planning and preparation for export.ppt

8/14/2019 Planning and Preparation for Export.ppt

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Chapter: Planning and Preparation for Export

Topics to be covered :Assessing and Selecting the ProductInternational Market ResearchInternational Market Assessment

Developing International Business Plan


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Assessing and Selecting the ProductThere are basically two approaches for the selection of a product for

export. Before selecting the one over the other, exportingcompany must critically understand these two approaches:

Systematic Approach : The systematic approach involvesselection of a product or service based on overall market demand.An individual entrepreneur often selects a product line or servicebased on demand and growth trends by observing trade flows. Itis, however, important to select products or services based onfamiliarity and skills.

Reactive Approach : The reactive approach involves selecting aproduct based on immediate market need. The first step would beto contact potential importers to indicate ones interest insupplying the product and to obtain the useful information. Thereactive approach has the following disadvantages:

Lack of focus on a given product or market,Absence of long-term relationship with importer


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International Market ResearchInternational Market Research (IMR) Helps Decision-Making : International market research deals with howbusiness organizations engaged in international trade makedecisions that lead to the allocation of resources in marketswith greatest potential for sales.

Why Conduct International Market Research : Thepurpose of conducting international market research can besummarized below:

To identify, evaluate, and compare the size and potential ofvarious markets and select the most desirable market(s)for a given product or service.To reassess market changes that may require a change ina companys strategy.


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International Market AssessmentInternational Market Assessment Defined : Internationalmarket assessment is a form of environmental scanningthat permits a firm to select a small number of desirablemarkets on the basis of broad variables. Usually followedsix steps in the international market assessment are:

Preliminary Screening (Basic Need and Potential)Secondary Screening (Financial and Economic Conditions)Third Screening (Political and Legal Forces)Fourth Screening (Sociocultural Forces)

Fifth Screening (Competitive Forces)Final Selection (Field Trip)


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Preliminary Screening (Basic Need and Potential)

The first step in market assessment is the process ofestablishing whether there is a basic need for thecompanys products or services in foreign markets. Ifsuch need is not satisfied and the research indicates themarket opportunities, it is pertinent to consider the

markets overall buying power by examining country-specific factors such as population , GDP, per capitaincome , distribution of wealth, exports , and imports .Availability of foreign currency, as well as change induties and trade policies, should also be closelymonitored.


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Secondary Screening (Financial and Economic Conditions)

Secondary screening involves financial and economicconditions such as trends in inflation, interest rates,exchange rate stability, availability of credit and financing,and the availability of commercial banks than can financeoverseas transactions and handle collection, payments, andmoney transfer. Economic data are also used to measurecertain indicators such as:

Market Size : The relative size of each market aspercentage of total world market.

Market Intensity : Degree of purchasing power.

Growth of the Market : Annual increase in sale.


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Third Screening (Political and Legal Forces)

It is important to assess the type of government and itsstability. Consideration should also be given to thefollowing legal forces in the countries that affectexport/import operations:

Entry barriers

Limits on profit remittance and/or ownership

Taxes and price controls and protection of intellectualproperty rights.


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Fourth Screening (Sociocultural Forces)

This involves consideration of sociocultural forces suchas customs, religion, and values that may have anadverse effect on the purchase or consumption of certainproducts.


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Fifth Screening (Competitive Forces)It is important to appraise the level and quality ofcompetition in potential markets. The exporter has toidentify

Companies competing in the markets

The level of technology used by the competitors

The quality and price of the products and/or servicesoffered by the competitors

Estimated market shares of the competitors

Other pertinent matters affecting the competition in themarket.


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Final Selection (Field Trip)This stage involves a visit to the markets that appear tobe promising in light of the market assessmenttechnique. Such visits could be in the form of trademissions or trade fairs . The purpose of such visit is to:

Corroborate the facts gathered during the various stages ofmarket assessment

Supplement currently available information by doingresearch in the local market, including face-to-faceinterviews with potential consumers, distributors, agentsand government officials


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Developing an International Business Plan

Business Plan Defined : A business plan involves aprocess in which an entity puts together a given set ofresources (people, capital, materials) to achievedefined goals and objectives over a specific period of

time.

The Necessity of Business Plan in InternationalTrade : Even though some export-import companiesstart a business plan after they have reached acertain stage, research findings ( Williams and Manzo ,1983) show that planning is needed at all stages ofbusiness development from inception to maturity.


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Developing an International Business Plan (continued)

Structure of anInternationalBusiness Plan:The structureof a typicalbusiness planis shown in thegiven figure.

Some plans alsoinclude criticalrisks/problemsand communitybenefits.


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Thank You!

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