1. Foreign Market Selection – Managerial Issues
INTERNATIONAL
MANAGEMENT
Chapter 5
Foreign Market Selection – Managerial Issues

2. International Market Selection Process- Steps
1. Segmentation, targeting & positioning
2.Collection of relevant data on each country
3. Analysis of relevant data
4. Filtering less promising countries
5. Selecting most promising countries

3. Model for Selecting Foreign Markets
Macro Level Research
( General Market Potential)
Economic Statistics, Political Environment, Social Structure, Geographic Features
Filter 1
Preliminary Opportunities
General Marketing Relating to the Products
Growth Trends for Similar Products, Cultural Acceptance of Such Products, Market Size, State of Development, Taxes and Duties
Filter 1
Rejected Country

4. ( Specific Factors Affecting the Product)
Possible Opportunity
Micro Level Research
( Specific Factors Affecting the Product)
Existing and Potential Competition, Ease of Entry,
Reliability of Information, /Sales Projections, Cost of Entry, Probable Product Acceptance,
Profit Potential
Filter 3
Probable Opportunity
Target Markets
Corporate Factors
Influencing Implementation
Filter 4

5. Filtering Process- First Stage
Using macro variables discriminating countries- Opportunities, little opportunity, no opportunity, excessive risk.
Macroeconomic statistics- GNP, Per Capita GNP, Personal Disposable Income.
Political conditions.
Relation between the home and host country.
Geographical distance

6. Filtering Process- Second Stage
Variables indicating potential market size and acceptance of the product or similar products are used.
Year to year growth rates and total sales of similar products are indicators of market size and growth.
Also consider the stage of economic development, taxes and duty requirements.

7. Filtering Process- Third Stage
Consider a limited number of countries.
Get more detailed, reliable and updated information.
Focus of screening process switches from market size to profitability.
Issues- Looking to the competitors, how much should be invested to gain a particular market share?

8. Third Stage
Issues- Given the prices currently charged in the market, what margin can your company expect?
Given the cost of entry and the expected sales, what is the likely profit?
Micro-level factors influence the success or failure of specific product in market.

9. Filtering Process- Fourth Stage
Evaluates and ranks the potential target countries based on corporate resources, objectives and strategies.

10. Criteria For Selecting Target Countries
Critical factors influence market selection are:
Market size
Political environment
Legal environment
Social and culture environment

11. Market Size and Growth Macro Indicators of Market Size
Geographic Indicators
Size of the country in terms geographic area
Climatic condition
Topographical characteristics
Demographic Characteristics
Total Population
Population growth rate
Distribution of the population age-wise, gender-wise, income-wise, rural-urban wise, etc.
Population density

12. Economic Characteristics
Total gross national product
Per capital income (Also income growth rate)
Personal or household disposable income
Income distribution
Industrial, mineral, agriculture infrastructure and development plans
Balance of payments /Trade position
Import size and growth
Commercial policy instruments
Nature and export of restrictions and incentives
Trade agreements with the other countries

13. Micro Indicators of Market Size
Radios
Television sets
Cinema seats
Scientists and Engineers
Hospitals and Beds
Physicians
Alcoholic Liquor Consumption
Coffee Consumption
Petrol/Diesel Consumption
Telephones
Tourist Arrivals

14. Micro Indicators of Market Size
Passenger cars
Civil airline passengers
Steel production
Land under cultivation
Electricity consumption
Number of farms
Micro indicators indicate actual consumption of the product that a firm wants to sell or a similar product.

15. Political Environment
Indicators of Political Risk
Probability of nationalization
Bureaucratic delays
Number of riots and assassinations
Political executions
Percent of members of the communist party
Restrictions on capital movement
Government intervention

16. Social and Cultural Conditions
Main elements are:
Material Culture
Language
Esthetics
Education
Religion

17. Errors in Selection
Ignoring countries with significant potential for the company’s products.
Spending resources investigating countries that may turn out to be poor prospects.

18. Assignment in the class-Group Task
Considering the case of a company and its product, how would you make a detailed screening process of international market selection?
What factors you consider as the major managerial issues?