978-0077606121 Chapter 12 Lecture

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Solution Manual

Book Title

International Business: The Challenge of Global Competition 13th Edition

ISBN 13

978-0077606121

978-0077606121 Chapter 12 Lecture

April 7, 2019

CHAPTER 12

1Assessing International Markets

3 Learning Objectives

4 LO1 Discuss environmental analysis and two types of market screening.

5 LO2 Explain market indicators and market factors.

6 LO3 Describe some statistical techniques for estimating market demand and grouping similar

markets.

7 LO4 Discuss the value to businesspeople of trade missions and trade fairs.

8 LO5 Discuss some of the problems market researchers encounter in foreign markets.

9 LO6 Discuss some of the options for conducting survey-based research.

10 LO7 Explain the difference between country screening and segment screening.

NOTE:

International business statistics, data, and facts about countries, regions, governments, and companies can

change rapidly and dramatically. We recommend that you update this information as needed.

As an adopter of this text, McGraw-Hill Irwin offers you a complementary online resource each month,

the International Business Newsletter. The IB Newsletter gives you an array of timely and relevant

articles, videos, country profiles, teaching suggestions, and data resources to add breadth, depth, and

richness to the ever-changing topic of international business.

iGlobe is also a way to keep your courses current. In partnership with PBS, iGlobe is a free video

service for McGraw-Hill adopters that allows you to download breaking news videos onto your desktop

to show in class or online. Updated monthly, these streaming videos are complete with teaching notes and

discussion questions. Key concepts for each video are identified to save you time! See www.MHHE.com

and contact your sales representative for access codes.

11 Overview

This chapter introduces a screening process to assist in the analysis and assessment of foreign markets

based on the environmental forces impacting IB. The process reviews the forces in succession and

involves the elimination of countries or markets at each step that do not offer acceptable ROI potential or

the opportunity for a firm to exploit its competitive advantage in that market. The screening sequence

starts with broad assessments working toward market specifics.

Often ICs will also require primary research done in the market. Researchers find that obtaining these

data is more difficult than it is in the home country because of cultural differences and technical or social

differences. Examples of the cultural issues are language barriers and distrust of strangers. Among the

technical issues are the lack of maps, street names, telephone directories, and adequate mail services.

12 Suggestions and Comments

1. This chapter brings together the external forces and applies them to assessing the business potential

markets offer.

2. The sections on statistics and marketing research give students an opportunity to appreciate the

difficulties of assessing foreign markets. It is application of what they may have learned in

statistics and market research courses.

13 Student Involvement Exercises

1. Teams can use the screening process on three or four countries and one product that they choose. If

the class has been doing the continuous exercise, they can report on the countries they have been

researching.

2. Ask students to select a country and a product they wish to export to it. Have them report on the

sources of information available to enable them to decide if the market is worth entering.

14 Guest Lecturers

1. A market researcher from a nearby IC or export management company can tell the class the trials

of market research in international markets.

2. The foreign trade representative from either your state’s Department of Commerce or Trade Office

or the U.S. Department of Commerce district office often will have experience in helping firms

obtain market data. They are a good connection to the reality of market research for the class.

15 Lecture Outline

Opening Section

This section introduces students to the two broad concepts of market screening and environmental

scanning.

I. Market Screening (Fig 12.1)

Market screening is a method of market analysis and assessment that allows management to

identify a small number of viable markets by eliminating those that are unattractive. The

countries are subjected to a series of screenings based on environmental forces. Screenings have

been put in an order so that the less difficult and less expensive to do come first.

II. Country Screening

A. Initial Screening – Basic Needs Potential

1. Basic Needs Potential – First screening based on the need potential. If firm produces air

conditioners, it will look for countries with warm climates.

2. Foreign Trade – By examining where similar products are going now or where producers

are setting up plants to produce them, analysts can identify some prospects. Note that this

information is usually provided in less detail than we would ideally prefer. Standard trade

data sources include:

a. International Trade Administration (ITA)

b.U.S. DOC’s National Trade Data Bank (NTBD) reports:

oU.S. Exports of Merchandise

oU.S. International Trade in Goods and Services

oAnnual Worldwide Industry Reviews

oInternational Market Research Reports

oCountry Market Surveys

c. The EU (Eurostat) publishes External Trade

d. JETRO publishes trade data focusing on Asia and Pacific Rim

3. Imports Do Not Completely Measure Market Potential

a. Import data only indicate that a market buys certain products from abroad and there

are no guarantees imports will continue.

B. Second Screening – Financial and Economic Forces. After the initial screening, there will be

a smaller list of prospects for the second screening. The analyst will look at such factors as

trends in inflation rates, exchange rates, and interest rates. Credit availability, paying habits

of customers and ROI on similar investments are other factors to consider. Two measures of

market demand based on economic data are (1) market indicators, and (2) market factors.

1. Market Indicators

a. Economic data that serve as yardsticks for measuring the relative market strength of

various geographic areas.

b. An example of a multi-country index developed for the needs of a specific industry is

the index of e-commerce potential for Latin America (Table 12.1). This index

contains general economic factors as well as more industry-specific indicators. The

summary e-commerce potential index is composed of three indices: market size,

market growth rate, and e-commerce readiness.

