Criteria For Identifying Markets

7/31/2019 Criteria For Identifying Markets

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Step 3: Identify / Select

Foreign Markets


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3 Largest markets for U.S. Products are

Canada, Japan & Mexico

May or may not be best market for your

product

Then how do you choose?


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Market Selection Strategies

Reactive choose markets with demonstrated success Use past sales

Past leads

Competitive sales

Participation in Trade shows Discussions with Industry Experts

Proactive choose market based on independentanalysis

Global Indicators Trade Barriers

Tariff Barriers

Non tariff Barriers


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Advantages/Disadvantages

Reactive Strategy

Reactive Strategy

Pros

Low cost, fast, low-risk, product need established

Cons

May lose first mover advantage

Competitors may mislead you

Market may not match your products life cycle


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Market Selection Model (Proactive)

1. Develop indicators to assess market (s)

2. Rate indicators

3. Weight each indicator4. Compare countries Analyze results


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Market Selection Model

Country Indicator 1 Weight Points Indicator 2 Weight Points Indicator 3 Weight Points Total

Country 1

Country 2


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Key Identify

Best Indicators

Global Environment Indicators

Demographic

Macroeconomic

Government Policies

Environmental

Industry Specific


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Indicators Suitable for Global Assessment(Figure 4.2 Foley,2004)

Demographic Indicators

Population including growth and density

Gender makeup

Literacy rate

Education levels

Age distribution

Per capita income and distribution

Receptivity to U.S./foreign products Social considrations such as religion, taboos,

Language


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Macroeconomic Indicators

GDP

GDP growth Inflation rate


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Government Policies Import tariffs

Currency exchange controls

Non tariff trade barriers (technical standadrs, labelingrequirements, documentation)

Intellectual property rights protection (patents,copyrights, trademarks, trade secrets)

Political risk (stability)

Investment policies and protections

Labor practices and restrictions

Taxation


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Environmental Indicators

Climate

Geography

Infrastructure (transportation,

telecommunications)


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Industry Indicators Entry barriers (obstacles such as local branding, access to

distribution, expected retaliation)

Rivalry (number of competitors, intensity of the competition,market shares)

Supplier power (concentration of suppliers, switching costs)

Buyer power (maturity of distirbution channel, access toconsumer)

Substitute products (use of products not directly competing butused as a substitute)

Growth of the industry

Stability of the industry

Risks of the industry


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Narrow List of Indicators

Market Size

Market Growth

Market Accessibility

Economic Stability

Political Climate

Cultural Climate

Environmental Factors

Geographical Factors


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Market Size

When examining market size, look at the overall population. Then, estimatethe percent of potential buyers within that population. Look at the numbersthat suggest how much the population spends on this type of import. Whiledoing so, identify if there are domestic or international competitors alreadyproviding a similar product. If there are, what is the production rate of each?If possible, determine the price your competitors are charging, and compareyour product's price and quality against theirs.

Entering smaller markets where few competitors have set up shop may giveyou the opportunity to start at the "ground" floor and grow with the market.However, if you enter smaller markets beware of the barriers you mayencounter as a result (e.g., transportation and political infrastructureproblems).

In researching demographics, look at the unemployment trends andeducational levels of consumers in the target market. The moresophisticated the target market, the more difficult it may be to compete. Alsoidentify the language and dialects spoken within a particular


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Market Growth

Examining the growth of the market over the last few years will tell you if itis consistently growing or shrinking. Look at the last three to five years ofimport history for your product (if available) within a given market. Also lookat trends and growth forecasts. What do they tell you about the market andits potential for growth? Has it reached its peak? Is the market saturated

with like products? Are the number of imports increasing or decreasing? Ifthe numbers are increasing consistently, this indicates that the market isexpanding. Seriously consider markets that are larger with strong growthpotential to increase profit margins and reduce production costs.

Also consider the industrial development stage of your market. Those thatare just beginning to industrialize may not have need for the latesttechnology. However, some markets developing industrially may take

advantage of the progress made in more developed markets and leapahead bypassing earlier innovations and adopting later technology to helpbuild their infrastructure (e.g. the Middle East is considering fiber optics fortelecommunications instead of copper wire due to its quality and pricestructure).


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Market Accessibility

Many factors influence market accessibility. The following is not anexhaustive list, but it may help you assess how accessible the market is toyou and how accessible your product is to your targeted customers:

Import duties and tariffs costs may make sending your goods (or services)into the foreign marketplace unprofitable. To determine the duty or tariffrate, contact a trade agent to help you identify the Harmonized Tariff sectionwhich corresponds to your product. Remember, each country has its ownschedule of duty rates.

Local and foreign suppliers may influence your marketplace accessibility.Be sure you know who your international competitors are. Compare theprice and quality of your product with the competition's.

Sales representatives located within the country to which you wish to exportcan represent your product and act as an intermediary. Representatives

may be able to give you ideas of the best ways to access the market andcustomers through different channels of distribution. Promotional practices, such as how you advertise and promote your

product will affect how much of the targeted market will have access to (andknow about) your product.


