1、International Business: Strategy, Management, and the New Realities,1,International Business Strategy, Management & the New Realities by Cavusgil, Knight and Riesenberger,Chapter 12 Global Market Opportunity Assessment,International Business: Strategy, Management, and the New Realities,2,Global Mark
2、et Opportunity,A favorable combination of circumstances, locations, or timing that offer prospects for exporting, investing, sourcing, or partnering in foreign markets. Opportunities include: marketing products and services; establishing factories or other production facilities to make offerings mor
3、e competently or cost-effectively; procuring raw materials or components, services of lower cost or superior quality; Entering into collaborative arrangements with foreign partners.,International Business: Strategy, Management, and the New Realities,3,The Six Tasks of GMOA,Conduct an internal assess
4、ment of readiness to initiate international business activity. Assess suitability of products and services for foreign markets. Systematically identify the best markets to target with the chosen product(s) or service(s). Estimate industry market potential, or the “market demand”, for the product(s)
5、or service(s) in the selected target markets. Screen and select qualified business partners, such as distributors or suppliers. Estimate company sales potential for each target market.,International Business: Strategy, Management, and the New Realities,5,Task 1. Organizational Readiness,Objective: T
6、o provide an objective assessment of the companys preparedness to engage in international business activity. Outcomes: A list of firm strengths and weaknesses, regarding international business, and recommendations for resolving deficiencies that hinder achieving company goals. Criteria: Relevant fin
7、ancial and tangible resources; relevant skills and competencies; senior management commitment and motivation,International Business: Strategy, Management, and the New Realities,6,Issues to be Resolved in Organizational Readiness Analysis,What does the firm hope to gain from international business? E
8、.g., increasing sales or profits, challenging competitors in their home markets, pursuing a global strategy, etc. Is international business expansion consistent with other company goals, now or in the future? What demands will internationalization place on company resources, such as management, pers
9、onnel, finance, production and marketing capacity? How will such demands be met?,International Business: Strategy, Management, and the New Realities,7,Task 2. Product Suitability,Objective: To conduct a systematic assessment of the suitability of the firms products and services for international cus
10、tomers; To evaluate the degree of the fit between the product or service and customer needs. Outcomes: Determination of factors that may hinder product or service market potential in each target market; Identification of needs for the adaptations that may be required to initial and ongoing market en
11、try. Criteria: Assess the firms products and services with regard to: foreign customer characteristics and requirements government regulations expectations of channel intermediaries characteristics of competitors offerings,International Business: Strategy, Management, and the New Realities,8,Product
12、 Suitability,Sell well in the domestic market. E.g., Microsoft Xbox, Iphone Cater to universal needs. E.g., cancer drug, energy efficient refridgerator Address a need not well served in particular foreign markets. E.g., mutual fund, home mortgage Address a new or emergent need abroad. E.g., major ea
13、rthquake creates urgent need for portable housing; AIDS in Africa creates need for drugs and medical supplies.,International Business: Strategy, Management, and the New Realities,9,Task 3. Country Screening,Objective: To reduce the number of countries that warrant in-depth investigation as potential
14、 target markets to a manageable few. Outcomes: Identification of 5 or 6 of the highest potential country markets. Criteria: Market size and growth rate; market intensity (that is, buying power of the residents in terms of income level); consumption capacity (that is, size and growth rate of the coun
15、trys middle class); countrys receptivity to imports; infrastructure appropriate for doing business; economic freedom; political risk.,International Business: Strategy, Management, and the New Realities,10,Specific Considerations,Cultural Similarity with Target Market may Matter. Some firms target co
16、untries that are “psychically” similar in terms of language and culture. Nature of Information Sought varies with product/industry. E.g., for farming equipment, consider countries with much agricultural land and farmers with higher incomes. Targeting a Region may Make Sense. E.g., European Union, La
17、tin America,International Business: Strategy, Management, and the New Realities,12,Criteria Relevant to Country Screening for FDI,Long-term growth prospects Cost of doing business. Potential attractiveness of the country based on the cost and availability of commercial infrastructure, tax rates and
