Trade potential index

One of the shortcomings of the MPI presented at the website of MSU-CIBER is that it is not product specific. A company might for instance want to identify the potential of markets across the world in regards to their product. Your textbook gives an example of such a case and how the MPI can be constructed. In the following example, a more general example is given with explicit steps on how to construct such an index and its advantages/disadvantages in assessing markets for firm entry. Your assignment is to replicate the MPI 2009 worksheet for any other year in the period 2004-2008. For this particular research task, your report should be a Word or PDF document that has the final MPI table (e.g., Step 4 table in the excel file below). Make sure that you sort the final MPI table by Overall Ranking. You may find it easier to report the top 10 countries in your first page along with a short paragraph describing your findings and copy/paste the full table in the following pages of your document.

Step 1:

The first step in constructing such an index is to select the variables that measure the various markets' potential and the sample of countries that you want to include.

In regards to the sample of countries, the more countries we include in the analysis the more representative the sample is and the more options to choose from. Therefore, a sample with more countries is preferred even if we want to focus on emerging markets since we can always isolate the emerging markets after the analysis is performed.

In regards to variables that measure the various markets' potential, it sometimes is product-specific (e.g., a pharmaceutical company might want to include some different measures in the calculation of MPI than a retail company) but most of the measures will be the same, especially the institutional measures (economic and political freedom, country risk rating). In this example, we have selected the following variables for the year 2009: