market selection
DESCRIPTION
TRANSCRIPT
Market selectionMarket selection(Country (Country selection)selection)
Foreign market selectionForeign market selection
Screening potential Screening potential marketsmarkets
Step 1: Identify Basic Appeal
Step 2: Access national business environment
Step 3: Measure market size
Step 4: Select the market
DemandDemand
Determine basic demandDetermine basic demand Whether there is a basic demand for Whether there is a basic demand for
company’s productcompany’s product
Religion constraint – E.g. No pork in Islamic Religion constraint – E.g. No pork in Islamic countriescountries
Climatic condition – E.g. No hot-air Climatic condition – E.g. No hot-air conditioner in tropical countriesconditioner in tropical countries
Step 1: Identify Basic Appeal
Resource availabilityResource availability Determine resource availabilityDetermine resource availability
Raw materialsRaw materials LaborLabor CapitalCapital LandLand
Step 1: Identify Basic Appeal
Cultural & local forcesCultural & local forces
Cultural forcesCultural forces Language, attitude toward business, Language, attitude toward business,
religious belief and customreligious belief and custom Product adaptationProduct adaptation
Some products can be sold worldwideSome products can be sold worldwide Some products need local customizationSome products need local customization
E.g. KFC, books and magazineE.g. KFC, books and magazine
Step 2: Access national business environment
Political & legal forcesPolitical & legal forces
Political and legal forcesPolitical and legal forces Political stability Political stability
Government regulationGovernment regulation Government’s attitude toward trade and Government’s attitude toward trade and
investmentinvestment Types of restriction on import and exportTypes of restriction on import and export Investment barriersInvestment barriers Business ownershipBusiness ownership
E.g. 51% of local ownershipE.g. 51% of local ownership
Step 2: Access national business environment
Government regulationGovernment regulation Restrict remitting profit out of countryRestrict remitting profit out of country
Strict environmental regulation – Strict pollutiStrict environmental regulation – Strict pollution standard which may increase cost of produon standard which may increase cost of productionction
Require that companies divulge ceratin trade iRequire that companies divulge ceratin trade information – E.g. Coca-cola left India because nformation – E.g. Coca-cola left India because it refused to disclose its secret Coke formulait refused to disclose its secret Coke formula
Step 2: Access national business environment
Political & legal forcesPolitical & legal forces
Economic forcesEconomic forces
Economic forcesEconomic forces Fiscal and monetary policiesFiscal and monetary policies
Interest rate - Can cause high inflationInterest rate - Can cause high inflation Currency devaluation – Can affect exportCurrency devaluation – Can affect export
Other forcesOther forces TransportationTransportation InfrastructureInfrastructure
Step 2: Access national business environment
Data & InformationData & Information
InformationInformation Industrial market dataIndustrial market data Consumer dataConsumer data
Emerging marketEmerging market Data may not be readily availableData may not be readily available
Step 3: Measure market size
Market variablesMarket variables Market sizeMarket size
Market growth rateMarket growth rate
Consumption capacityConsumption capacity E.g. % of middle class populationE.g. % of middle class population
Commercial infrastructureCommercial infrastructure E.g. Number of TVs, phones, PCs, cars etcE.g. Number of TVs, phones, PCs, cars etc
Step 3: Measure market size
Market variablesMarket variables Economic freedomEconomic freedom
E.g Government’s trade policiesE.g Government’s trade policies
Market receptivityMarket receptivity Volume of international trade as a % of GVolume of international trade as a % of G
DPDP
Step 3: Measure market size
Field tripField trip
Competitor analysisCompetitor analysis
Step 4: Select the market
Opportunities and risksOpportunities and risks
Evaluation
OpportunitiesOpportunitiesCHOOSING AND WEIGHTING VARIABLESCHOOSING AND WEIGHTING VARIABLES
Variables must be weighed against each other to effectively Variables must be weighed against each other to effectively evaluate the potential success of a particular venture and to evaluate the potential success of a particular venture and to compare various ventures.compare various ventures.
OpportunitiesOpportunities
Market SizeMarket SizeMarket size is determined by sales potential.Market size is determined by sales potential.Ease and Compatibility of OperationsEase and Compatibility of OperationsMarket located nearby, share the same language and offer similar Market located nearby, share the same language and offer similar market conditions.market conditions.Costs and Resource AvailabilityCosts and Resource AvailabilityThe cost of labor, the cost of inputs, tax rates, and available The cost of labor, the cost of inputs, tax rates, and available capital, utilities, real estate and transportation. capital, utilities, real estate and transportation. Red TapeRed TapeDifficulty of getting permission to operate the business.Difficulty of getting permission to operate the business.
Evaluation
OpportunitiesOpportunities Measure Weighting Rating (1-10) Attractiveness
France India Korea France India Korea
Market sizeBest 10 – worst 1
50% 8 9 6 4.0 4.5 3.0
Ease and compatibility of operationBest 10 – worst 1
30% 7 9 2 2.1 2.7 0.6
Costs and resource availabilityBest 10 – worst 1
10% 2 10 5 0.2 1.0 0.5
Red tapeLowest 10 - highest 1
10% 8 2 5 0.8 0.2 0.5
Total 100% 7.1 8.4 4.6
Evaluation
RisksRisksEconomic and political risk ratingsEconomic and political risk ratings
Risk and UncertaintyRisk and UncertaintyFirms usually experience higher risk and uncertainty when Firms usually experience higher risk and uncertainty when they operate abroad. they operate abroad.
Competitive RiskCompetitive RiskA firm’s innovative advantage may be short-lived.A firm’s innovative advantage may be short-lived. Monetary RiskMonetary RiskA firm’s expansion occurs through foreign-direct A firm’s expansion occurs through foreign-direct investment, foreign-exchange rates and access to investment, foreign-exchange rates and access to investment capital and earnings. investment capital and earnings.
Political RiskPolitical RiskLook for economic and social conditions that could lead to Look for economic and social conditions that could lead to political instability.political instability.
Evaluation
RisksRisks MeasureMeasure WeightingWeighting Rating (1-10)Rating (1-10) AttractivenessAttractiveness
FranceFrance IndiaIndia KoreaKorea FrancFrancee
IndiaIndia KoreaKorea
Risk & Risk & uncertaintyuncertaintyLowest 10 - highest 1Lowest 10 - highest 1
50%50% 99 88 55 4.54.5 4.04.0 2.52.5
Competitive riskCompetitive riskLowest 10 - highest 1Lowest 10 - highest 1
20%20% 33 99 55 0.60.6 1.81.8 1.01.0
Monetary riskMonetary riskLowest 10 - highest 1Lowest 10 - highest 1
10%10% 77 55 44 0.70.7 0.50.5 0.40.4
Political riskPolitical riskLowest 10 - highest 1Lowest 10 - highest 1
10%10% 88 99 55 0.80.8 0.90.9 0.50.5
TotalTotal 100%100% 6.66.6 7.27.2 4.44.4
Evaluation
Opportunity-risk matrixOpportunity-risk matrix
3.3
6.7
Low Med High
Opportunities
Low
Med
High
Risks
India
France
S Korea
6.73.3
Evaluation