International Market Selection

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International Market Selection

  1. 1. International Market Selection Madhup Srivastava
  2. 2. Learning objectives <ul><li>Identify the different problems faced in selecting an overseas market between firms inexperienced and experienced in international business </li></ul><ul><li>Assess a country’s attractiveness in terms of potential, membership of trading blocs, competitive intensity and entry barriers. </li></ul><ul><li>Create a portfolio of the most attractive markets to enter, given the circumstances of the firm and potential offered by the market. </li></ul>
  3. 3. Two important questions <ul><li>Which of the vast range of markets overseas should the firm enter? </li></ul><ul><li>What mode should the involvement in the selected market take? </li></ul>
  4. 4. Alternative approaches to market selection <ul><li>Take both the situation of the firm and the circumstances of the overseas market(s) into account. </li></ul><ul><li>Doing so the charecteristics of the individual markets as well as the extent to which one overseas market is integrated with another need to be considered. </li></ul><ul><li>Entering one market may facilitate subsequent or simultaneous entry into others. </li></ul>
  5. 5. Alternative approaches to market selection <ul><li>Selection of overseas market involves comparison--- can be difficult for quality of data emanating from various countries. </li></ul><ul><li>These difficulties may make a more structured approach to overseas market selection desirable. </li></ul>
  6. 6. Alternative approaches to market selection <ul><li>The first category of approaches focuses on whether to enter overseas markets on an incremental basis or whther to enter a number of overseas markets simultaneously and on the basis of experience decide which markets to concentrate on. </li></ul>
  7. 7. Alternative approaches to market selection <ul><li>The second category of approaches focusses on whether a concentrated as opposed to a diversified approach should be adopted. </li></ul>
  8. 8. Screening for market selection <ul><li>The purpose of screening is to enable the firm to arrive at a portfolio of attractive overseas markets. </li></ul><ul><li>AUSTRADE (Australian Trade Commission ) developed two grids that compares attractiveness of the overseas market with the competitiveness of Australian firm in order to decide the merits of entering the specific market. </li></ul><ul><li>Time consuming and beyond the resources of many SMEs. </li></ul>
  9. 9. Screening for market selection <ul><li>Alternative could be to consider all markets in the World and then screening markets in relation to a succession of criteria. Unsuitable markets are eliminated leaving a small cluster of markets that offer the greatest potential. </li></ul><ul><li>The approach is made up of five stages. </li></ul>
  10. 10. Five stage overseas market selection process <ul><li>Stage 1: Domestic regulations and management preferences </li></ul><ul><li>Stage 2: Initial entry assessment </li></ul><ul><li>Stage 3: Competitive environment </li></ul><ul><li>Stage 4: Marketing responsiveness </li></ul><ul><li>Stage 5: Internal trade-off analysis </li></ul>
  11. 11. Stage 1 <ul><li>Question1: Which overseas markets are of no interest to the firm regardless of their apparent potential? </li></ul><ul><ul><li>Does influence market selection. It is often due to the prejudice of the senior executives. For example, an unhappy holiday experience in India may result in a refusal by the CEO to contemplate exporting to that country. </li></ul></ul>
  12. 12. Stage 1 <ul><li>Question 2:Which remaining overseas markets should be excluded because of regulations initiated by or involving support of your country’s government? </li></ul><ul><ul><li>Generally political but important. </li></ul></ul><ul><li>At the conclusion of stage 1 analysis it is likely that around 20% of the world markets can be excluded from further consideration. </li></ul>
  13. 13. Stage 2 <ul><li>This stage is described as ‘initial entry assessment’ screens out unattractive markets. </li></ul><ul><li>Question 3: Which remaining overseas markets have the least attractive political and social environments? </li></ul><ul><ul><li>Considerations such as the ease with which profits can be repatriated, freedom to convert local currency, and the volatility of the exchange rates should also be considered. </li></ul></ul>
  14. 14. Stage 2 <ul><li>Question 4: Which remaining overseas markets are the least attractive because of their nature and potential size? </li></ul><ul><ul><li>Involves assessing potential demand as well as any untapped or unfilled demand that may exist in a particular market. Some techniques to assess are: </li></ul></ul><ul><ul><ul><li>Demand pattern analysis </li></ul></ul></ul><ul><ul><ul><li>International product life cycle </li></ul></ul></ul><ul><ul><ul><li>Income elasticity measurement </li></ul></ul></ul><ul><ul><ul><li>Proxy and multiple factor indices </li></ul></ul></ul><ul><li>At the end of this stage around 50% of world markets would have been eliminated from further consideration. </li></ul>
  15. 15. Stage 3 <ul><li>Only 30% of world markets remain. Now more expensive and time consuming elements of evaluation are applied to remaining countries. </li></ul><ul><li>Question 5: Which remaining overseas markets have substantial entry barriers to products from your country to protect domestic industry or to confirm to trade relations arrangements with other countries </li></ul><ul><li>Question 6: Which remaining overseas markets should be avoided because competitors (bothe domestic and foreign ) are already entrenched in them? </li></ul><ul><li>End of this stage will see dropping of another 10% markets from the list. </li></ul>
  16. 16. Stage 4 <ul><li>Question 7: Which remaining overseas markets are not large enough to justify the marketing effort that will be necessary to gain a satisfactory market share? </li></ul><ul><li>Question 8: Which remaining overseas markets are unlikely to respond to those marketing activities which are considered necessary to effectively establish the product/service in the market place? </li></ul><ul><li>Question 9: Which remaining overseas markets prohibit the form of presence that your firm considers optimal and can afford when entering a new overseas markets? </li></ul><ul><li>Question 10: Which remaining overseas markets are unattractive because of cost and difficulty in reaching them from your country? </li></ul>
  17. 17. Stage 5 <ul><li>Likely that less than 10% markets remain for consideration </li></ul><ul><li>Question 11: Which remaining overseas markets are no longer attractive because of the extent to which resources need to be committed and changes made to existing company resources? </li></ul><ul><li>Question 12: Do any of the markets still under consideration fail to meet the company’s objectives or match its competitive advantages? </li></ul><ul><li>With the several remaining markets having promise, no final decision should be made until these markets have been visited by a responsible executive to see whether the impressions of potential are justified. It is only then that they should be ranked in order of attractiveness. </li></ul>
  18. 18. Some useful websites <ul><li>www.ita.doc.gov/bizam/balst </li></ul><ul><li>www.exporter.com/ct/index </li></ul><ul><li>www.state/gov/www/background_notes/index </li></ul><ul><li>www.mktplace.com </li></ul><ul><li>www.govt.nz </li></ul><ul><li>www.exporter.com/sr/xnvsrls </li></ul><ul><li>www.tradebook.com/home </li></ul>

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