04a-Introduction to Trade Map indicators.pdf
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The document introduces market scanning methods and ITC Trade Map indicators essential for exporters to analyze and select potential markets effectively, focusing on dynamic and static indicators. It emphasizes the importance of thorough market research to avoid costly mistakes and improve the chances of sustainable exports. Key concepts discussed include competition analysis, market size, growth rates, and the methodology for assigning scores to potential export markets.
04a-Introduction to Trade Map indicators.pdf
- 1. Market Scan (1/2): Introduction to Trade Map indicators Cairo, March 2018
- 2. Overview • Introduction to Market Scanning • Introduction to Trade Map • Static indicators (market size, trade balance, unit values,…) • Dynamic indicators (growth rates, …) • Analysing a target market • Assigning scores to variables Learning Objectives • To understand basic trade data concepts • To become comfortable in using ITC Trade Map • To compare and analyse potential target markets in a Market Scan • To be aware of additional Trade Map features Trade Map Indicators
- 3. Key steps to get to the right target market Market Zoom (9 Ps) Panorama People Permission Product Price Packaging Placement Promotion Prospects Market Entry Key minimum requirements Differentiation opportunities Develop a winning value proposition Identify your target market Understand your target market Get to the target market Market Scan Size Dynamism Competition Proximity Diaspora opportunity Access conditions Market Profile report + Group presentation
- 4. Should we prioritize countries when we want to export? Please select the correct answer from the options below. o Yes, careful selection, based on sound and systematic research, can deliver huge benefits o No, you should focus only on finding business leads
- 5. Feedback Yes, careful selection, based on sound and systematic research, can deliver huge benefits o No, you should focus only on finding business leads Export market research is expensive and prioritizing your research time and resources is essential. This market selection process helps to avoid costly mistakes and can ensure that your organisation is able to build sustainable exports.
- 6. Why is market scanning important? (1/2) Often markets are chosen with little analysis. Some examples of potentially false leads that can result in poorly-researched market selection include: • Unquestioning acceptance of media articles, seminars and conferences that focus only on “hot” or “boom” markets • A “tip” from a business associate whose business may be very different from your own • An unsolicited order suggesting that there is high potential for sales development – when in fact it was a one-off event • Positive impressions gained on a holiday – that do not reflect day- to-day reality • “Following the leader” – knowing your competitors are active in that market, and assuming you need to be there too • Looking for “comfort factors” – markets where business settings appear on the surface to be easy and friendly
- 7. Why is market scanning important? (2/2) A common mistake is to decide on a particular market before proper research. “It is the best one for your first move into export.” Even if the exporter is very familiar with a market, it is smart not to assume it is necessarily the best one for him. Taking a time to double-check if there is not another market that might suits his purposes better. He may find it easier –and more profitable– to establish first somewhere else. Always approach the choice of export markets with an open mind.
- 8. What is market scanning? Market scanning involves comparing potential markets against various criteria to help identify a suitable market
- 9. Practical exercise: Brainstorm What criteria should you take into account to identify an attractive market? ?
- 10. What does an exporter need to take into account to select the right market? • Which markets are attractive? • What products should I focus on? • What are the market requirements to export to these countries? • What are the consumer trends in the importing country? • What packaging should I use? • What pricing strategy should I use? • How will I promote my product? • How do I obtain trade finance? • What are the risks of doing business in these markets? Exporters must analyse and compare each importing country, then select the countries with the highest estimated import potential for their product. This would be extremely time consuming!
- 11. Market Scan In order to select a market efficiently we suggest a Market Scan. • Comparing markets across a specific set of criteria that are both available and comparable across countries • Method for combining heterogeneous criteria by standardising them and then combining them to get a single composite score • Enables results in a ranking of the different export markets All importing markets Argentina Brazil Cambodia Denmark Egypt … Most attractive markets 1. China 2. India 3. UK 4. Indonesia 5. Russia … 3. Competition 1. Market Size 2. Market Growth 4. Market Openness - Tariff level - Tariff advantage Market Scan
- 12. Market Scan Criteria During a Market Scan we assess trade and market assess indicators in order to compare the attractiveness of importing countries: • Import potential with Trade Map – Market size: in value and quantity – Market Dynamism: annual growth rate over a 5-year period – Competition in each importing market: concentration index of supplying countries • Market openness with Market Access Map – Tariff level: tariff faced by Egypt in each importing market – Tariff advantage against competing supplying countries
- 13. What do exporters have to be aware of? Legal system, regulation Trade Map Market Regulations (health, safety, etc.) Custom tariffs Import restrictions Different Tastes Competition Business contacts What is the demand for the product Global and national market dynamics Standards
- 14. • Online application to analyse international trade flows • Based on one of the largest trade flow database in the world • Provides the trade indicators needed for our market scan • Graphic presentation of outputs to facilitate analysis • User-friendly interface, report-ready outputs What is Trade Map?
