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Assessing Market Potential

-Building the Knowledge Base


Learning Outcomes
• Pitfalls in Foreign Market Assessment
• A framework for assessing foreign
markets
• Guidelines for market research in
assessing International markets
• Introduction to different secondary sources
of information
• Forecasting Market Potential
Stages of Researching Foreign
Market Potential
Stage One
Preliminary Screening for Attractive Country Markets
(Which foreign Markets warrant detailed Investigation?)

Stage Two
Assessment of Industry Market Potential
(What is the aggregate demand in each of the selected
Markets?)

Stage Three
Company Sales Potential Analysis
(How Attractive is the potential demand for company
Products and services?)
Internal Data External Data

Macroeconomic
Data for Country B
GNP Industry
Firm General Data Stability of Currency Growth patterns
(Firm Context) Inflation
of sectors Secondary
Size
Secondary Analysis of Data
Product Lines
Data
Imports
Financial Situation
Characteristics of
Problem
Competition
Is there a market
For product A
in country B?
If yes,
how large is it Competitors
SW Profile and what is Specific
Benchmarking the possible Strategies
(Compared to market share
main Competitor)
Corporate Level Intermediaries
End Customers
Product line-level Purchasing
Threat of using Primary
Primary Specific Product Behavior
substitutes Data
Data level Financial
Consumption Capabilities
Patterns
Access to
distribution
Channels
Internal Data External Data
Why research?
• From an insurance company: ‘We are a
relatively small company in a growing but
fiercely competitive business. We need
research information to decide how to
increase business from our existing
customers and attract business from new
customers.’
From a whisky manufacturer
• Whisky sales generally are in decline. We
need research to evaluate the potential of
new whisky-based drink products. We also
need research to select the most effective
packaging to maximize product sales in an
increasingly self-service market.’
From an integrated
communications agency
• Our clients look to us for advice on
internet advertising strategy. How can
research help in providing more effective
online advertising?’
From a carpet manufacturer
• The floor-coverings market is in decline
and over-supplied. We know that design is
an important factor in the market. We
need research to help us maintain and
improve market share by identifying
appealing designs and appropriate target
markets for them.’
From a business-to-business IT
supplier
• We are now able to develop an enhanced
range of systems integration products. We
need research to discover whether a
viable market exists for these possible
products, who our potential customers
might be and whether they know our name
and would buy from us.’
Going International
• Exporting
• Importing
• Expansion
Reasons for Entering International
Markets
Profitability Achieving
Growth Economies of
scale

Spreading R&D Why should a firm enter Risk


cost international markets spread

Access to
Marketing
imported
Opportunities Uniqueness inputs
due to life cycle of product
or service
Key international marketing
questions faced by a firm:

• How will my product or service fit into the international market?


• What marketing adjustments are or will be necessary?
• What global competitive threats should I expect?
• How can I work with these threats and turn them into opportunities?
• What are my strategic global alternatives?
International Marketing Research
Types of Information
• Economic-economy, inflation, business
cycle trends
• Cultural, sociological, and political climate
• Overview of market conditions
• Summary of the technological
environment
• Competitive situation
Research Process
• Define the research problem and establish
research objectives
• Determine the sources of information to fulfill the
research objectives
• Consider the costs and benefits of the research
effort
• Gather the relevant data from secondary or
primary sources or both
• Analyze, interpret and summarize the results
• Effectively communicate the results to decision
makers
Country Identification
• Typically the company decides to enter
into a particular trade area.

A Country Report is prepared for each country in the trade area.


Statistical Variables-
1. Level of development (including per
capita income)
2. Cultural similarities between countries
in the trade area
3. Population comparison
4. Socio Economic Data of various
segments
Non-Statistical Variables

1. Political Risk Research


2. Environmental Risk Research
a. Physical Environment
c. Sociocultural Environment
d. Economic Environment
e. Regulatory Environment
3. Researching Competitors
a. Strength and Weakness
b. Competitive Signaling
Preliminary Screening
• This involves rating the countries on the
macro level indicators
In-Depth Screening
• Market Size
• Market Growth
• Competitive Intensity
• Trade barriers
Final Selection
• Forecasted revenues and costs are
compared to find the country market that
best leverages the resources available.
• Importance /Weights are assigned to
various variables in the country report
• The weighted sum may be chosen as a
criteria to get the final list of two-three
countries.
Plotting of country cluster with two
variables –Income and Growth
• High-income, low-growth countries
• Average per capita GDP USD 38,722, average real GDP
growth 2.6 (Australia, Austria, Belgium, Canada, Denmark,
Finland, France, Germany, Greece, Iceland, Ireland, Italy,
Japan, Netherlands, New Zealand, Norway, Singapore,
Spain, Sweden, Switzerland, United Kingdom, United States)

• Middle-income, high-growth countries


• Average per capita GDP USD 6,252, average real GDP
growth 4.5 (Argentina, Brazil, Chile, China, Croatia, Hungary,
Jamaica, Latvia, Mexico, Slovenia, South Africa, Thailand,
Venezuela)
Forecasting Country Sales

• Sales = Industry Sales X Market Share


(Expected)
Industry Sales (Build up Method)

1.Build-up method- market sales are


estimated on the basis of separate
estimates from individuals knowledgeable
about certain segments of the market.
2.These single estimates of various parts of
the market are aggregated (build-up) into
an evaluation of total market size.
Industry Sales: Forecasting
Analogy
• The basic premise underlying forecasting by analogy is that
the sales in one “lagging” country will show similarities in
another “leading” country where product is already marketed.
Sb (2009)=[Sa(2000)/GNPa(2000)]xGNPb(2009)
 To account the difference between the countries, the sales
figures are usually weighted by a measure such as GNP or
population size,
 S = Unit sales, subscript a=leading country, subscript b=
lagging country and there is a lag of 9 years.
 [Sa(2000)/GNPa(2000)]= Unit sales per dollar (or the currency
equivalent)
 By multiplying the above to lagging country GNP a sales
forecast is arrived to
Judgmental Forecasts
• Jury technique
• Expert pooling
• Panel Consensus
• Delphi Method
Forecasting Market Sale for the
firm
• Armstrong's Regression Model:
R=f(E, P, B, T, W, C, G)
E= Standard of living Index
P= Price of the good
B= Buying unit index (household per adult)
T= Temperature
W=Rainfall
C=Proportion of children in the population
G= Growth of per capita income per year
Forecasting Market Sale for the
firm
The second step is to get the size of the potential
market using a multicaptive chain
• M=(T)x(L)X(A)X(N)
M= Number of potential buyers
T=Total population
L= Literacy rate (proportion)
A= Proportion of population in the desired age
group (e.g., 15-64)
N= Proportion of nonagricultural employment
Forecasting final Sales
• S= (R) X (M)

• S= forecasted sales in unit per year in a


given country.
Qualitative Information
• Domestic Competitors
• Foreign Competitors
Personal Visit
• Managers visit the countries for direct
experience and cross check on the
country report.
Sources of Secondary Data
• www.stat-usa.gov
• www.ita.doc.gov
• www.ustradeonline.gov
• www.census.gov/foreign-trade.gov
• www.cia.gov/cia/publications/factbook
• www.customs.ustreas.gov
• www.opic.gov

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