Market Assessment and Analysis

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Market Assessment and Analysis

• Daniel F. Duran
• BSAD 350 International Business
• Whittier College

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Heineken Brews Up Global Strategy

• Within a few years of its founding, in 1864,
  Heineken was exporting beer to France, Italy,
  Spain, Germany, and the Far East. In 1914
  Heinekens managers decided to export beer to the
  United States, and contracted with Van Munching
  Company to distribute its products in North
  America.
• After World War II, Alfred Heineken came to New
  York to study marketing and advertising with Van
  Munching, and returned to the Netherlands in 1948
  with knowledge to help launch Heineken into other
  foreign markets worldwide.

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Heineken Brews Up Global Strategy (cont.)

• Heineken has refused to establish a brewery in
  the United States. Why?
• Heineken learned from the experience of other
  breweries. Lowenbrau had begun to brew in the
  U.S. and sales began to drop. The beer was no
  longer an import and lost its cachet as an
  authentic Bavarian beer. Heineken continues to
  ship its beer into the U.S. market even though it
  might be cheaper to produce it there.
• Heineken recently bought Van Munching Company,
  and now owns its U.S. distribution arm outright.

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Foreign Market Analysis

• To successfully increase market share, revenue,
  and profits, firms must normally follow three
  steps
• Assess alternative markets
• Evaluate the respective costs, benefits, and
  risks of entering each
• Select those that hold the most potential for
  entry or expansion

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Selection of Foreign Markets
Initial Screening Basic Needs Potential/Foreign
Trade Investment
Second ScreeningEconomic and Financial Forces
Third ScreeningPolitical and Legal Forces
Fourth ScreeningSociocultural Forces
Fifth ScreeningCompetitive Forces
Final SelectionPersonal Visit
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Initial Screening

• Basic Need Potential
• Identify locales where product or service is
  needed
• Foreign Trade and Investment
• Assess similar products already in market
• International Trade Statistics Yearbook (U.N.)
• Limitations of Import data
• Foreign Exchange indexing
• changing restrictions of liberties
• import situation may change
• political change

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Assessing Alternative Foreign Markets

• Market potential
• The first step in foreign market selection is
  assessing market potential. Many publications
  provide data about population, GDP, per capita
  GDP, public infrastructure, and ownership of such
  goods as cars and televisions. Such data permit
  firms to conduct a preliminary screening of
  foreign markets.
• Levels of competition
• To assess the competitive environment, a firm
  should identify the number and sizes of firms
  already competing in the target market, their
  relative market shares, their pricing and
  distribution strategies, and their relative
  strengths and weaknesses, both individually and
  collectively.

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Second Screening--Financial and Economic Forces

• Inflation Rate
• Exchange Rate
• Interest Rates (Nominal and Real)
• Credit Availability
• Volatility of all

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Second Screening--Financial and Economic Forces

• Market indicators
• Measures of relative market strength
• Market factors
• Estimates demand for specific products

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Second Screening--Financial and Economic Forces

• Trend Analysis
• Cluster Analysis
• All analysis should be updated regularly

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Third Screening--Political/Legal Forces

• Market entry barriers
• Profit repatriation barriers
• Political instability
• Taxes
• Standards
• Price controls

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Assessing Alternative Foreign Markets (cont.)

• Legal and political environment
• A firm may choose to forego exporting its goods
  to a country that has high tariffs and other
  trade restrictions in favor of exporting to one
  that has fewer or less significant barriers.
  Conversely, trade policies and/or trade barriers
  may induce a firm to enter a market via FDI.
• Sociocultural influences
• Managers assessing foreign markets must also
  consider sociocultural influences, which, because
  of their subjective nature, are often difficult
  to quantify. To reduce the uncertainty associated
  with these factors, firms often focus their
  initial internationalization efforts in countries
  culturally similar to their home markets.

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Fourth Screening--Sociocultural Factors

• Language
• Regional Dialects
• Education
• Religious Attitudes
• Holidays
• Social Values

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Fifth Screening--Competitive Forces

• Size and strength of competitors
• Competitors promotion methods
• Competitors product mixes
• Prices
• Distribution channels employed
• Market share distribution
• Market coverage

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Evaluating Costs, Benefits, and Risks

• Costs
• Two types of costs are relevant at this point
  direct and opportunity. Direct costs are those
  the firm incurs in entering a new foreign market
  and include costs associated with setting up a
  business operation. Opportunity costs are those
  that result from entering one market as opposed
  to anothera firm forfeits or delays its
  opportunity to earn profits in one market by
  dedicating its resources to another.
• Benefits
• Among the most obvious potential benefits are the
  expected sales and profits from the market.
  Others include lower acquisition and
  manufacturing costs, foreclosing of markets to
  competitors, competitive advantage, access to new
  technology, and the opportunity to achieve
  synergy with other operations.

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Evaluating Costs, Benefits, and Risks (cont.)

• Risks
• Generally, a firm entering a new market incurs
  the risks of exchange rate fluctuations,
  additional operating complexity, and direct
  financial losses due to inaccurate assessment of
  market potential.

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Final Selection

• Field Trip
• Research local markets
• Secondary data (UN IMF, WTO, et al)
• Primary data
• Cultural problems
• Technical problems
• Research as a Reality
• Highly developed in Developed Countries
• Less Developed Countries simpler and less of it