18、wages, access to high-level skills and capital markets Country risk. Regulatory, financial, political, and cultural barriers and the legal environment for intellectual-property protection Competitive environment. Intensity of competition from local and foreign firms Government incentives. Availabili
19、ty of tax holidays, subsidized training costs, grants, or low-interest loans.,International Business: Strategy, Management, and the New Realities,14,A.T. Kearneys Offshore Location Attractiveness Index,Assists managers understand and compare the factors that make countries attractive as potential lo
20、cations for offshoring of service activities such as IT, business processes and call centers. Evaluates countries on 39 criteria categorized into three dimensions: Financial structure accounts for cost of labor, infrastructure costs (for electricity and telecom systems), and tax and regulatory costs
21、. People skills and availability accounts for suppliers experience and skills, labor force availability, education and linguistic proficiency, and employee attrition rates. Business environment assesses economic and political aspects of the country, commercial infrastructure, cultural adaptability,
22、and security of intellectual property.,International Business: Strategy, Management, and the New Realities,16,Task 4. Industry Market Potential Analysis,Objective: To estimate the size of relevant industry sales within each target country; To investigate and evaluate any potential barriers to market
23、 entry. Outcomes: 3 to 5- year forecasts of industry sales for each target market. Delineation of market entry barriers in industry Criteria: Market size, growth rate, and trends in the industry; degree of competitive intensity; tariff and non-tariff trade barriers; standards and regulations; availa
24、bility and sophistication of local distribution; unique customer requirements and preferences; industry-specific market potential indicators.,International Business: Strategy, Management, and the New Realities,17,Industry Market Potential,Estimate of the likely sales that can be expected for all fir
25、ms in a particular industry during a specific time period. Industry Market Potential is different from company sales potential, which refers to the share of industry sales the firm itself expects during a specific period. Most companies forecast sales at least three years into the future, of both in
26、dustry market potential and company sales potential.,International Business: Strategy, Management, and the New Realities,18,Indicators of Industry Market Potential,Market size, growth rate, and trends in the specific industry Tariff and non-tariff trade barriers to enter the market Standards and reg
27、ulations that affect the industry Availability and sophistication of local distribution Unique customer requirements and preferences Industry-specific market potential indicators,International Business: Strategy, Management, and the New Realities,19,Examples of Industry-Specific Indicators,Cameras:
28、Examine climate-related factors such as the average number of sunny days in a typical year. Laboratory equipment: Examine government expenditures on health care. Cooling equipment: Examine the number of institutional buyers, such as restaurants and hotels.,International Business: Strategy, Managemen
29、t, and the New Realities,20,Practical Methods for Estimating Industry Market Potential,Simple Trend Analysis. Aggregate production for the industry as a whole, adding imports from abroad and deducting exports. Monitoring Key Industry-Specific Indicators. Caterpillar, examines announced construction
30、projects, building permits, growth rate of households, and infrastructure development. Monitoring Key Competitors. If Caterpillar is considering Chile as a potential market, it investigates the current involvement in Chile of its number-one competitor, the Japanese firm Komatsu. Following Key Custom
31、ers. Automotive suppliers can anticipate where their services will be needed next by monitoring the international expansion of their customers such as Honda or Mercedes Benz. Tapping into Supplier Networks. Firms can gain valuable leads from current suppliers by inquiring with them about competitor
32、activities. Attending International Trade Fairs. Industry trade fairs and exhibitions are excellent venues for obtaining valuable market information.,International Business: Strategy, Management, and the New Realities,21,National Trade Data Bank,Best Market Reports identify the top 10 country market
33、s for specific industry sectors. Country Commercial Guides analyze economic and commercial environments of countries. Industry Sector Analysis reports analyze market potential for sectors such as telecommunications. International Market Insight reports cover country and product-specific topics, with
34、 various ideas for approaching markets of interest.,International Business: Strategy, Management, and the New Realities,22,Task 5. Foreign Partner Selection,Objectives: To decide on the type of foreign business partner; clarify ideal partner qualifications; and plan mode of entry. Outcomes: Determin
