
supervisor to measure progress and disseminate any
changes in plans.8 As the importance of correct
understanding of the translator and the foreign counterpart
are during communication, the final communication of the
study should be understood by the top decision-makers.
When these four steps are taken while conducting a study the
measure of feasibility will become more accurate.
Understanding the importance of proper analyzation of
ventures can be seen with the following example of the Patras
Cement Company, SA.9 Yankee Cement Company Inc. of
Denver Colorado needed to approve an expansion of it's
subsidiary, Yankee International SA of Switzerland. The
expansion was to build a 500,000-ton cement plant in
conjunction with Titan Cement Co. SA of Athens. The plant
would reach full production capacity within two years after the
beginning of construction. Estimates by both Titan and
Yankee showed that total capital needed for the Patras
operation was US$15 million. The equipment manufacturer,
F.L. Smidth of Copenhagen would finance 40 percent of
capital expenditures, and another 20 percent would be
financed through the National Investment Bank for Industrial
Development, SA. The remaining 60 percent of Patras shares
would be equity, of which 75 percent of shares would be
owned by Yankee, and 25 percent of Patras shares would be
owned by Titan. The international division manager of
Yankee, Bob Walbecker, dealt with the Manourpoulos family,
who were the owners of Titan. After establishing the
connection with Titan, Mr. Walbecker continued to establish
good rapport between his division and Titan. Ten days after
preliminary negotiations between the two parties Mr.
Walbecker was assembling a feasibility team in Denver, which
was Yankees' domestic headquarters. The team consisted of
a market analyst, an accountant, a geologist, a civil engineer,
and Mr. Walbecker, who managed the study. For each
American there was a Greek counterpart that translated and
disclosed all information known to Titan. After four years from
the start of the study Yankee expected that personnel within
the subsidiary would be able to handle any further
developments. Preparing for the in country phase of the study
is perhaps more important than the actual time spent in the
country conducting research. Before departing for Athens with
his team, Mr. Walbecker prepared an outline for each day's
activities for the entire study period. He also had the
individuals make a contact list, which contained a bank, an
accounting firm, a lawyer, an equipment supplier, the
embassy, the ministry, as well as industry source phone and
cable numbers. Another important point that was covered was
that Mr. Walbecker made maps available to the team of the
location, and showed documentary films discussing the
political and economical situation of the country as well. Shots
and medical supplies were also made available and taken
with the team. Language was also a concern to the accuracy
of the study. Based on this fact personnel were required to
attend classes on the language even if they had some prior
knowledge. After sufficiently preparing the personnel for the
trip, Mr. Walbecker departed with the team for Athens. For the
first four days the team was allowed to orient themselves to
their surroundings. There are several reasons why the team
was given this time to relax. First, they had to recover from the
long flight. Physical and mental stamina were at a low-point
when the team left the plane. Secondly, the change in
surroundings has an effect on the emotions of a person.
Third, it allows for the creation of a team from a group of
individuals. A sense of camaraderie can be established during
this free time. By the beginning of the week the team was
eager and ready to start work on the study. Using the contact
list and each individuals daily schedule the team was sent
about to gather information. From each contact on the
prepared list each member was expected to gain at least two
additional contacts. While meeting with contacts the team was
asked to differentiate between opinion and fact. This is
because misinformation gathered by inexperienced people is
very abundant. Fortunately for Walbecker the team he had
assembled was able to distinguish between relevant and
irrelevant material. During the study the team was also
required to take notes every day. They were also encouraged
to go outside of the metropolitan area in order to gain a better
feeling of the country and it's people. Upon return of the team
from Athens, Walbecker concluded the following: the rate of
return would be 16 percent, the partners had good integrity
and intentions, the political situation was not extremely stable,
the ownership option was good for other projects if the Patras
investment was slow, and there were no technical or market
developments evident to slow down progress in construction.
