PART 3
STRATEGY AND OPPORTUNITY ASSESSMENT
CHAPTER 12
GLOBAL MARKET OPPORTUNITY ASSESSMENT
Instructor’s Manual by Marta Szabo White, Ph.D.
I. LECTURE STARTER/LAUNCHER
■ With this chapter, the class begins to explore how managers decide how and in
what countries they will do business internationally.
■ Again, reinforce to students that we are working at the micro, or firm level
perspective, and that all the things we learned in Chapters 1 through 10 represent a
macro-perspective, and need to be revisited to help managers make decisions for
their companies. Managers – particularly managers of small or medium sized firms
or enterprises (SME’s) – go through this process.
■ We might assume that managers make completely rational decisions based on
clear due diligence, but that is often not true. Once upon a time a company owner
met and became friendly with a Swiss businessman on a flight to Europe. By the
end of the flight, the company owner had agreed to export his product to the
businessman’s firm in Switzerland, without doing much due diligence at all. Upon his
return to the Midwest, he instructed his sales manager to contact the Swiss
company and prepare a shipment. Fortunately, this chance venture was successful –
the Swiss company paid and the product was quite well received. However, in
retrospect, the company owner confesses that it was one of the dumbest things he
ever did. He felt lucky about this venture. Each and every international venture since
that one has been accompanied by significant research and due diligence.
II. LEARNING OBJECTIVES AND THE OPENING VIGNETTE
LEARNING OBJECTIVES
After studying this chapter, students should be able to:
12.1 Understand analyzing organizational readiness to internationalize.
12.2 Determine the suitability of products and services for foreign markets.
12.3 Describe screening countries to identify target markets.
12.4 Understand assessing industry market potential.
12.5 Explain about choosing foreign business partners.
12.6 Know about estimating company sales potential.
Key Themes
■ In this chapter, there are six themes:
[1] Analyzing organizational readiness to internationalize
[2] Assessing the suitability of products and services for foreign markets
[3] Screening countries to identify target markets
[4] Assessing industry market potential
[5] Choosing foreign business partners
[6] Estimating company sales potential
■ This chapter highlights the research and assessment process, methodologies, and
tools managers and students should use as they consider doing business
internationally.
■ The chapter is full of checklists and criteria that managers need to think about before
they make a decision about which country to sell in, which products to sell there, and
what kind of entry mode to use.
■ The chapter provides practical tools, most of which are available on-line, to help
students and managers gather information.
Teaching Tips
■ Remind students that doing business nationally or domestically requires the company
conduct significant due diligence. A manager should not sell her product to a domestic
customer unless she is quite confident that the customer is reliable, has a track record
in the industry, can communicate its needs well, and (above all) will pay.
■ This same due diligence is required for international ventures – and then some.
Information about foreign markets is much more difficult to gather, and managers must
use methods that are sound yet very creative, and are often based on assumptions and
conjecture.
■ Ask students how they might begin to think about selling cellular phones (the
hardware, not the contractual service) in Costa Rica. Tell them that Costa Rica has
about 4.6 million people, a sprawling urban area around the capital San José, and
several secondary but much smaller cities in the mostly rural provinces. The Costa
Rican government owns and operates the landed telephone system, and as a result of
constraints and inefficiencies, demand for land lines has always exceeded supply. Cell
phones have “leap-frogged” land lines in countries like Costa Rica, and although
consumers’ willingness to pay may be lower than in more developed countries, people
have enthusiastically embraced cell phone usage as substitutes for land lines.
■ Using the Costa Rican example, ask the students to list the kinds of information they
would need to know before they could make a sensible decision about selling cell
phones made in the U.S. in that country. Keep in mind (and in your hands) the criteria
discussed in the chapter (i.e., factors contributing to product suitability for international
markets; key issues for managers as they determine product potential; country
screening criteria; etc), and as they name the criteria or variables, write them on the
board in the separate categories (without titles).
