Foreign market selection process


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Foreign market selection process

  1. 1. Foreign MarketSelection Process Kelly E. Fish, Ph.D. International Business Workshop
  2. 2. Overview Market Entry Strategies • Exporting Foreign Market Selection How IBRC can help with the process
  3. 3. High risk/reward Wholly owned subsidiaryForeign Market Entry Strategies Local production Joint venture Local assembly Contract manufacturing Franchising/Licensing Sales subsidiary Low risk/reward Direct exporting Indirect exporting
  4. 4. Strategy Trade-offs Control Asset Variable Fixed Market Overall Entry Strategy Level Costs Costs Share CostIndirect ExportingDirect ExportingSales SubsidiaryFranchising/LicensingContract ManufacturingLocal AssemblyJoint VentureLocal ProductionWholly ownedsubsidiary
  5. 5. Indirect Export – Trading Companies (TCs) Advantages  Open new markets without expertise or investment  TCs cover market well and service products they sell
  6. 6. Indirect Export – Trading Companies (TCs) Disadvantages  TCs control market selection and marketing  More of a foreign concept (Japan, South Korea, Brazil, Western Europe)  Product may not get attention it deserves
  7. 7. Indirect Export – Export Management Companies Advantages  Instant foreign market knowledge and contacts  Sales are on commission basis (variable cost)  Potentially better feedback than TC
  8. 8. Indirect Export – Export Management Companies Disadvantages  EMCs may spread themselves too thin with too many customers  Product may not get attention it deserves  Market expertise/contacts can be limited to one or two countries
  9. 9. Indirect Export – Piggyback Exporting Advantages Rider benefits from carrier’s established export and distribution facilities Shared expenses Rider benefits from carrier’s reputation
  10. 10. Indirect Export – Piggyback Exporting Disadvantages Carrier seldom assumes any risk on rider’s product Rider subject to carrier’s strategy/reputation
  11. 11. Direct Exporting Advantages Usually yields higher sales than indirect exporting Company has greater control, better market information Company develops in-house expertise Company has greater freedom to choose entering markets
  12. 12. Direct Exporting Disadvantages Costs are higher than with indirect exporting It may take longer to establish market entry, distribution network, etc.
  13. 13. Foreign Market SelectionThe two most widespread mistakes of market selection are:1) ignoring or missing markets that offer good potential for a firm’s productsand2) spending too much time researching markets that are poor prospects for the firm
  14. 14. Foreign Market Screening Target
  15. 15. Foreign Market Screening 1. Macro-level research 2. General market factors relating to the product 3. Micro-level factors specific to the product 4. Final screening Target
  16. 16. Foreign Market Screening Screening techniques range from simple minimum criteria thresholds (Example A) to clustering techniques using artificial intelligence (Example B). Target
  17. 17. Example A – Targeting Countries for Kidney Dialysis Equipment1. Macro-level  GDP over $15 research billion  GDP per capita over $1,500  Political stability
  18. 18. Example A – Targeting Countries for Kidney Dialysis Equipment2. General market  Less than 200 factors relating to the people/hospital bed product  Less than 1,000 people/doctor  Govt. expenditures over $100 million for healthcare  Govt. expenditures over $20 per capita for healthcare
  19. 19. Example A – Targeting Countries for Kidney Dialysis Equipment3. General market  Kidney-related factors relating to deaths over 1,000 the product  Patient use of dialysis equipment – over 40% annual growth
  20. 20. Example A – Targeting Countries for Kidney Dialysis Equipment4. Final screening  Number of competitors  Distributor reputation
  21. 21. Example B – Targeting Countries for Kidney Dialysis Equipment Self-Organizing  GDP Map  GDP per capita  Total health expenditure per capita  Total Health expenditure as a % of GDP  Political Risk Index  Cultural score
  22. 22. Example B – Targeting Countries for Kidney Dialysis Equipment Hong Kong Australia United StatesIndiaMalaysia Jamaica Austria JapanPhilippines Singapore Canada Ireland New Zealand Switzerland United KingdomEcuador Iran France DenmarkGuatemala Mexico Italy FinlandIndonesia South Africa NetherlandsPakistan NorwayTurkey SwedenVenezuelaYugoslaviaChile Brazil Argentina IsraelPanama Colombia Costa RicaPeru GreeceSouth Korea PortugalThailand El Salvador Spain Uruguay
  23. 23. How the IBRC can help your business
  24. 24. Provide export assistance to NEA businesses 1. NEA Business Contacts the IBRC 2. IBRC matches ASU Intern with NEA Business 3. Intern Researches International Markets and Develops Export Strategy for the NEA firm under direction of IBRC 4. Intern makes Final report and end of semester
  25. 25. Provide export assistance to NEA businesses • We have the expertise for oversight (Drs. Fish & Guha) • We have the manpower (Students are cheap – free!) • We have the country data • We are committed to working with the U.S. Export Assistance Center
  26. 26. Visit the ASU InternationalBusiness Resource Center on the Web at: