Welcome to Milestone 1 of Management Economics and Business Analysis Capstone. In this milestone you'll be selecting a company and product and identifying your geographic expansion opportunities. This is a pretty, pretty busy milestone folks. So be ready to get some work done as a result of you work here you should be able to select two countries who will be your Prime candidates for expansion. And the majority of the work that will be done in Modules 2 and 3. And of course, your final recommendations and Module 4 will be done on the basis of that selection. So this module is very important as a reminder your company selection could be US based or International. It should be a company that's fairly large and fairly solid to actually afford that $350 million investment. And that company should have enough information in the public domain about it, so that you can get some research done. And so that your peers who will review your material would be able to also find that material to verify your reports as well. Your product should be a physical product. You shouldn't be selecting services, you shouldn't be selecting digital content as enticing as it sometimes sounds. And remember, your product should ideally require some manufacturing, assembly or some sort of production activity in that country that you're expanding to. And this is what you're using those $350 million for. We often get questions about distribution of the product in that host country. You can actually distribute that product in the country where you are setting up that new base, where you could be distributing that in that geographic region. For example, you could say well, I'm going to establish my production facility in Egypt, but you could distribute that product in the entire Middle East using Egypt as a base, that is perfectly fine. And remember if you are selecting a relatively large company that produces multiple lines of a specific product. It makes a lot of sense to identify a very specific type of product or a line of business. So in my example here if you're using Gillette as your company and Gillette, of course, is a division of Procter & Gamble, so your company selection would probably be Procter & Gamble. You should be making a very specific selection of a line of business, which might, in this case be some sort of a disposable razor blades line of business here. Let's talk about past student projects to give you a sense of what might work wel. Students have selected Nike, which is based in Oregon, USA and students selected budget and environmentally friendly sneakers. Students had selected L'Oreal based in Paris France for low-cost haircare in developing countries. And one of the best projects that I previously seen the woods for Mars, which actually owns a pet food business, and that was a fantastic project too. So now that we've talked about selection of your product and selection of your company. Let's move on to probably the toughest part of this module, which is identifying your geographic expansion opportunities. So you are starting with a list of ten countries that could be any countries in the world, but those could not be high income or sometimes we call them developed economies. And for the purpose of this project we are using one source only to make those judgments, which is a classification by the World Bank. So those documents and those links are in the module overview in the analysis template document. So please take a look in there. But as long as you stick to those documents the choice is absolutely yours. What might be some of the criteria that you'll be using there? You probably want to select countries that are a good fit with your company and a good fit with your product selection. You might decide to select countries in a specific geographic location. So for example, that might be South America, or that might be Africa, or that might be Asia, that's really up to you. And last but not least, and that's really important for you when you're working with data. You want to make sure that the data is available for those countries because if you are selecting a country like North Korea, which generally doesn't report much of its data to international authority. There's basically just not going to be data available out there or that data simply is not going to be reliable. So data is an important consideration for a project like that. So what's our goal here? The goal is to gather relevant data for those ten countries and to rank their attractiveness for this investment project. You're providing to an analysis template document so that you'll be able to gather, organize and analyze your data to develop a ranking. And we are actually forcing you to use three variables in this template that every single student this going to use. One of them is the Gross Domestic Product per Capita, expressed and current US dollars and the outcomes from the World Bank. And obviously that's important because Gross Domestic Product per Capita is a really good measure or a really good proxy for consumption on for consumers ability to buy your product, right? It's not a perfect measure by any chance but it really is good enough. Another variable that we asked you to use is Corruption. The variable here would be the corruption perception index with the source being Transparency International. And finally the third variable is Trade Openness. And the variable here is trade as percentage of GDP with the source being the World Bank. What's the logic for including this variable while that is fairly simple typically a country that trades a lot with other countries is a pretty promising candidate for foreign direct investment. Because it probably does make that trait theory really