35、ation of most suitable types of foreign business partners. List of attributes desired of foreign business partners. Determination of value-adding activities foreign business partner contribute. Criteria: Manufacturing and marketing expertise in the industry; commitment to the international venture;
36、access to distribution channels in the market; financial strength; quality of staff; technical expertise; infrastructure & facilities.,International Business: Strategy, Management, and the New Realities,23,Types of Foreign Business Partners,Exporters tend to collaborate with foreign market intermedi
37、aries, such as distributors and agents. Licensing partners are independent businesses that apply intellectual property to produce products in their own country. Franchising partners are franchisees independent businesses abroad that acquires rights and skills from the focal firm to conduct local ope
38、rations International collaborative venture, include joint venture and strategic alliance partners. Others: global sourcing, contract manufacturing, and basic suppliers.,International Business: Strategy, Management, and the New Realities,24,Ideal Qualifications of Foreign Distributors,Financially so
39、und and resourceful Competent management Qualified technical and sales staff Willing and able to invest to grow the business Strong industry knowledge Access to distribution channels and end-users Known in the marketplace and well-connected with local government Committed and loyal,International Bus
40、iness: Strategy, Management, and the New Realities,25,Task 6. Estimate Company Sales Potential,Objective: To estimate the most likely share of industry sales the company can achieve, over a period of time, for each target market. Outcomes: 3 to 5-year forecast of company sales in each target market.
41、 Understanding of factors that will influence company sales potential. Criteria: Capabilities of partners; access to distribution; competitive intensity; pricing and financing; market penetration timetable of the firm; risk tolerance of senior managers.,International Business: Strategy, Management,
42、and the New Realities,26,Company Sales Potential,Company sales potential is an estimate of the share of annual industry sales that the firm expects to generate in a particular target market during a given time period. Requires obtaining highly refined information from the market. Researcher must pro
43、ject the firms revenues and expenses for 3-5 years into the future; very challenging.,International Business: Strategy, Management, and the New Realities,27,Factors That Determine Company Sales Potential,Partner capabilities. The competencies and resources of foreign partners determine how quickly t
44、he firm can enter and generate sales in the target market. Access to distribution channels. The ability to establish and make best use of channel intermediaries and distribution infrastructure in the target market. Intensity of the competitive environment. Local or third-country competitors are like
45、ly to intensify their own marketing efforts when confronted by new entrants. Pricing and financing of sales. The degree to which pricing and financing are attractive to both customers and channel members is critical to initial penetration. Human and financial resources. Such resources are a major fa
46、ctor in determining the proficiency and speed with which success can be achieved.,International Business: Strategy, Management, and the New Realities,28,Factors Determining Company Sales Potential (cont.),Market penetration timetable. Gradual entry gives the firm time to develop and leverage appropr
47、iate resources and strategies, but may cede some advantages to competitors in getting established in the market. Rapid entry may allow the firm to surpass competitors and obtain first-mover advantages, but it can tax the firms resources and capabilities. Risk tolerance of senior managers. Management
48、s tolerance for risk in the market. Special links, contacts, capabilities of the firm. The focal firms network in the market its existing relationships with customers, channel members, and suppliers. Reputation. The firm can succeed faster in the market if target customers are already familiar with
49、its brand name and reputation.,International Business: Strategy, Management, and the New Realities,30,Practical Approaches to Estimating Company Sales Potential,Survey of end-users and intermediaries. The firm can survey a sample of customers and distributors to identify a potential market. Trade au
50、dits. Managers visit retail outlets and question channel members to assess relative price levels of competitors offerings and perceptions of competitor strength. The trade audit can indicate opportunities for new modes of distribution, identify types of alternative outlets, and provide insights into
51、 relative competitive strength. Competitor assessment. The firm may benchmark itself against principal competitor(s) in the market and estimate the level of sales it can potentially attract away from them. What rival firms will have to be outperformed? Even in those countries dominated by large firms research may reveal market segments that are underserved or ignored altogether.,
