{"id":1868,"date":"2014-07-31T22:11:30","date_gmt":"2014-07-31T21:11:30","guid":{"rendered":"https:\/\/blog.iese.edu\/expatriatus\/?p=1868"},"modified":"2014-07-31T22:11:30","modified_gmt":"2014-07-31T21:11:30","slug":"picking-a-new-foreign-location-what-a-hassle","status":"publish","type":"post","link":"https:\/\/blog.iese.edu\/expatriatus\/2014\/07\/31\/picking-a-new-foreign-location-what-a-hassle\/","title":{"rendered":"Picking a New Foreign Location? What a Hassle!"},"content":{"rendered":"

\"globe\"<\/a>Multinational corporations<\/strong> continue expanding abroad and thus try to populate foreign markets<\/strong> more and more. For instance, a lot has been said and written about emerging markets<\/strong>, which lure Western corporations with good investment opportunities. At the same time, there is also a reverse trend of emerging-market brands going global. As such, all businesses with global ambitions are looking for new foreign markets<\/strong> to conquer. This leads to a seemingly simple question: how do businesses actually choose new foreign locations?<\/p>\n

In line with other choices we make in life, probably the two main factors we account for are our needs and available opportunities. For example, when picking a restaurant for dinner, I would likely consider what I like to eat and also which of the restaurants offer that kind of food. Similarly, when selecting a college for my child, I would take into account my child\u2019s academic interests and see which colleges have the best programs in that respective field. Does it work the same way with business expansion choices? Why would it not?!<\/p>\n

I am sure that the first and quite logical answer many of us would instantly propose is that companies do pick foreign locations<\/strong> following their business needs and local business opportunities<\/strong>. Indeed, that would be quite a prevalent assumption. Yet, it is not quite that simple.<\/p>\n

As a recent research study by Schotter and Beamish (2013) shows, the aforementioned assumption is far from reality. It turned out that companies\u2019 foreign location<\/strong> choices are more based on managerial preferences in terms of travel conveniences. Naturally, it is not just about how comfortable and pricy the flights are to the new destination, there are many more \u2018hassle\u2019 factors<\/strong> involved.<\/p>\n

The researchers developed a measure of the most common travel inconveniences and, based on this measure, composed so-called \u2018hassle\u2019 scores<\/a> for 131 locations. The hassle factors<\/strong> range from most impactful factors, such as local transportation (1), climate (2), and business facilitation (3), to the least impactful factors of language (9), food, water, hygiene (10), and personal safety (11). As for the location rankings, the five countries with the highest \u2018hassle\u2019 scores are (in descending order) Sudan, Angola, Nicaragua, Burkina Faso and Nigeria. The list of the lowest hassle countries is topped by Denmark, followed by Canada, Belgium, Austria, and UK.<\/p>\n

As we can see the most comfortable countries are also the most developed and economically prosperous ones, which also means highly competitive and overcrowded markets. Yet, the opportunities probably lie in the other direction, where many companies may hesitate trying. Following the concept of Blue Ocean Strategy<\/em> by Kim and Mauborgne, from INSEAD, companies are more likely to succeed by creating \u2018blue oceans\u2019 of uncontested market space. In other words, it is smarter for companies to go to an open space and unlock demand with their product (either due to the uniqueness of the product or lack of competition), rather than get into already crowded spaces, trying to battle through the competition.<\/p>\n

Looking back at the countries with the highest and lowest hassle factors<\/strong>, we could propose that the highest ones may represent blue oceans, while the lowest ones, due to their \u201cbloody\u201d competition, might be red. Why not go for the blue waters then? As the research study implies, probably because the water is warmer, the sun is brighter and the grass is greener on the shores of the red ocean. As the researchers put it, travel inconveniences affect MNCs\u2019<\/strong> location choices, which is why \u2018even the most reputable multinationals frequently end up with a location mix that is suboptimal for their future global growth\u2019.<\/p>\n

 <\/p>\n

Further reading:<\/em><\/strong><\/p>\n

Kim, W.C., Mauborgne, R. (2005). Blue Ocean Strategy: How to Create Uncontested Market Space and Make the Competition Irrelevant.<\/em> Boston: Harvard Business School Press.<\/p>\n

Schotter, A., & Beamish, P. W. (2013). The hassle factor: An explanation for managerial\u00a0location shunning.\u00a0Journal of International Business Studies,\u00a044<\/em>, 5, 521-544<\/p>\n","protected":false},"excerpt":{"rendered":"

Multinational corporations continue expanding abroad and thus try to populate foreign markets more and more. For instance, a lot has been said and written about emerging markets, which lure Western corporations with good investment opportunities. At the same time, there is also a reverse trend of emerging-market brands going global. As such, all businesses with […]<\/p>\n","protected":false},"author":345,"featured_media":1870,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[18330],"tags":[67307,577,82052,82055,82053,82051],"class_list":["post-1868","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-views-and-news-about-expatriates","tag-business-opportunities","tag-emerging-markets","tag-foreign-locations","tag-foreign-markets","tag-hassle-factor","tag-mncs"],"acf":[],"aioseo_notices":[],"aioseo_head":"\n\t\t\n\t\n\t\n\t\n\t\n\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t