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Market selection

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Market selection

  1. 1. Market selection (Country selection)
  2. 2. Foreign market selection
  3. 3. Screening potential markets Step 1: Identify Basic Appeal Step 2: Access national business environment Step 3: Measure market size Step 4: Select the market
  4. 4. Demand <ul><li>Determine basic demand </li></ul><ul><ul><li>Whether there is a basic demand for company’s product </li></ul></ul><ul><ul><ul><li>Religion constraint – E.g. No pork in Islamic countries </li></ul></ul></ul><ul><ul><ul><li>Climatic condition – E.g. No hot-air conditioner in tropical countries </li></ul></ul></ul>Step 1: Identify Basic Appeal
  5. 5. Resource availability <ul><li>Determine resource availability </li></ul><ul><ul><li>Raw materials </li></ul></ul><ul><ul><li>Labor </li></ul></ul><ul><ul><li>Capital </li></ul></ul><ul><ul><li>Land </li></ul></ul>Step 1: Identify Basic Appeal
  6. 6. Cultural & local forces <ul><li>Cultural forces </li></ul><ul><ul><li>Language, attitude toward business, religious belief and custom </li></ul></ul><ul><li>Product adaptation </li></ul><ul><ul><li>Some products can be sold worldwide </li></ul></ul><ul><ul><li>Some products need local customization </li></ul></ul><ul><ul><ul><li>E.g. KFC, books and magazine </li></ul></ul></ul>Step 2: Access national business environment
  7. 7. Political & legal forces <ul><li>Political and legal forces </li></ul><ul><ul><li>Political stability </li></ul></ul><ul><ul><li>Government regulation </li></ul></ul><ul><ul><ul><li>Government’s attitude toward trade and investment </li></ul></ul></ul><ul><ul><ul><li>Types of restriction on import and export </li></ul></ul></ul><ul><ul><ul><li>Investment barriers </li></ul></ul></ul><ul><ul><ul><li>Business ownership </li></ul></ul></ul><ul><ul><ul><ul><li>E.g. 51% of local ownership </li></ul></ul></ul></ul>Step 2: Access national business environment
  8. 8. <ul><ul><li>Government regulation </li></ul></ul><ul><ul><ul><li>Restrict remitting profit out of country </li></ul></ul></ul><ul><ul><ul><li>Strict environmental regulation – Strict pollution standard which may increase cost of production </li></ul></ul></ul><ul><ul><ul><li>Require that companies divulge ceratin trade information – E.g. Coca-cola left India because it refused to disclose its secret Coke formula </li></ul></ul></ul>Political & legal forces Step 2: Access national business environment
  9. 9. Economic forces <ul><li>Economic forces </li></ul><ul><ul><li>Fiscal and monetary policies </li></ul></ul><ul><ul><ul><li>Interest rate - Can cause high inflation </li></ul></ul></ul><ul><ul><ul><li>Currency devaluation – Can affect export </li></ul></ul></ul><ul><li>Other forces </li></ul><ul><ul><li>Transportation </li></ul></ul><ul><ul><li>Infrastructure </li></ul></ul>Step 2: Access national business environment
  10. 10. Data & Information <ul><li>Information </li></ul><ul><ul><li>Industrial market data </li></ul></ul><ul><ul><li>Consumer data </li></ul></ul><ul><li>Emerging market </li></ul><ul><ul><li>Data may not be readily available </li></ul></ul>Step 3: Measure market size
  11. 11. Market variables <ul><li>Market size </li></ul><ul><li>Market growth rate </li></ul><ul><li>Consumption capacity </li></ul><ul><ul><li>E.g. % of middle class population </li></ul></ul><ul><li>Commercial infrastructure </li></ul><ul><ul><li>E.g. Number of TVs, phones, PCs, cars etc </li></ul></ul>Step 3: Measure market size
  12. 12. Market variables <ul><li>Economic freedom </li></ul><ul><ul><li>E.g Government’s trade policies </li></ul></ul><ul><li>Market receptivity </li></ul><ul><ul><li>Volume of international trade as a % of GDP </li></ul></ul>Step 3: Measure market size
  13. 13. <ul><li>Field trip </li></ul><ul><li>Competitor analysis </li></ul>Step 4: Select the market
  14. 14. Opportunities and risks Evaluation
  15. 15. Opportunities <ul><li>CHOOSING AND WEIGHTING VARIABLES </li></ul><ul><li>Variables must be weighed against each other to effectively evaluate the potential success of a particular venture and to compare various ventures. </li></ul><ul><li>Opportunities </li></ul><ul><li>Market Size </li></ul><ul><li>Market size is determined by sales potential. </li></ul><ul><li>Ease and Compatibility of Operations </li></ul><ul><li>Market located nearby, share the same language and offer similar market conditions. </li></ul><ul><li>Costs and Resource Availability </li></ul><ul><li>The cost of labor, the cost of inputs, tax rates, and available capital, utilities, real estate and transportation. </li></ul><ul><li>Red Tape </li></ul><ul><li>Difficulty of getting permission to operate the business. </li></ul>Evaluation
  16. 16. 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
  17. 17. Risks <ul><li>Economic and political risk ratings </li></ul><ul><li>Risk and Uncertainty </li></ul><ul><li>Firms usually experience higher risk and uncertainty when they operate abroad. </li></ul><ul><li>Competitive Risk </li></ul><ul><li>A firm’s innovative advantage may be short-lived. </li></ul><ul><li>Monetary Risk </li></ul><ul><li>A firm’s expansion occurs through foreign-direct investment, foreign-exchange rates and access to investment capital and earnings. </li></ul><ul><li>Political Risk </li></ul><ul><li>Look for economic and social conditions that could lead to political instability. </li></ul>Evaluation
  18. 18. 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
  19. 19. Opportunity-risk matrix 3.3 6.7 Low Med High Opportunities Low Med High Risks India France S Korea 6.7 3.3 Evaluation

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