Evaluating and prioritising potential export markets · Market Attractiveness Index provides an initial assessment of markets, ... Current private label share Private label share

Evaluating and prioritising

potential export markets

13th October 2009

Padraig Brennan

Outline

• Background

– Why evaluating potential export markets is important

• Market evaluation

– How to assess the suitability of potential markets for your company

• Case study

– Example of how an evaluation of potential export markets works

• Summary

Background – Why evaluating potential export markets is important

Growth opportunities

from exports

Exporting to other countries ...

But ...

- As a company, you have to prioritise

potential export markets to:

- Provide a common under-

standing of which marketplace

battles you have chosen and why

- Allocate your resources

accordingly

- Is an important lever for growth

- Provides value added opportunities

2003 2008

€7bn

€8.17bn

Irish

exports of

food and

beverages

Source: Roland Berger Strategy Consultants

Using the

"Attractiveness Index"

as a basis

Bord Bia introduced the "European Market Attractiveness

Index" a few years ago

• Index evaluates general export

attractiveness of major European

food and drink markets

• Index ranks export markets based

on two dimensions

– Country attractiveness

– Irish capability to serve

Market Attractiveness Index provides an initial assessment of markets, but

assessing the fit for your company requires a more detailed evaluation

Irish food & drink Industry

Capability to Serve

Co

un

try a

ttra

cti

ve

ne

ss

Low (0)

Low (1)

High (10)

Good (10)Average (5)

Avg. (5)

http://www.enchantedlearning.com/europe/greece/flag/

http://www.enchantedlearning.com/europe/sweden/flag/

http://www.enchantedlearning.com/europe/denmark/flag/

Market evaluation – How to assess the suitability of potential markets

for your company

TODAY'S FOCUS

The market evaluation

process involves

3 steps

STEPS

KEY

QUESTIONS

OUTPUT

Laying the foundation

• Defining strategic

parameters

• Creating a long-list

Evaluating potential

markets

• Developing a scoring

model

• Scoring and

prioritising markets

Detailing research and

initiating actions

• Analysing markets in

detail

• Planning and pre-

paring market entry

• What do you want to

achieve (size, growth,

profitability targets)?

• How much can you invest?

• What are your core

strengths?

• How much risk do you

want to take?

• Which geographic regions

do you want to consider?

• What dimensions and

criteria do you want to

consider in the market

evaluation?

• What KPIs do you use to

measure the criteria

selected?

• How do you weight the

dimensions and criteria?

• What are the most

attractive markets?

• What are the requirements

for entering a specific

market (e.g. packaging,

design, legal)?

• What specific SKUs should

be exported?

• What sales potential do you

estimate for your products

(year 1, year 2, etc.)?

• How will you operationally

manage exports (e.g. own

sales team vs. importer)?

• General "export strategy"

• Long-list of potential export

markets

• Prioritised short-list of

suitable export markets

• Detailed market profiles

• Defined export market(s)

• Clear launch roadmap


Top priority

markets

The general evaluation

framework is based on

two dimensions

• Market attractiveness:

How attractive is the market in

terms of size, accessibility and

country risk?

High

Low

Medium

Low HighMedium

MA

RK

ET

AT

TR

AC

TIV

EN

ES

S

ABILITY TO WIN


• Ability to win:

How well are we positioned to enter

the market in terms of:

• Financial/operational/marketing

capabilities

• Market knowledge to win on the

market?

The matrix is based on

two scoring models

Top priority

markets

High

Low

Medium

Low HighMedium

MA

RK

ET

AT

TR

AC

TIV

EN

ES

S

ABILITY TO WIN

Method for assessing each

market's performance

• Relevant evaluation dimensions and

criteria per axis are defined

• Each dimension is given a weighting

(between 0 and 100%; sum of

weightings for each axis equals 100%)

• Each criterion is scored from 0 (low) to

2 (high)

• The total score for each axis/market is

calculated based on scores and

weightings


"Market attractiveness" should

cover 5 dimensions

Dimensions of "Market attractiveness"

Country riskMarket Consumer CompetitionRetail

landscape

• Evaluates primary source of

business

• The higher your growth

targets/ambitions, the higher the

relative weighting should be

• Evaluates the competitive

marketplace you are likely to face

• Evaluates the risk of

exporting to a country

• The greater your risk

aversion, the higher

the relative weighting


Each dimension

includes several

criteria

The following criteria should be considered

Country riskMarket Consumer CompetitionRetail

landscapeDimension

Typical

weighting25% 25% 20% 20% 10%


Each criterion can be

measured by specific

KPIs

Market criteria

Criterion KPI

Current size Sales in 2008 [EUR m]

Future size Sales in 2012 [EUR m]

Average price per kg/litre Avg. price in 2008 [EUR/Kg]

Current private label share Private label share in relevant category, 2008 [value,%]

Future private label share Private label share in relevant category, 2012 [value,%]




KPIs

Consumer criteria

Criterion KPI

PCC category Per capita volume 2008 [kg]

Future PCC category

developmentDevelopment of per capita volume, 2009-2012 [% p.a.]

