Identifying foreign markets

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3 Largest markets for U.S. Products are Canada, Japan & Mexico
 May or may not be best market for your product
 Then how do you choose?

MARKET SELECTION STRATEGIES
Reactive – choose markets with demonstrated
success
 Use past sales
 Past leads
 Competitive sales
 Participation in Trade shows
 Discussions with Industry Experts
Proactive – choose market based on independent
analysis
 Global Indicators
 Trade Barriers
 Tariff Barriers
 Non tariff Barriers

ADVANTAGES/DISADVANTAGES
REACTIVE STRATEGY
Reactive Strategy
 Pros
 Low cost, fast, low-risk, product need established
 Cons
 May lose first mover advantage
 Competitors may mislead you
 Market may not match your product’s life cycle

MARKET SELECTION MODEL
(PROACTIVE)
1. Develop indicators to assess market (s)
2. Rate indicators
3. Weight each indicator
4. Compare countries Analyze results

MARKET SELECTION MODEL

Country Indicator 1 Weight Points Indicator Weight Points Indicator 3 Weight Points Total
2

Country
1

Country
2

KEY – IDENTIFY
BEST INDICATORS
Global Environment Indicators
 Demographic
 Macroeconomic
 Government Policies
 Environmental
 Industry Specific

INDICATORS SUITABLE FOR GLOBAL ASSESSMENT (FIGURE 4.2
FOLEY,2004)

Demographic Indicators
 Population including growth and density
 Gender makeup
 Literacy rate
 Education levels
 Age distribution
 Per capita income and distribution
 Receptivity to U.S./foreign products
 Social considrations such as religion, taboos,
 Language

INDICATORS SUITABLE FOR GLOBAL ASSESSMENT (FIGURE
4.2 FOLEY,2004)

Macroeconomic Indicators
GDP
GDP growth
Inflation rate

4.2 FOLEY,2004)

Government Policies
 Import tariffs
 Currency exchange controls
 Non tariff trade barriers (technical standadrs, labeling
requirements, documentation)
 Intellectual property rights protection (patents, copyrights,
trademarks, trade secrets)
 Political risk (stability)
 Investment policies and protections
 Labor practices and restrictions
 Taxation

4.2 FOLEY,2004)

Environmental Indicators
 Climate
 Geography
 Infrastructure (transportation, telecommunications)

4.2 FOLEY,2004)

Industry Indicators
 Entry barriers (obstacles such as local branding, access to
distribution, expected retaliation)
 Rivalry (number of competitors, intensity of the competition,
market shares)
 Supplier power (concentration of suppliers, switching costs)
 Buyer power (maturity of distirbution channel, access to
consumer)
 Substitute products (use of products not directly competing but
used as a substitute)
 Growth of the industry
 Stability of the industry
 Risks of the industry

NARROW LIST OF INDICATORS
Market Size
Market Growth
Market Accessibility
Economic Stability
Political Climate
Cultural Climate
Environmental Factors
Geographical Factors

MARKET SIZE
When examining market size, look at the overall population.
Then, estimate the percent of potential buyers within that
population. Look at the numbers that suggest how much the
population spends on this type of import. While doing so,
identify if there are domestic or international competitors
already providing a similar product. If there are, what is the
production rate of each? If possible, determine the price
your competitors are charging, and compare your product's
price and quality against theirs.
Entering smaller markets where few competitors have set up
shop may give you the opportunity to start at the "ground"
floor and grow with the market. However, if you enter
smaller markets beware of the barriers you may encounter
as a result (e.g., transportation and political infrastructure
problems).
In researching demographics, look at the unemployment trends
and educational levels of consumers in the target market .
The more sophisticated the target market, the more difficult
it may be to compete. Also identify the language and
dialects spoken within a particular

MARKET GROWTH

Examining the growth of the market over the last few years will tell
you if it is consistently growing or shrinking. Look at the last
three to five years of import history for your product (if
available) within a given market. Also look at trends and growth
forecasts. What do they tell you about the market and its
potential for growth? Has it reached its peak? Is the market
saturated with like products? Are the number of imports
increasing or decreasing? If the numbers are increasing
consistently, this indicates that the market is expanding.
Seriously consider markets that are larger with strong growth
potential to increase profit margins and reduce production
costs.
Also consider the industrial development stage of your market.
Those that are just beginning to industrialize may not have
need for the latest technology. However, some markets
developing industrially may take advantage of the progress
made in more developed markets and leap ahead bypassing
earlier innovations and adopting later technology to help build
their infrastructure (e.g. the Middle East is considering fiber
optics for telecommunications instead of copper wire due to its
quality and price structure).

