Foreign market selection process
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This document summarizes strategies for foreign market selection and entry. It discusses indirect exporting methods like using trading companies or export management companies. Direct exporting is described as having higher costs but more control. The document outlines a process for foreign market screening including macro-level research, general market factors, micro-level product factors, and final screening. Two examples of screening methods are provided: minimum criteria thresholds and clustering techniques using artificial intelligence. The document concludes by describing how the International Business Resource Center can help local businesses with export assistance through student interns and expertise.
Foreign market selection process
- 1. Foreign Market Selection Process Kelly E. Fish, Ph.D. International Business Workshop
- 2. Overview Market Entry Strategies • Exporting Foreign Market Selection How IBRC can help with the process
- 3. High risk/reward Wholly owned subsidiary Foreign Market Entry Strategies Local production Joint venture Local assembly Contract manufacturing Franchising/Licensing Sales subsidiary Low risk/reward Direct exporting Indirect exporting
- 4. Strategy Trade-offs Control Asset Variable Fixed Market Overall Entry Strategy Level Costs Costs Share Cost Indirect Exporting Direct Exporting Sales Subsidiary Franchising/Licensing Contract Manufacturing Local Assembly Joint Venture Local Production Wholly owned subsidiary
- 5. Indirect Export – Trading Companies (TCs) Advantages Open new markets without expertise or investment TCs cover market well and service products they sell
- 6. Indirect Export – Trading Companies (TCs) Disadvantages TCs control market selection and marketing More of a foreign concept (Japan, South Korea, Brazil, Western Europe) Product may not get attention it deserves
- 7. Indirect Export – Export Management Companies Advantages Instant foreign market knowledge and contacts Sales are on commission basis (variable cost) Potentially better feedback than TC
- 8. Indirect Export – Export Management Companies Disadvantages EMCs may spread themselves too thin with too many customers Product may not get attention it deserves Market expertise/contacts can be limited to one or two countries
- 9. Indirect Export – Piggyback Exporting Advantages Rider benefits from carrier’s established export and distribution facilities Shared expenses Rider benefits from carrier’s reputation
- 10. Indirect Export – Piggyback Exporting Disadvantages Carrier seldom assumes any risk on rider’s product Rider subject to carrier’s strategy/reputation
- 11. Direct Exporting Advantages Usually yields higher sales than indirect exporting Company has greater control, better market information Company develops in-house expertise Company has greater freedom to choose entering markets
- 12. Direct Exporting Disadvantages Costs are higher than with indirect exporting It may take longer to establish market entry, distribution network, etc.
- 13. Foreign Market Selection The two most widespread mistakes of market selection are: 1) ignoring or missing markets that offer good potential for a firm’s products and 2) spending too much time researching markets that are poor prospects for the firm
- 14. Foreign Market Screening Target
- 15. Foreign Market Screening 1. Macro-level research 2. General market factors relating to the product 3. Micro-level factors specific to the product 4. Final screening Target
- 16. Foreign Market Screening Screening techniques range from simple minimum criteria thresholds (Example A) to clustering techniques using artificial intelligence (Example B). Target
- 17. Example A – Targeting Countries for Kidney Dialysis Equipment 1. Macro-level GDP over $15 research billion GDP per capita over $1,500 Political stability
- 18. Example A – Targeting Countries for Kidney Dialysis Equipment 2. General market Less than 200 factors relating to the people/hospital bed product Less than 1,000 people/doctor Govt. expenditures over $100 million for healthcare Govt. expenditures over $20 per capita for healthcare
- 19. Example A – Targeting Countries for Kidney Dialysis Equipment 3. General market Kidney-related factors relating to deaths over 1,000 the product Patient use of dialysis equipment – over 40% annual growth
- 20. Example A – Targeting Countries for Kidney Dialysis Equipment 4. Final screening Number of competitors Distributor reputation
- 21. Example B – Targeting Countries for Kidney Dialysis Equipment Self-Organizing GDP Map GDP per capita Total health expenditure per capita Total Health expenditure as a % of GDP Political Risk Index Cultural score
- 22. Example B – Targeting Countries for Kidney Dialysis Equipment Hong Kong Australia United States India Malaysia Jamaica Austria Japan Philippines Singapore Canada Ireland New Zealand Switzerland United Kingdom Ecuador Iran France Denmark Guatemala Mexico Italy Finland Indonesia South Africa Netherlands Pakistan Norway Turkey Sweden Venezuela Yugoslavia Chile Brazil Argentina Israel Panama Colombia Costa Rica Peru Greece South Korea Portugal Thailand El Salvador Spain Uruguay
- 23. How the IBRC can help your business
- 24. Provide export assistance to NEA businesses 1. NEA Business Contacts the IBRC 2. IBRC matches ASU Intern with NEA Business 3. Intern Researches International Markets and Develops Export Strategy for the NEA firm under direction of IBRC 4. Intern makes Final report and end of semester
- 25. Provide export assistance to NEA businesses • We have the expertise for oversight (Drs. Fish & Guha) • We have the manpower (Students are cheap – free!) • We have the country data • We are committed to working with the U.S. Export Assistance Center
- 26. Visit the ASU International Business Resource Center on the Web at: ibrc.astate.edu