chapter fifteen Assessing and Analyzing Markets McGraw-Hill/Irwin International Business, 11/e Copyright © 2008 The McGraw-Hill Companies, Inc All rights reserved Learning Objectives Discuss environmental analysis and two types of market screening Explain market indicators and market factors Describe some statistical techniques for estimating market demand and grouping similar markets Discuss the value to businesspeople of trade missions and trade fairs 15-3 Learning Objectives Discuss some of the problems market researchers encounter in foreign markets Explain the difference between country screening and segment screening Identify sources of information for the screening process Discuss the utility of the Internet as a source of market research data 15-4 Assessing and Analyzing Markets • Market Screening – A version of environmental scanning in which the firm identifies desirable markets by using the environmental forces to eliminate the less desirable markets • Environmental Scanning – A procedure in which a firm scans the world for changes in the environmental forces that might affect it 15-5 Market Screening • Permits management to identify a small number of desirable by eliminating those judged to be less attractive 15-6 Market Screening • Two Types of Screening • Country Screening • Using countries as the basis for market selection • Segment Screening • Using market segments as the basis for market selection 15-7 Initial Screening • Basic Need Potential – If the need is lacking, then no reasonable expenditure of effort and money will enable the firm to market its goods and services – Easier for producers of specialized industrial materials or equipment than for widely consumed products 15-8 Initial Screening • Imports Don’t fully measure market potential • Resources to establish need potential – International Trade Administration site on the Internet (www.ita.doc.gov) – U.S Exports of Merchandise on the National Trade Data Bank – U.S International Trade in Goods and Services (FT900) by the Department of Commerce – Annual Worldwide Industry Reviews and International Market Research Reports prepared by various U.S embassies 15-9 Second Screening: Financial and Economic Forces • Measures of market demand based on economic and financial data – Market indicators – Market factors – Trend analysis – Cluster analysis 15-10 Market Indicators • Market Indicators – Economic data used to measure relative market strengths of countries or geographic areas – Possibilities: • Market size • Market growth rate • E-commerce readiness 15-11 Market Factors • Market Factors – Economic data that correlate highly with market demand for a product – Estimation by analogy 15-12 Trend Analysis • Trend Analysis – Statistical technique by which successive observations of a variable at regular time intervals are analyzed to establish regular patterns that are used for establishing future values 15-13 Cluster Analysis • Cluster analysis – Statistical technique that divides objects into groups so that the objects within each group are similar 15-14 Third Screening: Political and Legal Forces • Entry Barriers – Import restrictions, local participation requirements, local content restrictions, government-owned competition • Profit Remittance Barriers – Undue restrictions on repatriation of earnings, limits to FDI, inability to provide foreign exchange • Policy Stability – Political climate, government stability, public unrest 15-15 Fourth Screening: Sociocultural Forces Screening on the basis of sociocultural factors is challenging Sociocultural factors are fairly subjective Data are difficult to assemble, particularly from a distance 15-16 Fifth Screening: Competitive Forces • The number, size, and financial strength of the competitors • Their market shares • Their marketing strategies • The apparent effectiveness of their promotional programs • The quality levels of their product lines 15-17 Fifth Screening: Competitive Forces, cont’d • The source of their products imported or locally produced • Their pricing policies • The levels of their after-sales service • Their distribution channels • Their coverage of the market 15-18 Final Selection of New Markets • Personal visit to potential markets is essential – Field Trip, unhurried – Government-Sponsored Trade Missions – Trade Fairs 15-19 Final Selection of New Markets, cont’d • Research in Local Market – Face-to-face interviews reveal information that would never be written – Hire local research group • Person in charge of the project must have experience in that country or culturally similar one in same geographic area 15-20 Local Research Problems • Cultural – Language – Literacy – Social desirability bias • Technical – – – – – No up-to-date maps Streets have different names Houses not numbered Only wealthy have telephones Mail delivery issues 15-21 Research in Developing Nations • • Less research performed Often a seller’s market • Competition is frequently less intense in developing nations because • fewer competitors • management struggling with problems other than marketing 15-22 Return to Segment Screening • Segment Screening – – – – – Definable: identify and measure Large: to be worth the effort needed Accessible: for promotion and distribution Actionable: have control of marketing programs Capturable: potential exists 15-23 ... The quality levels of their product lines 15- 17 Fifth Screening: Competitive Forces, cont’d • The source of their products imported or locally produced • Their pricing policies • The levels of. .. distance 15- 16 Fifth Screening: Competitive Forces • The number, size, and financial strength of the competitors • Their market shares • Their marketing strategies • The apparent effectiveness of their... sources of information for the screening process Discuss the utility of the Internet as a source of market research data 15- 4 Assessing and Analyzing Markets • Market Screening – A version of environmental