MARKET ACCESSIBILITY
Many factors influence market accessibility. The following is not
an exhaustive list, but it may help you assess how accessible
the market is to you and how accessible your product is to your
targeted customers:
Import duties and tariffs costs may make sending your goods (or
services) into the foreign marketplace unprofitable. To
determine the duty or tariff rate, contact a trade agent to help
you identify the Harmonized Tariff section which corresponds to
your product. Remember, each country has its own schedule of
duty rates.
Local and foreign suppliers may influence your marketplace
accessibility. Be sure you know who your international
competitors are. Compare the price and quality of your product
with the competition's.
Sales representatives located within the country to which you wish
to export can represent your product and act as an
intermediary. Representatives may be able to give you ideas of
the best ways to access the market and customers through
different channels of distribution.
Promotional practices, such as how you advertise and promote
your product will affect how much of the targeted market will
have access to (and know about) your product.

ECONOMIC STABILITY
Many factors affect economic stability of a marketplace (and
country). Determine if the economic climate is thriving or
diving? Recessing or growing? If possible, identify the GNP
growth rate and per capita income. Also, ascertain the
unemployment rate of the country. This will affect how much of
the market can actually spend money to buy your product.
Markets that are stable and growing are obviously more
attractive to conduct business with.
Additionally, consider the availability of U.S. dollars in the target
market. What is the exchange rate between the U.S. dollar and
that of the country in which you will sell your product? Besides
unequal access to the dollar, another factor that may keep your
customers from purchasing your product may be a trade deficit,
which could be important if customers are able to obtain import
permits.
Lastly, note that foreign countries undergoing economic and
industrial development may not collect and disseminate trade
statistics. If they do, these statistics may be in a form that
cannot be easily interpreted. When such important market
information is missing or not understandable, consult a trade
agent or eliminate the market.

POLITICAL CLIMATE

Many questions must be asked regarding the political climate of a
potential market. Such questions include:
On what type of political system is the country and market based?
Is the system stable?
Will the governmental system affect your customer's ability to
import?
Will the political system affect tariff rates and licensing
requirements?
Is the legal system supportive of international trade?
Are there legal tariff and non-tariff barriers? And are there
incentives of which you should be aware?
If the market is politically unstable, how might that affect
economic stability?
What is the overriding attitude for doing business with companies
in the United States?
Has the market or country adopted the International Standards
Organization's ISO 9000 proces

CULTURAL CLIMATE
With over 300 countries in the world, many have their own
language, customs and culture. Being educated on the culture
and values of your target markets will increase your success in
the international marketplace.
Although the international business language is English, it may not
be that way for long. It is to your advantage to speak the native
language of your customer and understand his or her culture in
order to communicate more effectively. Make sure you utilize
your staff resources to their fullest to accomplish this task.
Customs and culture also affect consumption of goods. Factors
like colors, numbers, and communication fit this category. For
example, when considering product or promotional gift colors,
keep in mind that white is the color of death in China and
Korea, whereas purple is seen in the same light in Spain. In the
U.S. yellow implies cowardice, whereas it takes on religious and
mystical undertones in India. Study the cultural differences of
the target markets and of your own. You may be surprised how
a product that is fully accepted by a U.S. market is negatively
rejected by its foreign counterparts.

ENVIRONMENTAL FACTORS

Environmental factors such as climate can influence modifications you
must make to your product in order to sell it in a given market.
Determine if humidity or other climate issues will affect the product
performance or appearance as it is in transit or as it is used or
consumed.

GEOGRAPHIC FACTORS

Geographic factors can also affect your
success in a given foreign market. Such
factors include, transportation to the
country or market and legal restrictions
on travel. To enter a foreign market, a
transportation system must be in place
(i.e., there must be a way for you to get to
your foreign customers). Keep in mind the
longer and more remote the distance is to
the market, the more the transportation
and travel costs will be.

SOURCES FOR COUNTRY/MARKET INDICATOR
DATA
Stat-USA and WWW.Export.gov
 Country Commercial Guides
See Assignment 4 for additional market data sources
Country Desk officers at U.S. Dept. of Commerce; contact Trade
Information Center or U.S. Dept. Of Commerce Export Assistance
Center

SOURCES FOR INDUSTRY INDICATOR
DATA
Stat-USA and WWW.Export.gov
 Best Market Reports
 Industry Sector Analysis
 International Market Insights
Contact Industry Desk Officers for U.s.
Dept. of Commerce
Trade Associations
Publications, Industry Journals &
Periodicals
Foreign Phone Books
Networking

SOURCE: CENTER FOR INTERNATIONAL TRADE
DEVELOPMENT “EXPORTING BASICS”
HTTP://WWW.CITD.ORG/STARTUP/EB/PAGE.CF
M?CHAPTER=2&SEC=9

Best Market Reports are a fast way to
pinpoint high potential markets for
selected industries. BMRs are compiled
only on the industries considered "best-
prospects" worldwide, based on
recommendations of U.S. commercial
officers in each country. BMRs identify the
largest/fastest growing markets for
selected industries in one convenient
matrix and give a brief rationale for each
country's selection as a "best prospect."

