Topic 3 – Assessment of country markets Corporate policy Market attractiveness Topic 3 – Assessment of country markets

What is globalisation? It’s the growing integration and interdependence of nations, both in business and social terms

Global marketers consider the world as their market and different country markets as components of this world

In a global market.... A business has to decide whether to go international A business has to decide which market to enter A business has to decide how to enter the market A business has to decide the global marketing program and organization

Ansoffs Matrix – market/product growth strategy New product line/ modify existing products Increase market share/drive out competition Sell online/open shop abroad and new product line/ modify existing products Sell online/open shop abroad

The Indicators of market potential Geographic Technological Demographic Sociocultural Economic Political

Geographic characteristics Certain climate conditions might dictate adaptations to the product e.g. Some glues or oils might not work in cold climates so would have to be adapted Abnormal weather conditions may disrupt transportation or threaten seasonal goods The physical size of the country is important as the business will need to be able to supply to the whole country If there are lots of rivers or mountains the business might have to be more environmentally friendly to avoid getting a negative brand image The populations distribution will be affected by topography (rivers, mountains, deserts etc) and climate as people tend to settle where the climate is temperate and there is adequate water The climate conditions also affect the marketing and packaging used to safeguard the products Whether country has natural resources - mining and oil companies go to where the resources are and export them to places where there’s demand for them

Technological and labour characteristics Level of technological skill – although cheap labour is usually the most attractive to a business there may be a trade off between the need for cheap labour and the need for a technologically skilled labour force. Existing production technology Existing consumption technology Education level – training adds to costs

Demographic characteristics Age: there are distinct buying differences between age groups. E.G.Urban outfitters aim to sell to 18-30 year old females and males. Therefore they wouldn’t open shops in Monaco where the average age is 48.9 as the demand may not be high enough. However they could then open shops in specific regions with younger people like they have done in the UK by opening stores in places such as Manchester. Gender: If a country or region has more of one gender and the product a business is trying to sell is more aimed at a specific gender than the business will potentially not have a high enough demand to survive Income: If a company is looking to sell higher-end goods, they have to make sure that the surrounding population can afford them. Employment: Employment is a key indicator as to whether an area or country is growing. If businesses are hiring, it means that a business will have more potential customers. However if they are struggling, or laying off employees, then the business’s customer base will decrease in size.

Sociocultural characteristics Culture is a set of beliefs, customs, practices and behaviour that exists within a population The dominant values of the local culture e.g. India - Family Ethnic groups within countries need to be considered Lifestyle patterns Language barriers need to be taken into account e.g. Marketing material will need to be changed as may the product name. Some countries have more than one language e.g. Malaysia has Chinese, Indian and Malay Peoples values will be different in different countries so marketing needs to consider this in order to avoid offending

Economic characteristics The income distribution Rate of GNP growth [market value of all the products and services produced in a year divided by the labour and property supplied by the countries residents] The ratio of investment in GNP GNP per capita – economic development Human Development Index – economic and social development Consumer profile – new middle class in emerging economies create new markets. Rapid growth may also lead to a new luxury goods market Exchange rates – flexible and vary overtime which creates uncertainty. Selling in a market with a undervalued exchanged rate is bad because of the cheaper domestic competition (because you’d have to import and it would cost a lot – may need to open production in the country)

Political characteristics The Laws – businesses rely on a sound legal framework to protect their interests. This includes intellectual property rights and being able to use the law to enforce contracts and payments. Without adequate legal safeguard a business is unlikely to invest (especially with high tech products). If the legal system is corrupt it might not protect the foreign investors interests. Government policy – the tax regime is important (low corporation tax is attractive to businesses. Protectionism is also important(high tariffs on imports can deter businesses because it makes export markets unattractive). Political Stability and corruption – countries with a history of political unrest are unattractive (unless the company needs to be there e.g. For oil). Corruption may also be an issue (for ethical companies).

Ease of doing business index Created by world bank Looks at factors such as time + minimum capital to open a new business, dealing with regulation, ease in hiring and firing employees, tax payable against gross profit, cost and time to import and export. Higher ranking = easier to do business #1 in 2011 = signapore, Denmark #2 Hong Kong

Infrastructure Infrastructure = transport, communication, energy and water facilities Its vital for businesses to access supplies, services, distribute goods and contact stakeholders Weak infrastructure weakens a businesses growth (can’t use just in time, cant effectively distribute goods, communication is made difficult, slows down transport, raises costs, hard to maintain supply chain)

Corporate policy Some businesses want to diversify to reduce risks Other businesses want to expand their markets and become more profitable Some want to cut costs and have cheap labour Some want inorganic growth by acquiring businesses from abroad Others want to grow organically when they can create a market or cut costs Businesses vary as to the extent they want to expand abroad