Market selectionMarket selection(Country (Country selection)selection)

Foreign market selectionForeign market selection

Screening potential Screening potential marketsmarkets

Step 1: Identify Basic Appeal

Step 2: Access national business environment

Step 3: Measure market size

Step 4: Select the market

DemandDemand

Determine basic demandDetermine basic demand Whether there is a basic demand for Whether there is a basic demand for

company’s productcompany’s product

Religion constraint – E.g. No pork in Islamic Religion constraint – E.g. No pork in Islamic countriescountries

Climatic condition – E.g. No hot-air Climatic condition – E.g. No hot-air conditioner in tropical countriesconditioner in tropical countries

Step 1: Identify Basic Appeal

Resource availabilityResource availability Determine resource availabilityDetermine resource availability

Raw materialsRaw materials LaborLabor CapitalCapital LandLand

Step 1: Identify Basic Appeal

Cultural & local forcesCultural & local forces

Cultural forcesCultural forces Language, attitude toward business, Language, attitude toward business,

religious belief and customreligious belief and custom Product adaptationProduct adaptation

Some products can be sold worldwideSome products can be sold worldwide Some products need local customizationSome products need local customization

E.g. KFC, books and magazineE.g. KFC, books and magazine

Step 2: Access national business environment

Political & legal forcesPolitical & legal forces

Political and legal forcesPolitical and legal forces Political stability Political stability

Government regulationGovernment regulation Government’s attitude toward trade and Government’s attitude toward trade and

investmentinvestment Types of restriction on import and exportTypes of restriction on import and export Investment barriersInvestment barriers Business ownershipBusiness ownership

E.g. 51% of local ownershipE.g. 51% of local ownership

Step 2: Access national business environment

Government regulationGovernment regulation Restrict remitting profit out of countryRestrict remitting profit out of country

Strict environmental regulation – Strict pollutiStrict environmental regulation – Strict pollution standard which may increase cost of produon standard which may increase cost of productionction

Require that companies divulge ceratin trade iRequire that companies divulge ceratin trade information – E.g. Coca-cola left India because nformation – E.g. Coca-cola left India because it refused to disclose its secret Coke formulait refused to disclose its secret Coke formula

Step 2: Access national business environment

Political & legal forcesPolitical & legal forces

Economic forcesEconomic forces

Economic forcesEconomic forces Fiscal and monetary policiesFiscal and monetary policies

Interest rate - Can cause high inflationInterest rate - Can cause high inflation Currency devaluation – Can affect exportCurrency devaluation – Can affect export

Other forcesOther forces TransportationTransportation InfrastructureInfrastructure

Step 2: Access national business environment

Data & InformationData & Information

InformationInformation Industrial market dataIndustrial market data Consumer dataConsumer data

Emerging marketEmerging market Data may not be readily availableData may not be readily available

Step 3: Measure market size

Market variablesMarket variables Market sizeMarket size

Market growth rateMarket growth rate

Consumption capacityConsumption capacity E.g. % of middle class populationE.g. % of middle class population

Commercial infrastructureCommercial infrastructure E.g. Number of TVs, phones, PCs, cars etcE.g. Number of TVs, phones, PCs, cars etc

Step 3: Measure market size

Market variablesMarket variables Economic freedomEconomic freedom

E.g Government’s trade policiesE.g Government’s trade policies

Market receptivityMarket receptivity Volume of international trade as a % of GVolume of international trade as a % of G

DPDP

Step 3: Measure market size

Field tripField trip

Competitor analysisCompetitor analysis

Step 4: Select the market

Opportunities and risksOpportunities and risks

Evaluation

OpportunitiesOpportunitiesCHOOSING AND WEIGHTING VARIABLESCHOOSING AND WEIGHTING VARIABLES

Variables must be weighed against each other to effectively Variables must be weighed against each other to effectively evaluate the potential success of a particular venture and to evaluate the potential success of a particular venture and to compare various ventures.compare various ventures.

OpportunitiesOpportunities

Market SizeMarket SizeMarket size is determined by sales potential.Market size is determined by sales potential.Ease and Compatibility of OperationsEase and Compatibility of OperationsMarket located nearby, share the same language and offer similar Market located nearby, share the same language and offer similar market conditions.market conditions.Costs and Resource AvailabilityCosts and Resource AvailabilityThe cost of labor, the cost of inputs, tax rates, and available The cost of labor, the cost of inputs, tax rates, and available capital, utilities, real estate and transportation. capital, utilities, real estate and transportation. Red TapeRed TapeDifficulty of getting permission to operate the business.Difficulty of getting permission to operate the business.

Evaluation

OpportunitiesOpportunities Measure Weighting Rating (1-10) Attractiveness

France India Korea France India Korea

Market sizeBest 10 – worst 1

50% 8 9 6 4.0 4.5 3.0

Ease and compatibility of operationBest 10 – worst 1

30% 7 9 2 2.1 2.7 0.6

Costs and resource availabilityBest 10 – worst 1

10% 2 10 5 0.2 1.0 0.5

Red tapeLowest 10 - highest 1

10% 8 2 5 0.8 0.2 0.5

Total 100% 7.1 8.4 4.6

Evaluation

RisksRisksEconomic and political risk ratingsEconomic and political risk ratings

Risk and UncertaintyRisk and UncertaintyFirms usually experience higher risk and uncertainty when Firms usually experience higher risk and uncertainty when they operate abroad. they operate abroad.

Competitive RiskCompetitive RiskA firm’s innovative advantage may be short-lived.A firm’s innovative advantage may be short-lived. Monetary RiskMonetary RiskA firm’s expansion occurs through foreign-direct A firm’s expansion occurs through foreign-direct investment, foreign-exchange rates and access to investment, foreign-exchange rates and access to investment capital and earnings. investment capital and earnings.

Political RiskPolitical RiskLook for economic and social conditions that could lead to Look for economic and social conditions that could lead to political instability.political instability.

Evaluation

RisksRisks MeasureMeasure WeightingWeighting Rating (1-10)Rating (1-10) AttractivenessAttractiveness

FranceFrance IndiaIndia KoreaKorea FrancFrancee

IndiaIndia KoreaKorea

Risk & Risk & uncertaintyuncertaintyLowest 10 - highest 1Lowest 10 - highest 1

50%50% 99 88 55 4.54.5 4.04.0 2.52.5

Competitive riskCompetitive riskLowest 10 - highest 1Lowest 10 - highest 1

20%20% 33 99 55 0.60.6 1.81.8 1.01.0

Monetary riskMonetary riskLowest 10 - highest 1Lowest 10 - highest 1

10%10% 77 55 44 0.70.7 0.50.5 0.40.4

Political riskPolitical riskLowest 10 - highest 1Lowest 10 - highest 1

10%10% 88 99 55 0.80.8 0.90.9 0.50.5

TotalTotal 100%100% 6.66.6 7.27.2 4.44.4

Evaluation

Opportunity-risk matrixOpportunity-risk matrix

3.3

6.7

Low Med High

Opportunities

Low

Med

High

Risks

India

France

S Korea

6.73.3

Evaluation