Market selection

Market selection (Country selection)

Foreign market selection

Screening potential markets Step 1: Identify Basic Appeal Step 2: Access national business environment Step 3: Measure market size Step 4: Select the market

Demand
Determine basic demand
Whether there is a basic demand for company’s product
Religion constraint – E.g. No pork in Islamic countries
Climatic condition – E.g. No hot-air conditioner in tropical countries
Step 1: Identify Basic Appeal

Resource availability
Determine resource availability
Raw materials
Labor
Capital
Land
Step 1: Identify Basic Appeal

Cultural & local forces
Cultural forces
Language, attitude toward business, religious belief and custom
Product adaptation
Some products can be sold worldwide
Some products need local customization
E.g. KFC, books and magazine
Step 2: Access national business environment

Political & legal forces
Political and legal forces
Political stability
Government regulation
Government’s attitude toward trade and investment
Types of restriction on import and export
Investment barriers
Business ownership
E.g. 51% of local ownership

Government regulation
Restrict remitting profit out of country
Strict environmental regulation – Strict pollution standard which may increase cost of production
Require that companies divulge ceratin trade information – E.g. Coca-cola left India because it refused to disclose its secret Coke formula
Political & legal forces Step 2: Access national business environment

Economic forces
Economic forces
Fiscal and monetary policies
Interest rate - Can cause high inflation
Currency devaluation – Can affect export
Other forces
Transportation
Infrastructure

Data & Information
Information
Industrial market data
Consumer data
Emerging market
Data may not be readily available
Step 3: Measure market size

Market variables
Market size
Market growth rate
Consumption capacity
E.g. % of middle class population
Commercial infrastructure
E.g. Number of TVs, phones, PCs, cars etc

Market variables
Economic freedom
E.g Government’s trade policies
Market receptivity
Volume of international trade as a % of GDP

Field trip
Competitor analysis
Step 4: Select the market

Opportunities and risks Evaluation

Opportunities
CHOOSING AND WEIGHTING VARIABLES
Variables must be weighed against each other to effectively evaluate the potential success of a particular venture and to compare various ventures.
Opportunities
Market Size
Market size is determined by sales potential.
Ease and Compatibility of Operations
Market located nearby, share the same language and offer similar market conditions.
Costs and Resource Availability
The cost of labor, the cost of inputs, tax rates, and available capital, utilities, real estate and transportation.
Red Tape
Difficulty of getting permission to operate the business.
Evaluation

Opportunities Evaluation 4.6 8.4 7.1 100% Total 10% 10% 30% 50% Weighting Attractiveness Rating (1-10) 0.5 0.2 0.8 5 2 8 Red tape Lowest 10 - highest 1 0.5 1.0 0.2 5 10 2 Costs and resource availability Best 10 – worst 1 0.6 2.7 2.1 2 9 7 Ease and compatibility of operation Best 10 – worst 1 3.0 4.5 4.0 6 9 8 Market size Best 10 – worst 1 Korea India France Korea India France Measure

Risks
Economic and political risk ratings
Risk and Uncertainty
Firms usually experience higher risk and uncertainty when they operate abroad.
Competitive Risk
A firm’s innovative advantage may be short-lived.
Monetary Risk
A firm’s expansion occurs through foreign-direct investment, foreign-exchange rates and access to investment capital and earnings.
Political Risk
Look for economic and social conditions that could lead to political instability.
Evaluation

Risks Evaluation 0.5 0.9 0.8 5 9 8 10% Political risk Lowest 10 - highest 1 4.4 7.2 6.6 100% Total 10% 20% 50% Weighting Attractiveness Rating (1-10) 0.4 0.5 0.7 4 5 7 Monetary risk Lowest 10 - highest 1 1.0 1.8 0.6 5 9 3 Competitive risk Lowest 10 - highest 1 2.5 4.0 4.5 5 8 9 Risk & uncertainty Lowest 10 - highest 1 Korea India France Korea India France Measure

Opportunity-risk matrix 3.3 6.7 Low Med High Opportunities Low Med High Risks India France S Korea 6.7 3.3 Evaluation

Market selection

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