Chapter Eight Global Market Participation

Copyright © Houghton Mifflin Company. All rights reserved.Chapter 8 | Slide 2 Evaluating National Markets Where in the world do we look for markets? What should we consider when assessing market opportunities?

Copyright © Houghton Mifflin Company. All rights reserved.Chapter 8 | Slide 3 Market Considerations Stand-alone market attractiveness Strategic importance of markets

Copyright © Houghton Mifflin Company. All rights reserved.Chapter 8 | Slide 4 Stand-Alone Market Attractiveness Factors –Market and target segment(s) size –Growth rate –Market share potential –Government incentives

Copyright © Houghton Mifflin Company. All rights reserved.Chapter 8 | Slide 5 Strategic Importance of Markets Current and future battlegrounds where global competitors engage each other May not currently be attractive but are strategically important nonetheless

Copyright © Houghton Mifflin Company. All rights reserved.Chapter 8 | Slide 6 Targeting Lead Markets Have demanding customers who push for quality and innovation Examples: –Plastics = Japan –Italy = Textiles, Clothing –France = Wine

Copyright © Houghton Mifflin Company. All rights reserved.Chapter 8 | Slide 7 Geographic Market Choices Developed Economies versus Developing Economies

Copyright © Houghton Mifflin Company. All rights reserved.Chapter 8 | Slide 8 Attractiveness of Developed Economies Triad – Europe, Japan, USA 10 developed countries account for 50% world international trade and 90% of FDI Consumers with considerable disposable income 80% of sales for many industries Global competitors should have positions in all three areas Few are strong in more than two!

Copyright © Houghton Mifflin Company. All rights reserved.Chapter 8 | Slide 9 Challenges of Developed Markets High competition Market fragmentation Established brand and product loyalty Aging populations Labor costs are high Government regulation (highest product quality standards)

Copyright © Houghton Mifflin Company. All rights reserved.Chapter 8 | Slide 10 Attractiveness of Developing Markets Latin America, Africa, the Middle East and parts of Asia Trade and investment liberalization Market growth may be higher Middle class growth Competition may be less intense

Copyright © Houghton Mifflin Company. All rights reserved.Chapter 8 | Slide 11 Challenges of Developing Markets Political risk Weaker distribution infrastructures Economic risk – Big fluctuations in economies; currency and market volatility Some trade and investment restrictions remain Middle class may still be small – Predominated by small elite and large impoverished classes

Copyright © Houghton Mifflin Company. All rights reserved.Chapter 8 | Slide 12 The Search Begins… Macrovariables –Describe total market in terms of economic, social, geographic, political information Macrovariables are especially useful for determining which countries to reject!

Copyright © Houghton Mifflin Company. All rights reserved.Chapter 8 | Slide 13 Geographic Indicators Size of country, in terms of geographic area Climatic conditions Topographical characteristics

Copyright © Houghton Mifflin Company. All rights reserved.Chapter 8 | Slide 14 Demographic Characteristics Total population Population growth rate Age distribution of the population Degree of population density

Copyright © Houghton Mifflin Company. All rights reserved.Chapter 8 | Slide 15 Economic Characteristics Total gross national product Per-capita income (also income growth rate) Personal or household disposable income Income distribution

Copyright © Houghton Mifflin Company. All rights reserved.Chapter 8 | Slide 16 The Search Continues… Microindicators –Indicators (proxies) for specific markets

Copyright © Houghton Mifflin Company. All rights reserved.Chapter 8 | Slide 17 Microindicators of Market Size Televisions Scientists and engineers Hospitals Physicians Coffee consumption Hotel beds Steel production Rice production Number of farms Electricity consumption Passenger cars Telephones

Copyright © Houghton Mifflin Company. All rights reserved.Chapter 8 | Slide 18 Other Criteria Political conditions Competition Market similarity –The less the psychic distance the lower the risk –But similarities can be overestimated Canadian retailers in the USA (service levels and pricing)

Copyright © Houghton Mifflin Company. All rights reserved.Chapter 8 | Slide 19 Similarity to the United States Position in Investment Sequence Canada12 United Kingdom31 France54 Japan85 Argentina1015 Mexico118 Brazil147 Philippines1617 South Korea1718