From these findings Walbecker had to persuade the Board to
agree to the venture. He concentrated on the soundness of
the venture, the reliability of the partners, and the advantages
of Greece. Using market analyses and forecasts, an audit of
Titan's financial affairs, the geological report, plant layout and
consolidated capital estimates, and a business-environment
report, which covered the political situation, the economy,
partner evaluation, and an outlook on the country's
currency-the Drachma-Mr. Walbecker was prepared to start
finalizing the report. Concluding the report were the financial
details on the US$4.5 million equity needed by Yankee.
Before giving a formalized presentation to the Board and
other important associates, Mr. Walbecker had informal
discussions over breakfast with the three top executives at
Yankee about the project. The reason for this was not only to
give the executives a briefing about the information that was
gathered, but also to get an idea as to result of the vote on
the project. After the formal presentation, the Board was given
one month to decide on accepting or rejecting the project. At
the conclusion of one month's time from the formal
presentation the Board's vote revealed the acceptance of the
project. This example should have revealed the importance of
the site selection, gathering, and transmission processes
used in conducting a feasibility study. The main point of
conducting a feasibility study is to find the intricate details
which are necessary to make the right choice for expansion.
The example presented above is just one particular situation.
In trying to maintain brevity, the paper could not possibly
include all of the suggested actions that management should
take in every situation. Management must be able to adjust
and plan a course of action to find the details of their
particular situation that are essentials to making a viable
decision. As an overall idea in dealing with foreign
counterparts one should be objective in judgment and
abundant in knowledge of the person's/people's backgrounds.
Knowledge is a valuable resource when expanding
operations. Conducting venture analysis is one way in which
a company can perceive how the investment will contribute to
future operations. Table 1: List of statistics that portray the
market situation. Essential Market Statistics: 1. Population by
language, religion, ethnic groups 2. Population by age,
income, major occupations 3. Population by regions and
centers-with growth rates 4. Number of households and rate
of creation 5. Percentage of households with car, radio,
refrigerator, TV set, washing machine, running water,
electricity. 6. Per capita disposable income (per capita
national income less taxes and savings) broken down by
region 7. Personal and household consumption pattern;
changes over ten years. 8. Government purchases of goods
and services, broken down by product groupings and buying
agency. 9. Type, number, and purchasing of state enterprises
10. Imports, and exports, by product and by origin or
destination 11. Statistics on market for your product (internal
production plus imports less exports) * Source: Penetrating
the International Market, p.27-8. Table 2: Diagram showing
the timing of project events over a 12 month period. Months
Actions 0 Project received by outside party 1 2 3 Preliminary
evaluation by company completed 4 5 Initial screening in
country completed 6 Decisions to conduct study, employ
intelligence service 7 Departure of study team for country 8 9
Completion of field work 10 11 Completion of Report 12
decision by Board on acceptable terms * Source:
Multinational Management, Venture Analysis. p.58. 1
McGrath, John J. Sell Your CEO! Vital Speeches of the Day.
vol. 61-14. May 1, 1995: 444-7. 2 Stuart, Robert Douglas.
Penetrating the International Market. American Management
Association. New York 1965: 25-39. 3 Haner, F.T.
Multinational Management. Merrill. Columbus, Ohio 1973:
43-58. 4 Ewing, John S. and Meissner, Frank. International
Business Management; Readings and Cases. Wadsworth.
Belmont, California. 1964: 146-70. 5 Robinson, Richard D.
International Management. Holt, Reinhart and Winston. New
York. 1967: 71-85. 6 Morden, Tony. International Culture and
Management. Management Decision. vol. 33-2. 1995:16-21. 7
Harris, Philip R. and Moran, Robert T. Managing Cultural
Differences. Gulf. Houston, Texas. 1979: 12-24. 8
Fayerweather, John. International Business Management; A
Conceptual Framework. McGraw-Hill. New York. 1969: 51-64.
9 Haner, F.T. Multinational Management. Merill. Columbus,
Ohio. 1973: 60-64. mg1 1 M. Broich
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