When the Euromoney Country Risk (ECR) Survey data for the first half of 2012 was released this week, it was not much of a surprise to find out that overall, the political, economic, and structural environments in every region of the world have become riskier. But when more specific analysis revealed that 58% of the countries in the developing world have become a riskier place to do business, that might be a little surprising - or shocking - or disconcerting - or all three. This is especially true for the top U.S. retail chains that are looking to international markets for financial salvation.
It's a topsy turvy business world when the region that saw the most risk improvement in the first half of 2012 was Africa. It's an unsettled world when only 11 countries - just 5.9% - of the countries in the world are considered to be "tier one" in terms of stability. It's a shifting world order when that list of 11 tier-one low-risk countries does not include the United States.
In fact the eleven countries that the Q2 Euromoney Country Risk Survey has determined to be the "safest" are:
#1 - Norway
#2 - Switzerland
#3 - Finland
#4 - Sweden
#5 - Canada
#6 - Denmark
#7 - Netherlands
#8 - New Zealand
#9 - Australia
#10 - Germany
#11 - Austria
Of course low-risk political, economic, and infrastructural conditions are of great interest to the largest U.S. retail chains that have adopted an aggressive global expansion strategy in 2012. So it would be logical to assume that the list of low-risk countries would be identical to the list of most desirable countries for global retail expansion.
But risk is only one factor to consider when choosing locations for international retailers. Population, GDP, short-term market potential, and long-term opportunity are equally important, according to consulting firm A.T. Kearney. These are some of the key factors that it uses when evaluating the top 30 countries for its annual Hottest Countries for Retail Expansion list.
The recently released "hottest retail countries" list is not led by the 11 countries that Euromoney has assessed to be the safest places to do business. In fact, none of the low-risk countries are the best places to open retail stores in 2012, according to the A.T. Kearney experts. Because while the lowest-risk countries may be "safe," they don't hold as much long-term potential as retail-deprived countries like Tunisia, Sri Lanka, and Azerbaijan, even though the GRDI considers those countries to be risky indeed.
Retail leaders who are increasingly charged with being international business experts might look at the results of these two conflicting reports and come up with no defensible answers to the question about where-in-the-world their retail chain needs to go to make money in 2012. Is it worth the gamble to place profit potential before risk potential? Perhaps the answers about the best strategies for global expansion are unclear because the wrong questions are being asked.
If the world is moving towards becoming one interdependent global economy, then competition is becoming increasingly illogical, and cooperation is becoming increasingly imperative. When looking at the ECR global map of country risk, how can it be imagined that isolated success by any individual country is sustainable? Judging from the downward trajectory that most of the countries of the world are on, the old definition of competitive success is no longer imaginable, sustainable or even desirable.
Retailers on the path of global expansion don't need new answers as much as they need a new vision which naturally will create a whole new set of questions. But that will require a willingness to allow the win-as-much-as-you-can paradigm to be replaced by something larger. One of the first new questions is whether global retailers are willing to let go of the old definitions of success, or how painful things will need to get before they do?