Chapter 12 – Assessing International Markets
CHAPTER 12
Assessing International Markets
Learning Objectives
LO1 Discuss environmental analysis and two types of market screening.
LO2 Explain market indicators and market factors.
LO3 Describe some statistical techniques for estimating market demand and grouping similar markets.
LO4 Discuss the value to businesspeople of trade missions and trade fairs.
LO5 Discuss some of the problems market researchers encounter in foreign markets.
LO6 Discuss some of the options for conducting survey-based research.
LO7 Explain the difference between country screening and segment screening.
NOTE:
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Chapter 12 – Assessing International Markets
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.
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.
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.
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.
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.
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Chapter 12 – Assessing International Markets
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 Review
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.
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Chapter 12 – Assessing International Markets
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
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Chapter 12 – Assessing International Markets
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
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Chapter 12 – Assessing International Markets
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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