- 15. Trade Map – www.trademap.org Click here to login or create your account
- 16. Identify the HS-6 code of your product • HS-6 digit Code • National tariff line code Analyse demand conditions and performance for your product • Market size and growth • Market shares Assess the target market • Competition and distances • Customer information Market Scan using Trade Map
- 17. Which HS revision is used in Trade Map? • Revisions in 1996, 2002, 2007, 2012 and 2017 • In each revision, product codes may be: – created (new significant product) – removed (product have become marginal) – reallocated (trade volume changed) The analysis of such products codes should be approached with caution! For time series, the revision applied by the country in the reporting year is used. For calculating trade indicators, HS revision 4 (2012) is used.
- 18. Products we will use as an example 080510 – Oranges (fresh or dried)
- 19. Trade indicators in Trade Map Market size Market growth / Dynamism Other performance indicators More indicators…
- 20. Imports of buttermilk (040390) from all countries using trade indicators What do the colours mean?
- 21. Mirror statistics Australia (reporting country) Myanmar (non-reporting country) Iran (non-reporting country) Australia – direct data Iran – mirror data Impossible to get data In Trade Map mirror data is presented in yellow colour
- 22. Mirror data: be careful Imports Export Transportation and insurance costs Price of the product CIF: Cost Insurance Freight FOB: Free On Board
- 23. Mirror data: example Australia (reporting country) Iraq (non-reporting country) Exports of Iraq Invoice Value $920 FOB value $920 Imports reported Australia from Iraq Invoice Value $920 Insurance Paid $20 Freight Paid $60 Total CIF Value $1000
- 25. Market size can be measured in terms of • Imported value (USD, EUR, SAR, …) • Imported quantity (tons, litres, pairs,…) Unit Value = Value / Quantity Market size and unit values
- 26. Unit Value Unit Value = Value/ quantity Careful when interpreting, it is not a price paid in a shop by a customer. • Unit values are an average over the whole period covered, however prices vary across the year: e.g. vegetables • Every product code contains many different product sold (even at NTL level) • Value added by importing companies, tax, custom tariffs, etc. are not included UV = Time and product average of prices paid by importing companies
- 27. Trade Balance • One indicator of the health the economy and its trade relationship with the rest of the world • Most well known indicator is the nominal trade deficit or surplus • Usually broken down by product and by country (bilateral balance) Trade Balance = Exports (X) – Imports (M) X > M Trade surplus M > X Trade deficit
- 29. • Identify the top 5 importers of Oranges (080510) in 2016 in value terms • What is the growth rate of the top importer in terms of value between 2012 and 2016? And in terms of quantity? • Identify the top 5 net exporters of Oranges in 2016 Time allowed: 3 minutes Quiz: analyze the market for a product
- 30. But what does a growth rate of 2% really mean? You need to compare the growth with a benchmark! Demand is growing Demand is stagnating Demand is declining • If annual growth rate (%) is greater than 0? • If annual growth rate (%) is equal to 0? • If annual growth rate (%) is less than 0? Compare growth of Egypt’s exports to the world with the growth in world exports overall How does Egypt perform as compared to other suppliers? Compare growth rate of target market’s imports with the growth in world imports overall How dynamic is the target market as compared to the world market? Compare growth of target market’s imports with the growth of the market’s imports from specific suppliers Which of your competitors are gaining or losing shares in the target market? What else can we do with the available indicators: Benchmarking growth rates
- 31. What else can we do with the available indicators: Trend in unit values Growth in value Growth in quantity Growth in Unit Value Increasing UV Stable UV Decreasing UV
- 32. • What is Egypt’s export growth rate in value of Oranges (080510) in 2016? • Is Egypt’s unit value for Oranges increasing or decreasing in its main export market? • Is Egypt gaining or losing market shares in the world market of Oranges ? Time allowed: 3 minutes Quiz: analyze the export performance of a country
- 33. Identify the HS-6 code of your product • HS-6 digit Code • National tariff line code Analyse demand conditions and performance for your product • Market size and growth • Market shares Assess the target market • Competition and distances • Customer information Analyzing trade using Trade Map
- 34. Other performance indicators Other performance indicators: Worldwide Imports of Buttermilk (040390)
- 35. Do you think that the French market for oranges (080510) is concentrated or fragmented? List of countries exporting oranges to France in 2016 Source: Trade Map (March 2018) Concentration in the Oranges (080510) market Exporters Import Value ($ mill.) Market share (%) Method to calculate share World 423 100 Spain 296 70 =296/423 South Africa 45 11 =45/423 Italy 14 3 =14/423 Tunisia 10 2 =10/423 Rest of the World 58 14 =58/423
