CHAPTER 3

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 PROCEDURES 1. Expansive Method - Select market based on similarities - Minimum adaptation - Approaches: a. Geographic proximity b. 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 screening ii. Countries ranking iii. Determining specific factors - Geographic segmentation Prohibitive product characteristics Prohibitive market characteristics - Customer segmentation

MARKET SELECTION STRATEGIES 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

Market Concentration Strategy Market A Market B Marketing resources

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

Market Spreading Strategy Market A Market B Market C Market D Market E Marketing resources

Concentration = FEW Spreading = MANY

RESOURCE 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 Factors Factors 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 Factors Factors 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 Factors Factors 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