Notes Ch. 12- Global Market Opportunity Assessment the choices managers make determine the future of the firm; making good choices depends on objective evidence and hard data about which products and services to offer and where to offer them -the more managers know about an opportunity, the better equipped they will be to exploit it; this is particularly true in international business, which usually entails greater uncertainty and unknowns than domestic business -global market opportunity- favorable combination of circumstances, locations, or timing that offers prospects for exporting, investing, sourcing, or partnering in foreign markets -in various foreign locations, the firm may perceive opportunities to: sell its products and services; establish factories or other production facilities to produce its offerings more competently or more cost effectively; procure raw materials, components, or services of lower cost or superior quality; or enter into collaborative company performance, often far beyond what the firm can normally achieve in its home market Six Key Tasks (six key tasks that managers should perform to define and pursue global opportunities)
1. Analyze organizational readiness to internationalize 2.
Asses the suitability of the firm’s products and services for foreign markets 3. Screen countries to identify attractive target markets 4. Asses the industry market potential, or market demand, for the product(s) or service(s) in the selected target markets 5. Select qualified business partners, such as distributors or suppliers 6. Estimate company sales potential for each target market Task One: Analyze organizational readiness to internationalize -provide an objective assessment of the company’s preparedness to engage in international business activity -a list of firm strengths and weaknesses, in the context of international business, and recommendations for resolving deficiencies that hinder achieving company goals -relevant financial and tangible resources; relevant skills and competencies; senior management commitment and motivation –
Task Two: Asses the suitability of the firm’s products and services for foreign markets -conduct a systematic assessment of the suitability of the firm’s products and services for international customers; to evaluate the degree of the fit between the product or service nd customer needs -determination of factors that may hinder product or service market potential in each target market; Identification of needs for the adaptations that may be required to initial and ongoing market entry -assess the firm’s products and services with regard to: foreign customer characteristics and requirements; government mandated regulations; expectations of channel intermediaries; characteristics of competitors’ offerings -factors contributing to product suitability for international markets: sell well in the domestic market; cater to universal needs; address the need not well served in particular foreign markets; address a new or emerging need abroad
-Task Three: Screen countries to identify attractive target markets -reduce the number of countries that warrant in-depth investigation as potential target markets to a manageable few -identify 5 to 6 high potential country markets that are most promising for the firm -need to look at: market size and growth rate; market intensity (buying power of the residents in terms of income level); consumption capacity (size and growth rate of the country’s middle class); country’s receptivity to imports; infrastructure appropriate for doing business; economic freedom; political risk.
-Firms that seek to source from foreign suppliers need to identify countries where capable suppliers are located. -Once a firm chooses a particular country, it needs to ensure that conditions for importing from the country are favorable. -For firms looking to make a direct investment in foreign markets, it is best to focus on countries that promise long-term growth, substantial returns, while posing relatively low political risk. Exporting firms should target countries with low tariff barriers, steady demand, and qualified intermediaries. -Compared to targeting one country at a time, targeting a group of countries is more cost effective, particularly when the markets have similar demand conditions, business regulations, and culture. –
Task Four: Asses the industry market potential, or market demand, for the product(s) or service(s) in the selected target markets -estimate the size of relevant industry sales within each target country; To investigate and evaluate any potential barriers to market entry -3 to 5- year forecasts of industry sales for each target market. Delineation of market entry barriers in industry -Industry market potential – an estimate of the likely sales hat can be expected for all firms in the particular industry for a specific period of time. In other words, it is an aggregate of the sales that may be realized by all companies in the industry. -indicators of industry market potential: Market size, growth rate, and trends in the industry; The degree of competitive intensity; Tariff and non-tariff trade barriers; Standards and regulations; Availability and sophistication of local distribution; Unique customer requirements and preferences; Industry-specific market potential indicators. –
Task Five: Select qualified business partners, such as distributors or suppliers -To decide on the type of foreign business partner; clarify ideal partner qualifications; and plan mode of entry. Determination of most suitable types of foreign business partners. List of attributes desired of foreign business partners. Determination of value-adding activities foreign business partner contribute -Foreign business partners include distribution channel intermediaries, facilitators, suppliers, and collaborative venture partners such as joint venture partners, licensees, and franchisees -The focal firm needs to decide on: types of partners it needs for its foreign market venture; identify suitable partner candidates; negotiate the terms of its relationship with chosen partners; support as well as monitor the conduct of chosen partners. -Ideal Qualifications of Foreign Distributors: Financially sound and resourceful so that they can invest in the venture and ensure its future growth; -Competent and professional management, with qualified technical and sales staff;
-Willing and able to invest in the focal firm’s business and grow the business; -Possesses a good knowledge of the industry; and has access to distribution channels and end-users; -Known in the marketplace and well-connected with local government, as political clout is helpful especially in emerging markets. -Committed and loyal in the long run. -Task Six: Estimate company sales potential for each target market -estimate the most likely share of industry sales the company can achieve, over a period of time, for each target market. 3 to 5-year forecast of company sales in each target market. Understanding of factors that will influence company sales potential -Company sales potential- is an estimate of the share of annual industry sales that the firm expects to generate in a particular target market; Estimating company sales potential is often much more challenging than earlier tasks. It requires the researcher to obtain highly refined information from the market -Approaches to Estimating Company Sales Potential: Survey of end-users and intermediaries; Trade audits; Competitor assessment; Obtaining estimates from local partners; Limited marketing efforts to “test the waters. ”