M?CHAPTER=2&SEC=9

Industry Sector Analyses can provide more detailed
assessments of market potentials for your
products in particularly promising countries. ISAs
are product-and country-specific market surveys
written by U.S. commercial staff abroad. They
discuss overall demand trends; best sales
prospects within the subsector; key end-user
segments; major competitors; and relevant
business conditions, practices and market
barriers. They also identify useful government
and industry contacts, including importers and
distributors. ISAs offer corroborating information
for columns 8-10 in the Export Promotion Matrix
(market share, product receptivity, competitive
situation, and market access) and are even more
telling than BMRs because of their product

The "best" markets to export offer a combination of
high comfort for your company and high potential
for your products.
High-comfort markets are those you're personally
close to in some way:
 trusted contacts there
 at ease with the language and culture
 spent time in the country.
 Often, however, high comfort countries do not offer the highest potential for
your products.
High-potential markets are where you ultimately want
to be:
 large,
 emerging or fast-growing markets,
 high receptivity to products like yours;
 limited local or foreign competition;
 no significant market barriers.

CRITERIA FOR HIGH POTENTIAL
MARKETS
1. Look for the
Where are comparable products exported?

largest and fastest growing
export destinations for the product over the past
several years.
Source: For U.S. exporters, and foreign exporters to the U.S., see USITC
DataWeb for official U.S. export/import statistics by commodity and country.
http://dataweb.usitc.gov/

Criteria For High Potential Markets
2. Which countries are importing comparable
products? Look for countries with the largest and fastest growing
imports of the product over the past several years.

Sources: International Trade Centre –
Aggregated Trade Statistics
http://www.intracen.org/menus/products.
htm;
Best Market Reports and Industry
Subsector Analyses.

MARKETS
3. Which markets do the experts consider most promising? Look for

countries recommended as "Best-Prospect"
markets for comparable products.
Source: Best Market Reports and Industry Subsector Analyses.

MARKETS
4. Where are comparable products the most welcome and easiest to sell? Look

no
for countries with high receptivity to the product and

significant market barriers .
Source: Best Market Reports and Industry Subsector Analyses.

WHAT POTENTIAL MARKET TRADE
BARRIERS EXIST?
Tarrifs or taxes imposed on imported goods that, when high,
may make it difficult to sell your product profitably in a
foreign market.
Non-tariff barriers, such as laws and regulations that countries
enact that protect domestic industries against foreign
competition. Non-tariff barriers include import quotas or
restrictions on quality of imports.
International Standards promoted by the International
Standards Organization (ISO) involves establishing quality
manufacturing and service standards, and certification and
monitoring world wide. Originally advocated by the European
Union, around 100 nations are now considering adopting ISO
processes, as seen in the IS0 9000 (a generic family of
standards and quality control systems).
Communication may be a problem if you do not speak your
potential customer's language.
Distribution arrangements may present barriers if the market
has not yet been explored by other U.S. businesses.
Whether or not patents and trademarks exist on similar
products or property in that country

APPROACHES TO IDENTIFYING
FOREIGN MARKET
OPPORTUNITIESas a source of information
Use existing distributors
about developing market opportunities. There is
no better way to learn about viable export
chances than through someone who is already
participating in exporting.
Direct promotion to prospective distributors or other
customers. Getting your name and desires out to
people you would like to work with is a good way
to generate business opportunities.
Participate in overseas trade fairs and shows. This
exposes you to more potential business partners
than you might have thought of, and vise versa.

Market Potential Matrix

1 2 3 4 5 6
Country 1 XX XX X X XX

Country 2 X X X X X XX

Country 3 XX XX XX XX

Key: Columns/Criteria "X" (minimally
1. Largest export markets, latest year met)
2. Fastest growing export markets, latest year "XX"
3. Largest importing countries, latest year (significantly
4. Fastest growing importing countries, latest met).
year "blank" (didn't
5. Recommended as a “best” export market meet),
6. No Significant Market Barriers Source:

M?CHAPTER=2&SEC=9

Foreign Import Statistics help "size up"
markets of interest, identify the major
supplier countries, and compare
competitor country market shares. Each
country compiles and publishes its own
import statistics. The United Nations also
consolidates and publishes the data, but in
broader product categories and on a less
current basis. Alternative sources are
specific market research reports that
extract and analyze the data (e.g., Best
Market Reports and Industry Subsector

M?CHAPTER=2&SEC=9

U.S. Export Statistics includes the official U.S.
export/import statistics compiled by the U.S. Census
Bureau. The Commodity-by-Country series shows all
the destination or source countries for a specified
product, by value, quantity, unit value, customs
district, transport mode and year. The Country-by-
Commodity series shows all products exported to or
imported from a specified country. With these
statistics, you can readily spot the largest and
fastest growing export markets for products like
yours; or identify the largest and fastest growing
U.S. exports to a particular country. Individual tables
can be downloaded to a spreadsheet. Once in the
spreadsheet, you can do whatever calculations and
sorting you wish (e.g., growth rates, rank ordering,

Identifying foreign markets

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