easy, right? All right, so and then we do give you a little bit of choice. We do allow you and we do ask you actually to select to custom variables. You're going to select variables that are going to be relevant to your company or product. For example, if your project was dealing with making an electric appliance. One of the variables that you could have selected here is access to electricity, which is one of the data series from the World Bank. And the logic here I hope is pretty obvious to you because if you don't have access to electricity, you're probably not going to have very much use for an electric appliance. So give some thought to what custom variables you're going to usem discuss them with other participants in this course. This is going to be an important, very important choice that you are going to use and something that you're also going to defend in your report to the board of directors. So data, you must use reliable and consistent sources of data for your custom variables. We highly recommend using World Bank data, but you can select something else, but do remember that you're going to have to document that. So to develop this ranking for those ten countries, you're going to use the following process step one would be to identify the variables. We also refer to them as indicators, and you are going to collect the relevant data from the data sources. Step number two is in developing a ranking is normalizing those variables. In normalizing the variables we use a statistical process known as feature scaling. Essentially what we are doing here is that we are converting the variables into value, now it's going to be scaled between 0 and 1. So for data where higher value is better, so something like GDP per Capita. The higher is the GDP per Capita, the better it typically is for you. The higher highest GDP in your sample of ten countries is going to be scaled to 1. And the lowest GDP per Capita value in your sample of ten countries is going to be scaled to 0. And so for data where lower value is better, you're going to do the absolutely opposite. So the lowest value will be scale to 1 and the highest value is going to be scale to 0. And so the normalization formulas are as follows. Here they are I'm not going to go into those formulas in too much detail in this presentation. They are available in supporting documents and readings, but do take a look at them and ask questions in the discussion forum about them. And then finally, we move to step number three, which is determining and applying weights to each variable or two each indicator. So those weights must add up to a 100% because remember you have five variables and there. And the weights of those five variables should be 100% or 1. One condition that we do impose on here is that each variables weight must be equal to at least 10%. So you wouldn't be able to say gosh, they're going to take one variable and assign a weight of say 90% to it. And then just a few percentage points to everything else. So 10% minimum for each variable. This is a bit of an arbitrary decision on our part. But this is in general an arbitrary decision on your part to how much weight will your sign there. But still you should be able to explain the logic that you've used it. For example, if you think that gosh, GDP per Capita is one of the most important factors because it's a good proxy for ability to consume my product and that income is really, really important, do make sure that you explain something like this in a bit of detail. You don't have to write a few pages about that, a couple of sentences would do, but that's still pretty important too to give us a sense and to give the board of directors a sense of why you chose a specific weight. And so then to apply the weights essentially in step two, you have normalized to variable to a value between 0 and 1. You'll take that value, you'll multiply that by the weight of the variable. And in step four, you're just adding up the five weighted normalized variables together, and that gets you your final index value. As I said, I need to check your final index value should be between 0 and 1. If you are getting something that's greater than 1, that means that you've made an error somewhere. If you're getting something that's less than 0, that's getting into negative numbers, that's not right either. So make sure that these are the values that you are getting. And then in step five, you should be selecting your country based on that drinking that you obtained, right? And we are not listing this step right and here but that should be pretty obvious to you that the higher is the ranking the better it is for the country. You are selecting your top two countries, these are your top candidates for the investment, and this is what you're using to do additional research in the future modules. You're going to be also utilizing the data that you already collected for those countries in the future modules as well. Because you're doing macroeconomic and microeconomic analysis in those modules, and guess what? The data that you collected, this is macro and micro data. So you'll yank to do to use this data, again, don't throw it out make sure that you still have this data organized, that you have your sources put together. And make sure that this document that you've put together, your Excel document or whatever format it is that you're using, that you save it, that you're ready to attach it as an attachment to your final report. Do not discard this file under any circumstances. Your peers are going to look at this file and to review the formulas in this file as well. And that's our story for Module 1. Good luck folks. There is quite a bit of work to do here and see you in Module 2.