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Economic Stability

Many factors affect economic stability of a marketplace (and country).Determine if the economic climate is thriving or diving? Recessing orgrowing? If possible, identify the GNP growth rate and per capita income.Also, ascertain the unemployment rate of the country. This will affect howmuch of the market can actually spend money to buy your product. Marketsthat are stable and growing are obviously more attractive to conductbusiness with.

Additionally, consider the availability of U.S. dollars in the target market.What is the exchange rate between the U.S. dollar and that of the country inwhich you will sell your product? Besides unequal access to the dollar,another factor that may keep your customers from purchasing your productmay be a trade deficit, which could be important if customers are able toobtain import permits.

Lastly, note that foreign countries undergoing economic and industrialdevelopment may not collect and disseminate trade statistics. If they do,these statistics may be in a form that cannot be easily interpreted. Whensuch important market information is missing or not understandable, consulta trade agent or eliminate the market.


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Political Climate

Many questions must be asked regarding the political climate of a potentialmarket. Such questions include:

On what type of political system is the country and market based? Is thesystem stable?

Will the governmental system affect your customer's ability to import?

Will the political system affect tariff rates and licensing requirements? Is the legal system supportive of international trade? Are there legal tariff and non-tariff barriers? And are there incentives of

which you should be aware? If the market is politically unstable, how might that affect economic stability? What is the overriding attitude for doing business with companies in the

United States? Has the market or country adopted the International Standards

Organization's ISO 9000 proces


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Cultural Climate

With over 300 countries in the world, many have their own language,customs and culture. Being educated on the culture and values of yourtarget markets will increase your success in the international marketplace.

Although the international business language is English, it may not be thatway for long. It is to your advantage to speak the native language of yourcustomer and understand his or her culture in order to communicate moreeffectively. Make sure you utilize your staff resources to their fullest toaccomplish this task.

Customs and culture also affect consumption of goods. Factors like colors,numbers, and communication fit this category. For example, whenconsidering product or promotional gift colors, keep in mind that white is thecolor of death in China and Korea, whereas purple is seen in the same lightin Spain. In the U.S. yellow implies cowardice, whereas it takes on religiousand mystical undertones in India. Study the cultural differences of the targetmarkets and of your own. You may be surprised how a product that is fullyaccepted by a U.S. market is negatively rejected by its foreign counterparts.


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Environmental Factors

Environmental factors such as climate can

influence modifications you must make to

your product in order to sell it in a given

market. Determine if humidity or other

climate issues will affect the product

performance or appearance as it is intransit or as it is used or consumed.


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Geographic Factors

Geographic factors can also affect your success

in a given foreign market. Such factors include,

transportation to the country or market and legalrestrictions on travel. To enter a foreign market,

a transportation system must be in place (i.e.,

there must be a way for you to get to your

foreign customers). Keep in mind the longer andmore remote the distance is to the market, the

more the transportation and travel costs will be.


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Sources for Country/Market Indicator Data

Stat-USA and WWW.Export.gov

Country Commercial Guides

See Assignment 4 for additional market

data sources

Country Desk officers at U.S. Dept. of

Commerce; contact Trade Information

Center or U.S. Dept. Of Commerce Export

Assistance Center
http://www.export.gov/http://www.export.gov/


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Sources for Industry Indicator Data

Stat-USA and WWW.Export.gov Best Market Reports

Industry Sector Analysis

International Market Insights

Contact Industry Desk Officers for U.\s. Dept. ofCommerce

Trade Associations

Publications, Industry Journals & Periodicals Foreign Phone Books

Networking

Source: Center for International Trade
http://www.export.gov/http://www.export.gov/


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Development Exporting Basics

http://www.citd.org/startup/eb/page.cfm?

chapter=2&sec=9

Best Market Reports are a fast way to pinpoint

high potential markets for selected industries.

BMRs are compiled only on the industriesconsidered "best-prospects" worldwide, based

on recommendations of U.S. commercial officers

in each country. BMRs identify the

largest/fastest growing markets for selectedindustries in one convenient matrix and give a

brief rationale for each country's selection as a

"best prospect."



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chapter=2&sec=9 Industry Sector Analyses can provide more detailed

assessments of market potentials for your products inparticularly promising countries. ISAs are product-andcountry-specific market surveys written by U.S.commercial staff abroad. They discuss overall demandtrends; best sales prospects within the subsector; keyend-user segments; major competitors; and relevantbusiness conditions, practices and market barriers. Theyalso identify useful government and industry contacts,

including importers and distributors. ISAs offercorroborating information for columns 8-10 in the ExportPromotion Matrix (market share, product receptivity,competitive situation, and market access) and are evenmore telling than BMRs because of their productspecificity


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The "best" markets to export offer a combination ofhighcomfort for your company and high potential for yourproducts.

High-comfort markets are those you're personally close toin some way: trusted contacts there

at ease with the language and culture

spent time in the country. Often, however, high comfort countries do not offer the highest

potential for your products.

High-potential markets are where you ultimately want tobe:

large, emerging or fast-growing markets,

high receptivity to products like yours;

limited local or foreign competition;

no significant market barriers.


