1. Chapter 12 Assessing International Markets McGraw-Hill/Irwin Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.

2. Market Screening – Firm uses environmental forces to identify desirable markets – Similar to environmental scanning Market Screening – Firm uses environmental forces to identify desirable markets – Similar to environmental scanning Environmental Scanning – Firm scans world for changes in environmental forces that might affect it Environmental Scanning – Firm scans world for changes in environmental forces that might affect it LO1 12-2

3. Two Types of Market Screening: Country and Segment Country Screening: – Uses countries as basis for market selection Segment Screening: – Uses market segments as basis for market selection Country Screening: – Uses countries as basis for market selection Segment Screening: – Uses market segments as basis for market selection LO1 12-3

4. Country Screening Initial Screening – Basic Needs Potential –A firm must assess if there is a basic needs potential for its goods or services If the need is lacking, then no reasonable expenditure of effort & money will enable firm to market its goods and services –Assessment of basic needs potential Easier for producers of specialized industrial materials or equipment More difficult for specialized consumer products Initial Screening – Basic Needs Potential –A firm must assess if there is a basic needs potential for its goods or services If the need is lacking, then no reasonable expenditure of effort & money will enable firm to market its goods and services –Assessment of basic needs potential Easier for producers of specialized industrial materials or equipment More difficult for specialized consumer products LO1 12-4

5. Second Screening – Market Factors and Trend Analysis Market Factors – Data that correlate highly with market demand for a product. Estimation by Analogy: – Process of using a market factor that is successful in one market to estimate demand in a similar market. Market Factors – Data that correlate highly with market demand for a product. Estimation by Analogy: – Process of using a market factor that is successful in one market to estimate demand in a similar market. Trend Analysis – Statistical techniques by which successive observations of a variable at regular intervals are analyzed to establish regular patterns that are used for establishing future values. Trend Analysis – Statistical techniques by which successive observations of a variable at regular intervals are analyzed to establish regular patterns that are used for establishing future values. LO2 LO3 12-5

6. Second Screening – Cluster Analysis & Periodic Updating Cluster Analysis – Statistical technique that divides objects into groups so that the objects within each group are similar. Cluster Analysis – Statistical technique that divides objects into groups so that the objects within each group are similar. Periodic Updating –Changes in market data and other related events demand that business and marketing plans be updated to reflect the impact of these changes. Periodic Updating –Changes in market data and other related events demand that business and marketing plans be updated to reflect the impact of these changes. LO3 12-6

7. 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 the repatriation of earnings, limits to FDI, inability to provide foreign exchange Policy Stability –Political climate, government stability, public unrest Entry Barriers –Import restrictions, local participation requirements, local content restrictions, government-owned competition Profit Remittance Barriers –Undue restrictions on the repatriation of earnings, limits to FDI, inability to provide foreign exchange Policy Stability –Political climate, government stability, public unrest LO2 12-7

8. Fourth Screening - Sociocultural Forces Sociocultural Forces Screening –Sociocultural factors are fairly subjective –Data are difficult to assemble, particularly from a distance Sources:  US Department of Commerce Data & Reports  Business International  Financial Times  The Economist Sociocultural Forces Screening –Sociocultural factors are fairly subjective –Data are difficult to assemble, particularly from a distance Sources:  US Department of Commerce Data & Reports  Business International  Financial Times  The Economist LO2 12-8

9. Fifth Screening – Competitive Forces 1.The number, size, and financial strength of the competitors. 2.Their market shares. 3.Their marketing strategies. 4.The apparent effectiveness of their promotional programs. 5.The quality levels of their product lines. 6.The source of their products – imported or locally produced. 7.Their pricing policies. 8.The levels of their after-sales service. 9.Their distribution channels. 10.Their coverage of the market. (Could market segmentation produce niches that are currently poorly served?) 1.The number, size, and financial strength of the competitors. 2.Their market shares. 3.Their marketing strategies. 4.The apparent effectiveness of their promotional programs. 5.The quality levels of their product lines. 6.The source of their products – imported or locally produced. 7.Their pricing policies. 8.The levels of their after-sales service. 9.Their distribution channels. 10.Their coverage of the market. (Could market segmentation produce niches that are currently poorly served?) LO2 12-9

10. Fifth Screening – Competitive Forces To compete in countries with STRONG COMPETITON, management must: –Maintain a strategic presence where global competitors are, or –Enter a competitor’s home market to distract attention To compete in countries with STRONG COMPETITON, management must: –Maintain a strategic presence where global competitors are, or –Enter a competitor’s home market to distract attention LO2 12-10

