Assess the firm’s products and services with regard to: foreign customer characteristics and requirements government mandated regulations expectations of channel intermediaries’ characteristics of competitors’ offerings. Product Suitability Sell well in the domestic market. Those that are received well at home are likely to succeed abroad, especially where similar needs and conditions exist. Cater to universal needs. Address a need not well served in particular foreign markets. Address a new or emergent need abroad Issues that Determine Potential Product Demand Who initiates purchasing? Who uses the product or service?
Why do people buy the product or the service? Assessing global market opportunities By manqué Economic, cultural, geographic, and other factors in the target market can limit sales? Task 3. Country Screening To reduce the number of countries that warrant in-depth investigation as potential target markets too manageable few. Criteria: Market size and growth rate; market intensity (that is buying power of the residents in terms of income level); consumption capacity (that size and growth rate of the neutron middle class); country’s receptivity to imports; infrastructure appropriate for doing business; economic freedom; political risk.
Focus of Screening Varies with Entry Strategy Firms that seek to source from foreign suppliers need to identify countries where capable suppliers are located. Once a firm chooses a particular country, it needs to ensure that conditions for importing from the country are favorable. For firms looking to make a direct investment in foreign markets, it is best to focus on countries that promise long-term growth, substantial returns, while posing relatively low lattice risk. ; Exporting firms should target countries with low tariff barriers, steady demand, and qualified intermediaries.
Gateway Countries and Regional Hubs’ Managers may target so-called gateway countries or regional hubs that serve as entry points to nearby or affiliated markets. Singapore has traditionally served as the gateway to Southeast Asian countries; Hong Kong is an important gateway to China; Turkey is a good platform for entering the Central Asian republics; and Finland provides business-friendly access to the former Soviet Union. Firms base their operations in a gateway country so they can serve the larger, adjacent region.
Gradual Elimination Method for Screening Countries The manager starts with a large number of prospective target countries and then gradually narrows choices by examining increasingly specific information obtained via research. The objective is to reduce too manageable few the number of countries that warrant in-depth investigation as potential target markets five or six high potential country markets that are most promising. To save time and money, it is essential to eliminate unattractive markets as quickly as possible. At the same time, it is wise to be open-minded and consider all reasonable markets.
Task 4. Industry Market Potential Analysis To estimate the size of relevant industry sales within each target country; To investigate and evaluate any potential barriers to market entry. Criteria: Market size, growth rate, and trends in the industry; the degree of competitive and sophistication of local distribution; unique customer requirements and preferences; Industry Market Potential Industry market potential- an estimate of the likely sales that can be expected for all rims in the particular industry for a specific period of time.
In other words, it is an aggregate of the sales that may be realized by all companies in the industry. Industry market potential is different from company sales potential, which refers to the share of industry sales the focal firm itself can expect to achieve during a year. Indicators of Industry Market Potential Market size, growth rate, and trends in the specific industry Tariff and non-tariff trade barriers to enter the market Standards and regulations that affect the Industry Availability and sophistication of local distribution
Unique customer requirements and preferences Industry-specific market potential indicators Practical Methods for Estimating Industry Market Potential Simple Trend Analysis Likely industry market potential is derived from aggregate production for the industry as a whole, adding imports from abroad and deducting exports. Monitoring Key Industry-specific Indicators Caterpillar examines announced construction projects, building permits, growth rate of households, infrastructure development, and other pertinent leading indicators. Monitoring Key Competitors
If Caterpillar is considering Chile as a potential market, it investigates the current involvement in Chile of its number-one competitor, the Japanese firm Comates. Following Key Customers around the World Automotive suppliers can anticipate where their services will be needed next by monitoring the international expansion of their customers such as Honda or Mercedes Benz. ‘ Attending International Trade Fairs Industry trade fairs and exhibitions are excellent venues for managers to obtain valuable information on foreign markets.
Tapping into Supplier Networks Firms can gain valuable leads from current suppliers by inquiring with them about competitor activities. 5. Foreign Partner Selection Objectives: To decide on the type of foreign business partner; clarify ideal partner qualifications; and plan mode of entry. Criteria: manufacturing and marketing expertise in the industry; commitment to the international venture; access to distribution channels in the market; financial strength; quality of staff; technical expertise; infrastructure & facilities.
Foreign Business Partner Selection suppliers, and collaborative venture partners such as Joint venture partners, sciences, and franchisees. The focal firm needs to decide on the types of partners it needs for its foreign market venture; identify suitable partner candidates; negotiate the terms of its relationship with chosen partners; and support as well as monitor the conduct of chosen partners. Types of Foreign Business Partners Exporters tend to collaborate with foreign market intermediaries such as distributors and agents.
Firms that sell intellectual property, such as know-how, trademarks, and copyrights, tend to work through foreign licensees. These licensing partners are independent businesses that apply intellectual property to produce products in their own country. In franchising, the foreign partner is a franchisee – an independent business abroad that acquires rights and skills from the focal firm to conduct operations in its own market.
Ideal Qualifications of Foreign Distributors Financially sound and resourceful so that they can invest in the venture and ensure its future growth; Competent and professional management, with qualified technical and sales staff; Willing and able to invest in the focal firm’s business and grow the equines; Possesses a good knowledge of the industry; and has access to distribution channels and end-users; Known in the marketplace and well-connected with local government, as political clout is helpful especially in emerging markets.
Committed and loyal in the long run. Task 6. Estimate Company Sales Potential To estimate the most likely share of industry sales the company can achieve, over a period of time, for each target market. Outcomes: 3 to 5-year forecast of company sales in each target market. Understanding of factors that will influence company sales potential.
Criteria: Capabilities of partners; access to distribution; competitive intensity; pricing and financing; market penetration timetable of the firm; risk tolerance of senior managers Company sales potential Is an estimate of the share of annual industry sales that the firm expects to generate in a particular target market? Estimating company sales potential is often much more challenging than earlier tasks. It requires the researcher to obtain highly refined information from the market. The researcher needs to make certain assumptions about the market, and project the firm’s revenues and expenses for 3-5 ears into the future.
The estimates are never precise and require quite a bit of judgmental analysis Partner capabilities The competencies and resources of foreign partners determine how quickly the firm can enter and generate sales in the target market. Access to distribution channels The ability to establish and make best use of channel intermediaries and distribution Infrastructure in the target market. Intensity of the competitive environment Local or third-country competitors are likely to intensify their own marketing efforts when confronted by new entrants.