Choosing products and markets. Which market to enter? Arbitrage: markets of different income levels –But potential product adaptation Replication: markets.

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Presentation transcript:

Choosing products and markets

Which market to enter? Arbitrage: markets of different income levels –But potential product adaptation Replication: markets of similar income levels –But no price advantage

Which product to sell? Given advantage of incumbents, most foreign firms choose undefended/poorly served niches

Acer Aspire in the US Acer-branded multimedia desk family PC with design look Priced 8-10% below top brands Targeted to first time non-business buyers Sold through specialist stores

Acer Aspire in US Design does not allow scale economies Design does not allow mix and match Design problems Priced too high given low brand reputation Service support insufficient Competition fierce = Poor product/market decision

Haier in US Initial target poorly served niches (dorm mini fridges and wine coolers) Imported from China (now made in US) Priced low Distributed through large US retailers (Home Depot, Sears, Wal-Mart)

A method for selecting product and market 1.Choosing the candidate product 2.Preliminary screening of market size 3.Estimating industry market potential of prospective target countries 4.Estimating company sales potential for high market potential countries

1. Choosing the candidate product Price/quality OK for target market? Meets target market needs? Target market competition? Complementary services or products available? Need for product adaptation?

2. Preliminary screening of market size: consumer/user profile Consumer product –Income –Social class –Lifestyle –Age and Sex Industrial product –Input/output relationship –Customer type

2. Preliminary screening of market size Direct estimates of market size Indirect estimates of market size = preliminary list of countries

Insurance Premiums (life and non-life) in 2000 as percent of GDP (2000)

3. Estimating industry sales potential of prospective target countries Top-down Bottom-up = high market potential countries

4. Estimating company sales potential for high market potential countries Entry conditions Competitive audit –Product comparisons –Potential competitors Distribution access Consumers = target country(ies)