CHAPTER XII

ANALYZING INTERNATIONAL
OPPORTUNITIES

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 Learning Objectives
Explain each of the four steps in the market- and
site-screening process.
Describe the three primary difficulties of
conducting international market research.
Identify the main sources of secondary
international data, and explain their usefulness.
Describe the main methods used to conduct
primary international research.

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 I. SCREENING POTENTIAL MARKETS
AND SITES

1. Step 1: Identify Basic Appeal.

2. Step 2: Assess the National Business Environment
3. Step 3: Measure Market or Site Potential
4. Step 4: Select the Market or Site

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 SLECT THE MARKET OR SITE
Step 4 + Field Trips
+Competitor Analysis

MEASURE MARKET OR SITE POTENTIAL

+ Current sales, Income Elasticity,
Step 3 Market Potential Indicator.
+ Quality of Workforce, Material, Infrastructure c

ASSESS THE NATIONAL BUSINESS ENVIRONMENT

+ Language, attitudes, religious beliefs, traditions, work ethic
Step 2 + Government regulation, government bureaucracy, political stability.
+ Fiscal and monetary policies, currency issues
+ Cost of transporting goods, country image

IDENTIFY BASIC APPEAL

Step 1 + Suitability of climate, absolute bans
+ Access to materials, labor, financing
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 I.1 Step 1: Identify Basic Appeal

Determining Basic Demand

Determining Available of Resources

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 I.1.1 Determining Basic Demand

Climate
Regulations (Foods, Smuggling…)

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I.1.2 Determining Available of Resources

 Carry out local activities

 National market or imported
 Relocate to countries
 Available and cost of local capital (Secure
financing in a market abroad)

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 I.2 Step 2: Assess the National Business
Environment

Cultural Forces
Political and Legal Forces
Economic and Financial Forces
Other Forces

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 I.2.1 Step 2: Cultural Forces

Some countries display cultural similarities.

Most differ in many ways:
Languages/ Attitudes toward business/
Religious belief/ traditions/ customs.
What kinds (and How) of products are sold?

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 I.2.2 Political and Legal Forces

Government Regulation
Government Bureaucracy
Political Stability

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 I.2.2 Political and Legal Forces

Government Regulation
 Create investment barriers to ensure domestic control
of a company or industry.
 Restrict international companies from freely removing
profits earned in the nation.
 Impose very strict environmental regulations.
 Require companies divulge certain information.

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 I.2.2 Political and Legal Forces

Government Bureaucracy
 A lean and smoothly operating government
bureaucracy can make a market or site more
attractive.
 A bloated and cumbersome system of obtaining
approvals and licenses from government agencies
can make it less appealing.

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 I.2.2 Political and Legal Forces
Political Stability
 Every nation’s business environment is affected to some
degree by political risk.
 The key element of political risk that concerns companies is
unforeseen political change
 The perception of a market’s political risk is often affected
by managers’ memories of past political unrest in a nation.
 Managers may assign company personnel to gather
information on the level of political risk in a country.

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 I.2.3 Economic and Financial Forces

Managers must carefully analyze a nation’s economic

policies before selecting it as a new market or site for
operations.
The poor fiscal and monetary policies of a nation’s
central bank can cause high rates of inflation,
increasing budget deficits, a depreciating currency,
falling productivity levels, and flagging innovation.
Currency and liquidity problems pose special
challenges for international companies.
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 I.2.4 Other Forces

Costs of Transporting Materials and Goods.

The cost of transporting materials and
finished goods affects any decisions about
where to locate manufacturing facilities.

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 I.2.4 Other Forces

Logistics
Management of the physical flow of products
from the point of origin as raw materials to
end users as finished products.

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 I.2.4 Other Forces

Country Image
Country image embodies every facet of a
nation’s business environment
Highly relevant to the selection of sites for
production, R&D, or any other activity.

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I.3 Step 3: Measure Market or Site Potential

Measuring Market Potential

Measuring Site Potential

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 I.3.1 Measuring Market Potential

Industrialized Markets
The most developed markets: sole purpose of
supplying market data to companies.
 Names, production volumes, and market shares of the
largest competitors
 Volume of exports and imports of the product

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 I.3.1 Measuring Market Potential

Industrialized Markets…
 Structure of the wholesale and retail distribution
networks
 Background on the market (population, social trend…)
 Total expenditure on the product in the market
 Retail sales volume and market prices of the product
 Future outlook for the market and potential
opportunities.

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 I.3.1 Measuring Market Potential

Industrialized Markets…
Income Elasticity
Sensitivity of demand for a product relative to changes in
income.

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 I.3.1 Measuring Market Potential
Emerging Markets (China, India)
 Market Size
 Market Growth Rate
 Market Intensity
 Market Consumption Capacity
 Commercial Infrastructure
 Economic freedom
 Market Receptivity.
 Country Risk.
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 I.3.2 Measuring Site Potential

Managers must carefully assess the quality of the

resources (Human resources-both labor and
management)
 Training local managers requires a substantial
investment of time and money.
 Examine the local infrastructure: roads, bridges,
air-ports, seaports, telecommunications systems.