2. Market Factors

a. Market factors are data that tend to correlate highly with market demand for a given

product. These factors allow us to use estimation by analogy when we cannot

estimate demand directly.

b. Example 1: If one-fifth of existing home computers are replaced annually in the U.S.,

in a similar country we can expect similar demand for replacements.

c. Example 2: If each household in a similar country has an average of 1.3 television

sets, then 1.3 x the number of households in the country under study should indicate

the size of market potential.

3. Trend Analysis

If historic growth rates are known, the analyst can construct a time series or use the

arithmetic mean of past growth rates.

4. Cluster Analysis and Other Techniques

Cluster analysis is a data analysis tool for solving classification problems. Its object is to

sort people, things, events, etc. into groups so that the association is strong between

members of the same cluster and weak between members of different clusters.

Multidimensional scaling, factor analysis and conjoint analysis are other techniques for

examining differences and similarities among markets.

5. Periodic Updating

Long-term forecasts need to be modified when market changes occur.

C. Third Screening – Political and Legal Forces

Analyst will look for such elements as:

1. Entry Barriers – can be positive or negative on management’s entry decisions.

2. Profit Remittance Barriers – undue restrictions on repatriation of profits.

3. Political Stability – Instability makes planning difficult or impossible.



Political stability



Policy stability

D. Fourth Screening – Sociocultural Forces

1.This screening can be difficult because the data tend to be “soft.”

2.Hire consultants with region or country-specific knowledge and experience

3.Study publications and visit Web sites mentioned in text

4.Can attend area seminars on “How to Do Business in ________.”

5.Foreign expats, recent immigrants, or foreign students can offer insight, but remember

that they may not precisely represent those who haven’t left their home country.

E. Fifth Screening – Competitive Forces

1.Factors to be considered:

a. Number, size, financial strength of competitors

b. Their market shares

c. Their apparent marketing strategies

d. Apparent effectiveness of their promotional programs

e. Quality levels of their product lines

f. Source of their products–imported or locally produced

g. Pricing policies

h. Levels of after-sales service

i. Their distribution channels

j. Their coverage of the market (could market segmentation produce niches that are

currently poorly served?)

2. Countries with strong competition are eliminated unless:

a. Company is present where competition is

b. Management feels entering a competitor’s home market will distract attention

from its home market

F. Final Selection of New Markets

Target countries under consideration should be visited by an executive for first-hand

experience:

1. Field Trip

a. Should be unhurried

b. You may be able to join a government-sponsored trade missions or visit a trade

fair

2. Government-Sponsored Trade Missions and Trade Fairs

3. Sometimes Local Research is Required

a. Investment in primary data is safer than relying on questionable secondary data

4. Research in the Local Market

a. Researchers will try to obtain secondary data but if unavailable, they must collect

primary data.

5. Cultural Problems – transportation, low level of literacy, distrust of strangers, fear of tax

assessors. Local students can be used.

6. Technical Difficulties – no current maps, streets have multiple names, houses not

numbered, no telephone directories, poor mail system. Sometimes government

permission is required, or certain questions can’t be asked. Premiums and product

samples can be used to increase response rates.

7. Research as Practiced

a. Highly developed in industrialized nations

b. In developing areas, the tendency is to do less research and to use simpler

techniques.

c. The most common techniques are trend analysis and querying of knowledgeable

people such as salespeople, channel members, and customers. If demand is high

(seller’s market) then less market research is done.

G. Collecting Data Using Surveys

1. Customized Research

a. ESOMAR

b. Consumer products firms use ethnographic research (“corporate

anthropology”) and “on-the-ground” research

2. General Surveys

a. Omnibus survey

b. Proprietary design – research sold to a variety of firms

3. Nonprofit Surveys – completed by governments and non-profit NGOs

4. The Internet – blogs are becoming the new focus groups

III. Segment Screening

We naturally think in terms of countries, but markets often extend across borders. What are

important are needs and wants, not political boundaries. Similar age, income, and lifestyles usually

determine market segments. Global teens, Internet phone surfers are examples.

A. Criteria for Identifying and Assessing Segments

1. Definable – can identify and measure the segment.

2. Large – segments must be large enough to be worth serving.

3. Accessible – must be able to reach the segment for promotion and product

distribution.

4. Actionable – must be able to use the 4 Ps to compete for the segment.

5. Capturable – opportunity exists if segment cannot be completely captured by the

competition.

B. The Two Screening Methods, Reconsidered

1. We view the world in terms of national lines (country borders) but should think in

terms of market segments that may extend across borders.

2. Given the existence of subcultures within nations and similarities between

subcultures across nations, IB professionals need to think in terms of relevant “units

of analysis” rather than conventional national markets.

Global Debate

The focus of this Global Gauntlet explores “Clotaire Rapaille: Charlatan or Code Breaker

Extraordinaire in International Market Research?” According to Clotaire Rapaille, “the Code”

allows for access to the psyche of the market and can give significantly greater insight into the

culturally-based motivators which drive buyer behavior into market consumption. Is he correct or

not? This serves as a starting point for a class discussion on the topic of international market research

and the necessity of understanding cultural values of foreign markets.

Worldview

This Worldview offers students a collection of tips for market research.

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978-0077606121 Chapter 12 Lecture

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International Business: The Challenge of Global Competition 13th Edition