14 Assessing and Analyzing Markets International Business This chapter covers: Environmental analysis and market screening Market indicators and factors Market demand Trade missions Problems with marketing research Country and segment screening The internet as a market research tool Assessing and Analyzing Markets International Business by Ball, McCulloch, Frantz, Geringer, and Minor McGraw-Hill/Irwin Copyright © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

Chapter Objectives Discuss environmental analysis and market screening Explain market indicators and market factors Describe some statistical techniques for estimating market demand and grouping similar markets Appreciate the value to businesspeople of trade missions and trade fairs Discuss some of the problems market researchers encounter in foreign markets Understand the differences between country screening and segment screening Identify sources of information for the screening process Appreciate the utility of the Internet as a source of market research data 14-3

Assessing and Analyzing Markets Market Screening A modified version of environmental scanning in which the firm identifies markets by using the environmental forces to eliminate the less desirable markets Environmental Scanning A procedure in which a firm scans the world for changes in the environmental forces that affect it 14-4

Market Screening Permits management to identify a small number of desirable markets be eliminating those less attractive Two Types of Screening Country Screening Using countries as the basis for market selection Segment Screening Using market segments as the basis for market selection 14-5

Initial Screening Basic Need Potential Foreign Trade and Investment If the need is lacking, then no reasonable expenditure of effort and money will enable the firm to market its goods and services Easier for producers of specialized industrial materials or equipment than for widely consumed products 14-6 Foreign Trade and Investment If the need potential cannot be readily established for the good or service, analysts can use U.N.’s International Trade Statistics Yearbook, Volume II to identify export and import quantities

Foreign Trade and Investment Other helpful resources include International Trade Administration site on the Internet (www.ita.doc.gov) U.S. Exports of Merchandise on the National Trade Data Bank U.S. International Trade in Goods and Services (FT900) by the Department of Commerce Annual Worldwide Industry Reviews and International Market Research Reports prepared by various U.S. embassies 14-7

Second Screening Financial and Economic Forces Financial Forces Trends in inflation Exchange rates Interest rates Credit availability Paying habits of customers Rates of return on similar investments 14-8

Economic Forces Measures of market demand based on economic data include Market indicators Market factors Trend analysis Cluster analysis 14-9

Economic Forces Market Indicators Market Factors Economic data used to measure relative market strengths of countries or geographic areas Buying Power Index enables marketers to compare relative buying power 14-10 Market Factors Economic data that correlate highly with market demand for a product If the analyst of a foreign market has no factor for that market, he or she can use the “estimation by analogy”

Economic Forces Trend Analysis Cluster Analysis A statistical technique by which successive observations of a variable at regular time intervals are analyzed to establish future values Cluster Analysis A statistical technique that divides objects into groups so that the objects within each group are similar 14-11

Third Screening Political and Legal Forces Entry Barriers Import restrictions, local participation requirements, local content restrictions, government-owned competition Profit Remittance Barriers Undue restrictions on repatriation of earnings, limits to FDI, inability to provide foreign exchange Policy Stability Political climate, government stability, public unrest 14-12

Fourth Screening Sociocultural Forces Screening on the basis of sociocultural factors is challenging Sociocultural factors are fairly subjective “Data” are difficult to assemble, particularly from a distance 14-13 Sources of assistance to analyze and interpret sociocultural forces include Consultants U.S. Department of Commerce specialists Professional organizations and universities

Fifth Screening - Competitive Forces The number, size, and financial strength of the competitors Their market shares Their marketing strategies The apparent effectiveness of their promotional programs The quality levels of their product lines 14-16 The source of their products--imported or locally produced Their pricing policies The levels of their after-sales service Their distribution channels Their coverage of the market

Competitive Forces Countries where strong competitors make a profitable operation difficult are eliminated from list unless management is following a strategy of being present wherever its global competitors are believes entering a competitor’s home market will distract the competitor’s attention from its home market 14-15

Final Selection of New Markets A personal visit to potential markets is essential is selecting markets. Visits to potential markets can be through A Field Trip Should not be hurried Government-Sponsored Trade Mission A group of business or government people visit markets in search of business opportunities Less cost than going alone and greater impact Trade Fairs A large exhibition at which companies maintain booths to promote the same of their products 14-16

Final Selection of New Markets Research in Local market Face-to-face interviews reveal information that would never be written Management should hire a local research group The person in charge of the project must have experience in that country on one culturally similar in the same geographic area 14-17

Local Research Problems Cultural Language Literacy Social desirability bias Technical No up-to-date maps Streets have different names Houses not numbered Only wealthy have telephones Mail deliveries can take weeks or cost money 14-18

Final Selection of New Markets Research as Practiced Competition is frequently less intense in developing nations because there are fewer competitors management is struggling with problems other than marketing, which keep them from devoting more time to the marketing function 14-19

Segment Screening Segment Screening Definable Identify and measure Large Large enough to be worth the effort needed Accessible Reachable for either promotional or distribution purposes Actionable Able to control the components of marketing programs Capturable The potential still exists to “capture” the segment 14-20

TRADE MISSION CALENDAR February 15-16, 2005 Explore BC - Vancouver, Canada March 16-17, 2005 Men's Cosmetics and Skin Care Trade Mission - Montreal, Canada March 15-20, 2005 Aerospace Executive Service at the Australian International Airshow - Avalon Airport, (Geelong) Australia June 7-8, 2005 Explore BC - Vancouver, Canada June 14-15, 2005 REPCAN 2005 - Toronto, Canada

UK Trade Fairs trade fairs and exhibitions UK offers a comprehensive listing of all the consumer, public, industrial and trade exhibitions to be held in major venues around the UK