■ After they have given you everything that they can, add “other” criteria by completing
the lists with the items discussed in the chapters. Then ask students to label or title each
group of criteria: with any luck, if they’ve paid attention and read the chapter, they will
come close to identifying the process and the criteria correctly.
■ Ask them what kind of data they would want to obtain from the Government of Costa
Rica (GOCR), and list it on the board. First, they might suggest the data collection be
limited to the metropolitan areas (greater San José) – this is fine. Data they would need
includes population, demographics according to age groups, number of people
employed, number of existing land lines, number of households, and per capital income.
This data should be available from GOCR sources.
■ Tell them to assume the company wants to export cell phones. GOCR data should
provide rates of duties and tariffs, required certificates, safety considerations, and other
procedures needed to export cell phones to Costa Rica from the U.S.
■ Then, consider what data is not available from the government. What else would they
need to know? They need to know who else is selling cell phones (competitors), and
how many — two years back, one year ago, and in the last few quarters. Who uses cell
phones? Heads of households? Teens, Generation X-ers, Millennials? Business
people? Women? What is their willingness to pay for a cell phone? Are they first
movers or followers? List all of this on the board, and encourage them to write it all
down in their notes.
Commentary on the Opening Vignette:
ESTIMATING DEMAND IN EMERGING MARKETS
Key message
■ This vignette discusses non-traditional ways that market research may need to be
implemented to capture information on product demand and success in international
markets.
■ Three of the largest emerging markets—China, India, and Brazil—have a combined
GDP of more than $15 trillion.
■ Africa is among the biggest markets for mobile phone sales, growing to more than
100 million users in just a few years.
■ Automakers are doing substantial business selling economy cars throughout Latin
America, South Asia, and Eastern Europe.
■ Emerging markets and developing economies are huge market opportunities.
■ Assessing market demand in emerging markets presents even greater challenge than
in developed international markets.
Two Moroccan Examples- Estimating Demand for Wallpaper and Bandages
Wallpaper:
■ Triangulating data from the following to estimate potential wallpaper sales in Morocco
is a creative and effective way to do market research, particularly when other market
data is incomplete.
[1] Water heater sales
[2] Domestic wallpaper sales, discretionary income by type of household, and
home construction data
[3] Wall-to-wall carpet sales
Adhesive Bandages:
■ Assessing market demand for adhesive bandages by gathering information from:
[1] Retailers, suppliers, e.g. Curad and Johnson & Johnson
[2] Retail stores- prevailing prices, competitive brands, and consumer attitudes.
[3] Doctors, pharmacists
[4] Aid agencies, e.g. United Nations Development Program
■ By assimilating data from all of these sources results in significant knowledge of the
Moroccan market and a reasonable estimate of bandage sales.
Uniqueness of the situation described
■ Positioning a product or a service in an emerging market is different from doing so in a
more developed country.
■ Usage patterns may differ, and assumptions we might make about how a product will
be sold or consumed is often erroneous.
■ For example, using data from international aid agencies to find out about adhesive
bandage preferences is something we probably would not consider in the U.S.
■ Wallpaper sales in North America might be more closely associated with new
construction and remodeling, rather than with fitted carpet or water heater sales as is
the case in Morocco.
■ Conclusion: Estimating demand in foreign markets poses challenges, but managers
can overcome them through creative use of market research.
Classroom discussion
■ Ask students why firms considering international business ventures in emerging
markets might need to use more creative research techniques.
■ Are government or private statistics readily available? If so, are they reliable?
■ For wallpaper and band-aids, what other kinds of connections might a marketer use to
estimate demand for the products?
■ Refer students to D’Andrea, G., Stengel, E.A., & Goebel-Krstelj, A. 2004. Six truths
about emerging-market consumers. Strategy + Business, 34: 2-12: The article
challenges our assumptions about what customers in emerging markets may be looking
for.