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Criteria For High Potential Markets

1. Where are comparable productsexported?Look for the largest and

fastest growing export destinations for

the product over the past several years.Source: For U.S. exporters, and foreign

exporters to the U.S., see USITCDataWeb

for official U.S. export/import statistics bycommodity and country.

http://dataweb.usitc.gov/
http://dataweb.usitc.gov/http://dataweb.usitc.gov/


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2. Which countries are importing comparable

products?Look for countries with the

largest and fastest growing imports of the

product over the past several years.Sources:

International Trade Centre Aggregated Trade St

http://www.intracen.org/menus/products.htm;Best Market Reports and

Industry Subsector Analyses.

http://www.intracen.org/menus/products.htmhttp://www.tradecompass.com/intl_mkt_res/intl_mkt_res_bmr.asphttp://www.usatrade.gov/website/Website.nsf/WebBySubj/MarketResearch_AboutMarketResearchhttp://www.usatrade.gov/website/Website.nsf/WebBySubj/MarketResearch_AboutMarketResearchhttp://www.tradecompass.com/intl_mkt_res/intl_mkt_res_bmr.asphttp://www.intracen.org/menus/products.htm


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3. Which markets do the experts consider

most promising? Look for countries

recommended as "Best-Prospect"markets for comparable products.

Source: Best Market Reports and

http://www.tradecompass.com/intl_mkt_res/intl_mkt_res_bmr.asphttp://www.usatrade.gov/website/Website.nsf/WebBySubj/MarketResearch_AboutMarketResearchhttp://www.usatrade.gov/website/Website.nsf/WebBySubj/MarketResearch_AboutMarketResearchhttp://www.tradecompass.com/intl_mkt_res/intl_mkt_res_bmr.asp


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4. Where are comparable products the

most welcome and easiest to sell? Look

for countries with high receptivity to the

product and no significant marketbarriers.

Source: Best Market Reports and



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Wh t P t ti l M k t T d B i


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What Potential Market Trade Barriers

exist?

Tarrifs or taxes imposed on imported goods that, when high, may

make it difficult to sell your product profitably in a foreign market. Non-tariff barriers, such as laws and regulations that countries enact

that protect domestic industries against foreign competition. Non-tariffbarriers include import quotas or restrictions on quality of imports.

International Standards promoted by the International StandardsOrganization (ISO) involves establishing quality manufacturing and

service standards, and certification and monitoring world wide.Originally advocated by the European Union, around 100 nations arenow considering adopting ISO processes, as seen in the IS0 9000 (ageneric family of standards and quality control systems).

Communication may be a problem if you do not speak your potentialcustomer's language.

Distribution arrangements may present barriers if the market hasnot yet been explored by other U.S. businesses.

Whether or not patents and trademarks exist on similar products orproperty in that country
http://globaledge.msu.edu/academy/HpgdtmLH/30/02_%20analysis_of_industry_market_potential/ie5/index.htmlhttp://globaledge.msu.edu/academy/HpgdtmLH/30/02_%20analysis_of_industry_market_potential/ie5/index.html


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Approaches to identifying foreign

market opportunities Use existing distributors as a source of information about

developing market opportunities. There is no better way tolearn about viable export chances than through someonewho is already participating in exporting.

Direct promotion to prospective distributors or othercustomers. Getting your name and desires out to peopleyou would like to work with is a good way to generatebusiness opportunities.

Participate in overseas trade fairs and shows. This

exposes you to more potential business partners than youmight have thought of, and vise versa.


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Key: Columns/Criteria

1. Largest export markets, latest year

2. Fastest growing export markets, latest year

3. Largest importing countries, latest year4. Fastest growing importing countries, latest

year

5. Recommended as a best export market

6. No Significant Market Barriers

"X" (minimally

met)

"XX"

(significantly

met).

"blank" (didn't

meet),

Source:

Market Potential Matrix

1 2 3 4 5 6

Country 1 XX XX X X XX

Country 2 X X X X X XX

Country 3 XX XX XX XX



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chapter=2&sec=9

Foreign Import Statistics help "size up" marketsof interest, identify the major supplier countries,and compare competitor country market shares.Each country compiles and publishes its ownimport statistics. The United Nations alsoconsolidates and publishes the data, but inbroader product categories and on a less current

basis. Alternative sources are specific marketresearch reports that extract and analyze thedata (e.g., Best Market Reports andIndustry Subsector Analyses).



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chapter=2&sec=9

U.S. Export Statistics includes the official U.S. export/importstatistics compiled by the U.S. Census Bureau. TheCommodity-by-Country series shows all the destination or

source countries for a specified product, by value, quantity,unit value, customs district, transport mode and year. TheCountry-by-Commodity series shows all products exported toor imported from a specified country. With these statistics,you can readily spot the largest and fastest growing export

markets for products like yours; or identify the largest andfastest growing U.S. exports to a particular country. Individualtables can be downloaded to a spreadsheet. Once in thespreadsheet, you can do whatever calculations and sortingyou wish (e.g., growth rates, rank ordering, projections, etc.)..
http://dataweb.usitc.gov/http://dataweb.usitc.gov/

Documents

Criteria For Identifying Markets