This document outlines a five-stage process for selecting international markets. Stage 1 eliminates markets based on domestic regulations and management preferences. Stage 2 screens out markets with unattractive political, social, and economic environments. Stage 3 assesses entry barriers and competitive intensity, eliminating another 10% of markets. Stage 4 considers the suitability of remaining markets based on factors like market size and marketing responsiveness. Stage 5 performs an internal trade-off analysis to identify the few most attractive markets for further consideration and visits. The process aims to systematically narrow thousands of potential markets down to a shortlist of top prospects.

1. International Market Selection Madhup Srivastava

2. Learning objectives Identify the different problems faced in selecting an overseas market between firms inexperienced and experienced in international business Assess a country’s attractiveness in terms of potential, membership of trading blocs, competitive intensity and entry barriers. Create a portfolio of the most attractive markets to enter, given the circumstances of the firm and potential offered by the market.

3. Two important questions Which of the vast range of markets overseas should the firm enter? What mode should the involvement in the selected market take?

4. Alternative approaches to market selection Take both the situation of the firm and the circumstances of the overseas market(s) into account. 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. Entering one market may facilitate subsequent or simultaneous entry into others.

5. Alternative approaches to market selection Selection of overseas market involves comparison--- can be difficult for quality of data emanating from various countries. These difficulties may make a more structured approach to overseas market selection desirable.

6. Alternative approaches to market selection 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.

7. Alternative approaches to market selection The second category of approaches focusses on whether a concentrated as opposed to a diversified approach should be adopted.

8. Screening for market selection The purpose of screening is to enable the firm to arrive at a portfolio of attractive overseas markets. 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. Time consuming and beyond the resources of many SMEs.

9. Screening for market selection 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. The approach is made up of five stages.

10. Five stage overseas market selection process Stage 1: Domestic regulations and management preferences Stage 2: Initial entry assessment Stage 3: Competitive environment Stage 4: Marketing responsiveness Stage 5: Internal trade-off analysis

11. Stage 1 Question1: Which overseas markets are of no interest to the firm regardless of their apparent potential? 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.

12. Stage 1 Question 2:Which remaining overseas markets should be excluded because of regulations initiated by or involving support of your country’s government? Generally political but important. At the conclusion of stage 1 analysis it is likely that around 20% of the world markets can be excluded from further consideration.

13. Stage 2 This stage is described as ‘initial entry assessment’ screens out unattractive markets. Question 3: Which remaining overseas markets have the least attractive political and social environments? 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.

14. Stage 2 Question 4: Which remaining overseas markets are the least attractive because of their nature and potential size? Involves assessing potential demand as well as any untapped or unfilled demand that may exist in a particular market. Some techniques to assess are: Demand pattern analysis International product life cycle Income elasticity measurement Proxy and multiple factor indices At the end of this stage around 50% of world markets would have been eliminated from further consideration.

15. Stage 3 Only 30% of world markets remain. Now more expensive and time consuming elements of evaluation are applied to remaining countries. 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 Question 6: Which remaining overseas markets should be avoided because competitors (bothe domestic and foreign ) are already entrenched in them? End of this stage will see dropping of another 10% markets from the list.

16. Stage 4 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? 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? 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? Question 10: Which remaining overseas markets are unattractive because of cost and difficulty in reaching them from your country?

17. Stage 5 Likely that less than 10% markets remain for consideration 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? Question 12: Do any of the markets still under consideration fail to meet the company’s objectives or match its competitive advantages? 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.

18. Some useful websites www.ita.doc.gov/bizam/balst www.exporter.com/ct/index www.state/gov/www/background_notes/index www.mktplace.com www.govt.nz www.exporter.com/sr/xnvsrls www.tradebook.com/home