Foreign Market Selection

1
Foreign Market Selection Managerial Issues

• INTERNATIONAL
• MANAGEMENT

Chapter 5
2
International Market Selection Process- Steps
3
Model for Selecting Foreign Markets
Macro Level Research ( General Market Potential)
Economic Statistics, Political Environment, Social Structure, Geographic Features
Filter 1
Preliminary Opportunities
General Marketing Relating to the Products
Growth Trends for Similar Products, Cultural Acceptance of Such Products, Market Size, State of Development, Taxes and Duties
Rejected Country
Filter 1
4
Possible Opportunity
Micro Level Research ( Specific Factors Affecting the Product)
Existing and Potential Competition, Ease of Entry, Reliability of Information, /Sales Projections, Cost of Entry, Probable Product Acceptance, Profit Potential
Filter 3
Probable Opportunity
Target Markets Corporate Factors Influencing Implementation
Filter 4
5
Filtering Process- First Stage

• Using macro variables discriminating countries-
  Opportunities, little opportunity, no
  opportunity, excessive risk.
• Macroeconomic statistics- GNP, Per Capita GNP,
  Personal Disposable Income.
• Political conditions.
• Relation between the home and host country.
• Geographical distance

6
Filtering Process- Second Stage

• Variables indicating potential market size and
  acceptance of the product or similar products are
  used.
• Year to year growth rates and total sales of
  similar products are indicators of market size
  and growth.
• Also consider the stage of economic development,
  taxes and duty requirements.

7
Filtering Process- Third Stage

• Consider a limited number of countries.
• Get more detailed, reliable and updated
  information.
• Focus of screening process switches from market
  size to profitability.
• Issues- Looking to the competitors, how much
  should be invested to gain a particular market
  share?

8
Third Stage

• Issues- Given the prices currently charged in
  the market, what margin can your company expect?
• Given the cost of entry and the expected sales,
  what is the likely profit?
• Micro-level factors influence the success or
  failure of specific product in market.

9
Filtering Process- Fourth Stage

• Evaluates and ranks the potential target
  countries based on corporate resources,
  objectives and strategies.

10
Criteria For Selecting Target Countries

• Critical factors influence market selection
  are
• Market size
• Political environment
• Legal environment
• Social and culture environment

11
Market Size and Growth

• Macro Indicators of Market Size
• Geographic Indicators
• Size of the country in terms geographic area
• Climatic condition
• Topographical characteristics
• Demographic Characteristics
• Total Population
• Population growth rate
• Distribution of the population age-wise,
  gender-wise, income-wise, rural-urban wise, etc.
• Population density

12

• Economic Characteristics
• Total gross national product
• Per capital income (Also income growth rate)
• Personal or household disposable income
• Income distribution
• Industrial, mineral, agriculture infrastructure
  and development plans
• Balance of payments /Trade position
• Import size and growth
• Commercial policy instruments
• Nature and export of restrictions and incentives
• Trade agreements with the other countries

13
Micro Indicators of Market Size

• Radios
• Television sets
• Cinema seats
• Scientists and Engineers
• Hospitals and Beds
• Physicians

• Alcoholic Liquor Consumption
• Coffee Consumption
• Petrol/Diesel Consumption
• Telephones
• Tourist Arrivals

14
Micro Indicators of Market Size

• Passenger cars
• Civil airline passengers
• Steel production
• Land under cultivation
• Electricity consumption
• Number of farms
• Micro indicators indicate actual consumption of
  the product that a firm wants to sell or a
  similar product.

15
Political Environment

• Indicators of Political Risk
• Probability of nationalization
• Bureaucratic delays
• Number of riots and assassinations
• Political executions
• Percent of members of the communist party
• Restrictions on capital movement
• Government intervention

16
Social and Cultural Conditions

• Main elements are
• Material Culture
• Language
• Esthetics
• Education
• Religion

17
Errors in Selection

1. Ignoring countries with significant potential for
   the companys products.
2. Spending resources investigating countries that
   may turn out to be poor prospects.

18
Assignment in the class-Group Task

• Considering the case of a company and its
  product, how would you make a detailed screening
  process of international market selection?
• What factors you consider as the major
  managerial issues?