ch 4 export market selection

8/3/2019 Ch 4 Export Market Selection

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Ch 4Export Market Selection


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Export Market Selection

The process of opportunity evaluationleading to the selection of foreignmarkets in which to compete.


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Identifying the right market isimportant Target market decisions are antecedent to

the development of foreign marketingprograms and thus, cost of marketing.

The nature and location of its markets willaffect a companys ability to coordinatethem.

Establishing bases at appropriate foreign

markets can be a major dimension in globalpositioning strategy.


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Market Segmentation

Breaking down the market for a particularproduct or service into segments ofcustomers which differ in terms of theirresponse to marketing strategies.

Export Market Segmentation : Because ofdifferences in the economic, cultural andpolitical environments between countries,

international markets tend to be moreheterogeneous than domestic markets


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Export Market Segmentation

Evaluation should be done by means of:

Measurability

AccessibilityProfitability

Actionability


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Measurability

Is the degree to which segments canbe identified and to which the size andpurchasing power of the segments

can be measured

Fx : is there statistic on age 16-26 in

Europe


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Accessibility

Is the degree to which the resultingsegments can be effectively reachedand served

Fx : are there medias to promote ourbusiness


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Profitability

Is the degree to which the resultingsegments are large / profitable enoughto be worth considering for seperate

marketing attention

Fx: Quality standard ,Tax


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Actionability

Is the degree to which seperateeffective programs can be formulatedfor attracting and serving the

segments.

Fx: resource and companies capability


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Market Expansion Policy

Market Selection Process

Market Selection Procedure

Market Selection Strategy


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Cont- Exporter apply the proactive strategyto

what are considered primary markets

- Exporter apply the reactive strategytowhat are considered secondary markets


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Market Selection Procedures

Expansive Methods

Contractible Methods


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MARKET SELECTION PROCEDURES

1. Expansive Method

- Select market based on similarities

- Minimum adaptation

- Approaches:

a. Geographic proximityb. Trade policy proximity


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a. Geographic Proximity

- Nearest neighbor approach

- Similarity in economic, political, sociological and culturalstanding

- Less adaptation needed

- Targeted market can be treated as base market area- Fx : 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 allmember countries

- Tax conditions


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MARKET SELECTION PROCEDURES

2. Contractible Method

Starting with large number of markets then the marketsare first organised on the basis of general market andproduct by screening and ranking

Steps for market screen Geographic segmentation

Customer segmentation


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MARKET SELECTION STRATEGIES

a. Market Concentration Strategy

b. Market Spreading Strategy


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Market Concentration Strategy

Market A Market B

Marketing resources


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a. Market Concentration Strategy

- Slow and gradual rate of growth in numberof market served by a company

- Channeling available resources in to a small

number of market

- Devoting relatively high levels of marketingeffort and resources

- To win significant market share


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b. Market Spreading Strategy

- Fast rate of growth in the number of marketserved 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


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Market Spreading Strategy

Market A Market B Market C Market D Market E

Marketing resources


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Concentration vs. Spreading

Concentration Spreading

Advantages:

- power of specialization,and market penetration;

- greater marketknowledge;

- higher degree of control;- learning of the export

process and theexperience curve

Advantages:

- flexibility;- less dependence on

particular markets;

- lower perception of

risk.


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Marketing FactorsFactors favoring market spreading Factors favoring market concentration

- Low communication costsfor additional markets;

- Low order handling costsfor additional markets

- Low physical distributioncosts for additional

markets- Standardized

communication in manymarkets

- High communicationcosts for additional

markets;- High order handling costs

for additional markets

- High physical distribution

costs for additionalmarkets

- Communication requiresadaptation to different

market


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Market FactorsFactors favoring marketspreading

Factors favoring market concentration

- Small markets-specializedsegments

- Unstable markets

- Many similar markets

- New or declining markets

- Low growth rate in eachmarket

- Established competitorshave large share of keymarkets

- Low source loyalty

- Large markets-high volumesegments

- Stable markets

- Limited number of comparablemarkets

- Mature markets

- High growth rate in each market

- Large markets are notexcessively competitive

- Key markets are divided amongmany competitors


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Company Factors

Factors favoring market spreadingFactors favoring marketconcentration

- High management risk-taker

- Objective of growththrough marketdevelopment;

- Little market knowledge

- Low management risk-consciousness;

- Objective of growththrough marketpenetration;

-Ability to pick bestmarkets.


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Product Factors

Factors favoring market spreadingFactors favoring marketconcentration

- Limited specialist uses;

- Low volume;- Non-repeat;

- Early or late in productlife cycle;

- Standard product salablein many markets

- General uses;

- High volume;- Repeat-purchase

product;

- Middle of product life

cycle;- Product requires

adaptation in differentmarkets


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Foreign market portfolios: techniquesand analysis

Standardized approach to portfolio analysis

Portfolio analysis is to evaluate degree and natureof international involvement.

BCG (Boston Consulting Group) model considersmarket strength and market attractiveness.

Portfolio model to export market selection

decisions

Standardized portfolio models do not include riskdimension.

Advantages: early consideration of companys

strengths/weaknesses helps determine primary

role of each market.


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ch 4 export market selection

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