- 36. The Herfindahl Index • A tool to measure concentration: can be used to measure product or market diversification • The index ranges from 1 to 0 1 = only one supplier market very concentrated 0 = many suppliers, each with very small share market very diversified • Rule of thumb: < 0.01 = highly diversified < 0.15 = not concentrated or diversified Between 0.15 and 0.25 = moderately concentrated Above 0.25 = highly concentrated
- 37. Quiz: analyze the competition in the market • What is Egypt’s #1 importing market (in value) for Oranges (080510) • Who is Egypt’s main competitor in its #1 importing market (in terms of value) for Oranges? • Is this market fragmented or concentrated? Why? Is this good or bad for Egypt? Time allowed: 3 minutes
- 38. Back to our Market Scan Methodology All importing markets Argentina Brazil Cambodia Denmark Egypt … Most attractive markets 1. China 2. India 3. Lebanon 4. Indonesia 5. Russia … 3. Competition 1. Market Size 2. Market Growth 4. Market Openness - Tariff level - Tariff advantage Trade evaluation criteria
- 39. Assigning scores to variables • Go through the criteria for evaluating a market • Use a scale to assign a score to each indicator Note: this is not a scientific model. The choice of scales and criteria is subjective. This is nevertheless a good screening exercise to identify the most attractive market that you feel warrants more research. Score Scale 5 Very large: above 25% 4 Large: between 15% and 25% 3 Medium: between 8% and 15% 2 Small: between 2% and 8% 1 Very small: below to 2% • Each indicator has its own scale • Each scale can be adapted to the data range Scale example
- 40. Assigning scores to Market Size Indicator: Market share in 2016 of the importing country in the world market Explanation: Relative size determined by the world import market share Market share data are based on the list of importers of “080510 Oranges” in Trade Map. Importing country Market Share (%) Score (1- 5, 5=best) France 8.2 Germany 7.4 Netherlands 6.9 Russia 5.3 Hong Kong 5.2 Score Scale 5 Very large: superior to 25% 4 Large: between 15% and 25% 3 Medium: between 8% and 15% 2 Small: between 2% and 8% 1 Very small: inferior to 2%
- 41. Assigning scores to Market Growth Indicator: Market growth Explanation: expected growth is determined relative to the annual growth in value between 2012-2016 of the importing country. Figures are based on the list of importers of “080510 Oranges” in Trade Map. Importing country Market Growth (% p.a) Score (1- 5, 5=best) France Germany Netherlands Russia Hong Kong Score Scale 5 Very Fast: superior to 10% 4 Fast: between 5% and 10% 3 Slow: between 0% and 5% 2 Stagnate -Slow decrease: between 0% and -5% 1 Fast decrease: inferior to -5%
- 42. Assigning scores to Competition Indicator: Concentration of supplying countries Explanation: knowing the degree of market concentration is useful, as it reflects the degree of competition present in the importing market. If the market is diversified, it is more likely for a new exporter to enter the market. Figures are based on the list of importers of “080510 Oranges” in Trade Map. Importing country Concentration index of supplying countries Score (1- 5, 5=best) France Germany Netherlands Russia Hong Kong Score Scale 5 Highly diversified : below 0.05 4 Diversified: between 0.05 and 0.15 3 Moderately concentrated : between 0.15 and 0.20 2 Concentrated: between 0.20 and 0.30 1 Highly concentrated: above 0.30
- 43. Key points • Market scan involves comparing potential markets against various criteria to help identify a suitable market. • The Market scan methodology combines heterogeneous criteria by standardizing them and then combining them to get a single composite score. • Trade Map provides indicators that can used to in the Market Scan methodology to identify attractive markets.
- 44. Market Screening (1/2) Please complete the table below by using a specific scale. Which importing country ranks first according to your market scan analysis? Market scan of the top 13 largest importers of 080510 Oranges Importers Market Growth Market Size Competition Annual growth in value between 2012-2016 (%) Score Share in world imports (%) Score Concentration of supplying countries Score France -1 8.2 0.51 Germany -3 7.4 0.59 Netherlands -2 6.9 0.2 Russian Federation -12 5.3 0.32 Hong Kong, China +11 5.2 0.28 China +22 4.7 0.26 Korea -1 4.2 0.91 UK -2 4.1 0.21 Saudi Arabia 0 3.8 0.39 Canada +1 3.5 0.56 USA +5 3.2 0.35 UAE +2 2.7 0.36 Japan -6 2.5 0.53
- 45. Market Screening (2/2): Scale Please complete the table below by using the scales provided in the second page.
- 46. Limitations of with international trade statistics • Inclusion of re-imports and re-exports • The export value refers to the total or contract value, not the local value-added • Similar products may be categorized differently • Exchange rate fluctuations are not always recorded • Trade data are not complete: smuggling, non-reporting, mistakes, … Mirror data
- 47. Let’s recap… By the end of this section you should have a good understanding of: How to analyse world market demand and export performance using Trade Map How to analyze a target market using Trade Map