11. Final Selection of New Markets Field Trip: –Spend enough time in the market to learn, experience, and “get a feel” for it Government-Sponsored Trade Missions and Trade Fairs: – Trade Mission - A group of businesspeople and/or government officials (state or federal) that visits a market in search of business opportunities. – Trade Fair – A large exhibition, generally held at the same place and same time periodically, wt which companies maintain booths to promote the sale of their products. GOOD SOURCE OF MARKET DATA & COMPETITIVE INTELLIGENCE! Field Trip: –Spend enough time in the market to learn, experience, and “get a feel” for it Government-Sponsored Trade Missions and Trade Fairs: – Trade Mission - A group of businesspeople and/or government officials (state or federal) that visits a market in search of business opportunities. – Trade Fair – A large exhibition, generally held at the same place and same time periodically, wt which companies maintain booths to promote the sale of their products. GOOD SOURCE OF MARKET DATA & COMPETITIVE INTELLIGENCE! LO4 12-11

12. Final Selection of New Markets Cultural Problems: –Language, dialect & translation problems –Multiple languages spoken within a country –Word meanings change between regions within a country –Low literacy impacts use of questionnaires –Access only to husband not wife on buying decisions generates worthless data –Not knowing who should be interviewed –Refusal to answer because f of distrust of strangers –Social Desirability Bias - The custom of politeness to everyone that can cause respondent’s to give answers calculated to please rather than reflect the respondent's true beliefs or feelings. –Fear that interviewer is really a Tax Assessor Cultural Problems: –Language, dialect & translation problems –Multiple languages spoken within a country –Word meanings change between regions within a country –Low literacy impacts use of questionnaires –Access only to husband not wife on buying decisions generates worthless data –Not knowing who should be interviewed –Refusal to answer because f of distrust of strangers –Social Desirability Bias - The custom of politeness to everyone that can cause respondent’s to give answers calculated to please rather than reflect the respondent's true beliefs or feelings. –Fear that interviewer is really a Tax Assessor LO5 12-12

13. Final Selection of New Markets Technical Difficulties –Updated maps not available –Streets may have multiple names –Houses may not be numbered –Telephone service may be poor or unreliable –Mail delivery may be slow –Low response rates if respondents need to go to post office to return survey Technical Difficulties –Updated maps not available –Streets may have multiple names –Houses may not be numbered –Telephone service may be poor or unreliable –Mail delivery may be slow –Low response rates if respondents need to go to post office to return survey Research as Practiced –In developed nations research data is readily available –In developing nations research is simpler and done less often because of: “Seller’s Market” Fewer competitors More important problems Research as Practiced –In developed nations research data is readily available –In developing nations research is simpler and done less often because of: “Seller’s Market” Fewer competitors More important problems LO5 12-13

14. Collecting Data Using Surveys Customized Research –Done by private, 3 rd party research firms for a specific firm –ESOMAR (European Society of Opinion and Marketing Research 5000 member firms in 100+ countries –Consumer Products firms use ethnographic or “corporate anthropology” to understand consumers with “on the ground” research watching customers use products. Customized Research –Done by private, 3 rd party research firms for a specific firm –ESOMAR (European Society of Opinion and Marketing Research 5000 member firms in 100+ countries –Consumer Products firms use ethnographic or “corporate anthropology” to understand consumers with “on the ground” research watching customers use products. General Surveys –Completed with no specific firm in mind but reports are sold commercially –3 Types: Omnibus Survey Proprietary Design Nonprofit Survey – Government or NGO sponsored General Surveys –Completed with no specific firm in mind but reports are sold commercially –3 Types: Omnibus Survey Proprietary Design Nonprofit Survey – Government or NGO sponsored LO6 12-14

15. Collecting Data Using Surveys The Internet –Growing in use –Offers firms the ability to: Conduct research at any time Survey any country 24/7 Have real-time data analysis Use blogs instead of focus groups Gather qualitative data from large groups over longer timeframes Save on cost of research The Internet –Growing in use –Offers firms the ability to: Conduct research at any time Survey any country 24/7 Have real-time data analysis Use blogs instead of focus groups Gather qualitative data from large groups over longer timeframes Save on cost of research LO6 12-15

16. Segment Screening Issues in Segment Identification: –Choices: Country segments or market segments? –Are there commonalities across nationalities? Similar desires regardless of country or language? –Dealing with a physical market (a country) or a conceptual market (“phone surfers in Japan”)? –Do our market segments extend across borders? –How difficult is the data to gather? Issues in Segment Identification: –Choices: Country segments or market segments? –Are there commonalities across nationalities? Similar desires regardless of country or language? –Dealing with a physical market (a country) or a conceptual market (“phone surfers in Japan”)? –Do our market segments extend across borders? –How difficult is the data to gather? LO7 12-16

17. Criteria for Identifying and Assessing Segments 1.Definable  Can it be identified and measured? 2.Large  Is the segment large enough to be worth serving it? 3.Accessible  Can we reach it? If no, we will not succeed! 4.Actionable  Can we apply our marketing mix to it? 5.Capturable  Can we capture market share or is it already captured by competition? Can we compete if we enter? 1.Definable  Can it be identified and measured? 2.Large  Is the segment large enough to be worth serving it? 3.Accessible  Can we reach it? If no, we will not succeed! 4.Actionable  Can we apply our marketing mix to it? 5.Capturable  Can we capture market share or is it already captured by competition? Can we compete if we enter? LO7 12-17