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 I.4 Select the Market or Site

Field Trips
Competitors Analysis

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 I.4.1 Field Trips

Making a personal visit to each

remaining potential market or site cannot
be overstated.

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 I.4.2 Competitors Analysis

Competitors Analysis
 Number of competitors in each market
 Market share of each competitors
 Whether each competitor’s product appeals to a small
market segment or has mass appeal.
 Whether each competitor focuses on high quality or low
price

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 I.4.2 Competitors Analysis

Competitors Analysis…
 Whether competitors tightly control channels of
distribution.
 Customers loyalty commanded by competitors
 Potential threat from substitute products
 Potential entry of new competitors into the market
 Competitors control of key production inputs.

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 II. CONDUCTING INTERNATIONAL
RESEARCH

1. Difficulties of conducting International

research
2. Sources of Secondary International data
3. Methods of conducting Primary
International Research
4. A Final word
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 II.1 Difficulties of Conducting
International Research
Availability of Data
Comparability of Data
Cultural Problems

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 II.1.1 Availability of Data

Highly industrialized countries: Both

agencies and private research firms supply
information.
Emerging and Developing countries:
To deliberate misrepresentation
specialize in gathering data (Research
agencies)
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 II.1.2 Comparability of Data

Data obtained from other countries must be

interpreted with great caution. (Poverty,
consumption, literacy)
Data must be accompanied by precise definitions.

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 II.1.3 Cultural Problems

In unfamiliar markets must pay attention to the

ways in which cultural variables influence
information.
Need to survey potential buyers (questionnaires
written in the local language)
Companies that have little experience in an
unfamiliar market often hire local agencies to
perform some or all of their market research.
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II.2 Sources of Secondary International
Data
International Organizations
Government Agencies
Industry and Trade Associations
Service Organizations
Internet and World Wide Web
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II.2 Sources of Secondary International
Data
Secondary Market Research
Process of obtaining information that already
exists within the company or that can be
obtained from outside sources.

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 II.2.1 International Organizations

A variety of international organizations are

excellent sources of much free and inexpensive
information about product demand in particular
countries.
International development agencies: WB, IMF…
provide valuable secondary data.

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 II.2.2 Government Agencies

The commerce department and international trades

agencies of most countries typically supply
information about import and export regulations,
quality standards, and the sizes of various markets.
The Trade Information Center (TIC) operated by the
U.S Department of commerce
The TIC details product standards in other countries
and offers advice on opportunities and best prospects
for US companies in individual markets.
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 II.2.2 Government Agencies…

Other TIC information includes:

 Information on federal export-assistance programs
that can be essential for first-time exporters
 National trade laws and other regulations
 Trade shows, trade missions, and special events
 Export counseling for specific countries
 Import tariffs and customs procedures
 The value of exports to other countries.
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 II.2.3 Industry and Trade Associations

Companies often join associations composed of

firms within their own industry or trade.
The publications of these organizations keep
members informed about current events and help
managers to keep abreast of important issues and
opportunities.
Sometimes industry and trade associations will
commission specialized studies of their industries.

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 II.2.4 Services Organizations

Many international service organizations in

fields such as: banking, insurance,
management consulting, and accounting
offer information to their clients on
cultural, regulatory, and financial
conditions in a market.

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 II.2.5 Internet and World Wide Web

Companies engaged in international

business are quickly realizing the wealth
of secondary research information
available on the internet and the World
Wide Web.

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 II.3 Methods of Conducting Primary
International Research

Primary Market Research

Process of collecting and analyzing
original data and applying the results to
current research needs.

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 II.3.1 Trade Shows and Trade Missions

Trade Show

Exhibition at which members of an industry or

group of industries showcase their latest products,
see what rivals are doing, and learn about recent
trends and opportunities.

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 II.3.1 Trade Shows and Trade Missions…

Trade Mission
International trip by government officials and
businesspeople that is organized by agencies of
national or provincial governments for the purpose
of exploring international business opportunities.

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 II.3.2 Interviews and Focus Groups

Focus Group
Unstructured but in- depth interview of a
small group of individual (8-12 people) by a
moderator to learn the group’s attitudes about
a company or its product.

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 II.3.2 Interviews and Focus Groups…

Consumer Panel
Research in which people record in personal
diaries, information on their attitudes,
behaviors, or purchasing habits.

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 II.3.3 Surveys

Survey
Research in which an interviewer asks
current or potential buyers to answer
written or verbal questions to obtain fact,
opinions, or attitudes.

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 II.3.4 Environmental Scanning

Environmental scanning
Ongoing process of gathering, analyzing,
and dispensing information for tactical or
strategic purpose.

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 III A Final word

In order to keep pace with an increasingly

hectic and competitive global business
environment, companies should follow a
systematic screening process that incorporates
high quality research methods.

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THE END

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