chapter 3. reactive proactive - exporter acts passively in choosing markets by filling unsolicited...
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REACTIVE PROACTIVE
- Exporter acts passively in choosing markets by filling unsolicited order on the part of foreign buyers
- Selection process is informal, unsystematic and purchase oriented
- Exporter acts actively in initiating the selection of foreign markets
- Selection process is systematic and formalized
REACTIVE PROACTIVE
- Approaches used are inquiries from foreign firms either through:
*active buying on their part
*contacts established by indirect media used by
the exporter
- Approaches used are formal and informal approach :
FORMAL *Involve systematic
market research and visiting abroad
INFORMAL *Selects a foreign market
on the basis of discussion with business partner
Cont…- No clear-cut divisions between
reactive and proactive approach- Exporter apply the proactive
strategy to what are considered primary markets
- Exporter apply the reactive strategy to what are considered secondary markets
MARKET SELECTION MARKET SELECTION PROCEDURESPROCEDURES
1. Expansive Method- Select market based on similarities- Minimum adaptation- Approaches:
a. Geographic proximityb. Trade policy proximity
a. Geographic Proximity- Nearest neighbor approach- Similarity in economic, political, sociological and
cultural standing- Less adaptation needed- Targeted market can be treated as base market area- Exp: South Pacific area (Australia, N. Zealand) Asian (Malaysia, Singapore, Thailand)
b. Trade Policy Proximity
- Established a common market and economic union structure- The exporter has essentially a home market situation in all member countries- Tax conditions
2. Contractible Method- Starting with large number of markets- Involves three stages
i. Preliminary screeningii. Countries rankingiii. Determining specific factors
- Geographic segmentation Prohibitive product characteristics Prohibitive market characteristics
- Customer segmentation
MARKET SELECTION MARKET SELECTION STRATEGIESSTRATEGIES
a. Market Concentration Strategy
b. Market Spreading Strategy
a. Market Concentration Strategy
- Slow and gradual rate of growth in number of market served by a company
- Channeling available resources in to a small number of market
- Devoting relatively high levels of marketing effort and resources
- To win significant market share
b. Market Spreading Strategy
- Fast rate of growth in the number of market served at the early stage of expansion.
- Allocating marketing resources over a large number of markets
- To reduce risks of concentrating resources
- Exploit the economics of flexibility
RESOURCE ALLOCATIONRESOURCE ALLOCATION- Each market are equal?- Degree of market differences affect
allocation resources of marketing efforts
Number of market = amount of resources
Concentration vs. Spreading
Concentration Spreading Advantages:
- power of specialization, scale, and market penetration;
- greater market knowledge;
- higher degree of control;
- learning of the export process and the experience curve
Advantages:
- flexibility; - less dependence on
particular markets; - lower perception of
risk.
Company Factors
Factors favoring market spreading
Factors favoring market concentration
- High management risk-consciousness;
- Objective of growth through market development;
- Little market knowledge
- Low management risk-consciousness;
- Objective of growth through market penetration;
- Ability to pick ‘best’ markets.
Product FactorsFactors favoring market spreading
Factors favoring market concentration
- Limited specialist uses; - Low volume; - Non-repeat; - Early or late in product
life cycle; - Standard product salable
in many markets
- General uses; - High volume; - Repeat-purchase
product; - Middle of product life
cycle; - Product requires
adaptation in different markets
Marketing FactorsFactors favoring market spreading
Factors favoring market concentration
- Low communication costs for
additional markets; - Low order handling costs
for additional markets - Low physical distribution
costs for additional markets - Standardized
communication in many markets
- High communication costs for additional markets;
- High order handling costs for additional markets
- High physical distribution costs for additional markets
- Communication requires adaptation to different market
Market FactorsFactors favoring market spreading
Factors favoring market concentration
- Small markets-specialized segments
- Unstable markets - Many similar markets- New or declining markets- Low growth rate in each
market- Large markets are very
competitive - Established competitors have
large share of key markets- Low source loyalty
- Large markets-high volume segments
- Stable markets - Limited number of
comparable markets - Mature markets - High growth rate in each
market - Large markets are not
excessively competitive - Key markets are divided
among many competitors - High source loyalty