PCC sub-category

Future PCC sub-category

development

Population density Inhabitants/km2

Avg. available income Avg. per capita income ['000 EUR/year]


PCC = Per Capita Consumption

Per capita volume 2008 [kg]

Development of per capita volume, 2009-2012 [% p.a.]



KPIs

Competition criteria

Criterion KPI

Degree of industry

consolidationCumulative market share of top 5 players [value,%]

Market share/acceptance

of international brandsCumulative market share of international brands [value, %]

Advertising intensity in

category relative to overall

market

Category's share of voice vs. category's share of market in

total FMCG [index]




KPIs

Retail landscape criteria

Criterion KPI

Degree of current retail

consolidation Cumulative market share of top 5 players [value,%]

Degree of future retail

consolidationCumulative market share of top 5 players [value,%]

Accessibility via wholesale Qualitative assessment




KPIs

Country risk criteria

Criterion KPI

Future inflation Avg. forecast inflation rate, 2009-2012 [%]

Corruption Corruption Perceptions Index 2008 [score]

Legal limitations for imports Qualitative assessment

Currency risk Currency volatility [%, 360 days]

Currently: exposure to

financial crisisChange in GDP, 2009 vs. 2008 [%]


The dimensions of

"Ability to win" are more

difficult to assess

Dimensions of "Ability to win"

Financial/operational

capabilityMarketing capability Country knowledge

• Evaluates your company's

financial and operational

ability to enter the market

and make the necessary

investments


ability to successfully

create demand for your

product and achieve

distribution


ability to understand the

market's needs

The dimensions of "Ability

to win" cover several

criteria

Dimension

Typical

weighting35% 35% 30%

Financial/operational

capabilityMarketing capability Country knowledge


Each criterion needs

to be assessed

in detail

Criterion KPI

• Logistics costs Estimate of average logistics cost with suitable

means of transportation [EUR/'000 tons]

• Cost of required

sales structure

Estimate of average costs for sales structure (e.g.

sales force or importer fees) [EUR/'000 tons]

• Cost of promotional

activity

Estimate of average costs promotional activity

[EUR/'000 tons]

Dimension

Financial/

operational

capability


• IT costs Estimate of average costs for necessary IT

adjustments [EUR/'000 tons]

• Cost of changes in

production

Estimate of average costs for necessary

changes in production (ingredients, packaging,

lot sizes, etc.) [EUR/'000 tons]

Each criterion needs

to be assessed

in detail

Criterion KPIDimension

• Product fit Either results of product test or qualitative

assessment by experts regarding taste, quality,

serving size, fit to consumption occasions, etc.

[score]

• Pricing fit Relative price position of key SKUs vs. key

competitors in market or vs. market's average

price [index]

• Channel fit Qualitative assessment of company's capability

to deal with dominant distribution channels in

market [score]

Marketing

capability

• Cultural fit Qualitative assessment of trade and cultural

affinities with Ireland [score]

• Country experience Qualitative assessment of degree of relevant

county experience (e.g. experience with key

people, actual company experience in other

product categories, etc.) [score]

Country

knowledge


Case study

– Example of how an evaluation of potential export markets works

Case study –

Background

• European manufacturer of frozen ready meals aims to expand its business

and grow in Central and Northern Europe

• The following countries are on the long-list

– Sweden Germany

– Norway France

– Finland Switzerland

– Denmark

• The "Market attractiveness"/"Ability to win" framework is applied

• The dimensions and criteria presented previously are applied for evaluation


Assessing "Market

attractiveness" – Data

basis (1/2)


Once criteria and KPIs are defined, information needs to be gathered

– extensive desk research & usage of research reports recommended

Assessing "Market

attractiveness" – Data

basis (2/2)


Assessing "Market

attractiveness" –

Example of detailed

analysis


Market size frozen ready meals 2012 [EUR m]1)

42 59 70107

257

865

564

< 150 EUR m

0 points

> 400 EUR m

2 points

150-400 EUR m

1 point

1) Euromonitor estimate

• Definition of scoring criteria

based on comparison of

actual data

• Usage of absolute future

market size instead of

growth rates to avoid

distortions through high

growth rates on very small

basis

At least two of the

following limitations

apply

• Additional limitations

on ingredients besides

EU limitations

• More information on

packaging

compulsory in addition

to EU requirements

• Duties

• Import quotas

One of the following

limitations applies

• Additional limitations on

ingredients besides EU

limitations

• More information on

packaging compulsory

in addition to EU

requirements

• Duties

• Import quotas

Best case

• EU member: no

restrictions/no duties

• EU standard require-

ments for packaging

information apply

Assessing "Market

attractiveness" –

Example of detailed

analysis


Qualitative assessment of legal limitations/ import restrictions

• Precisely

defined scoring

criteria serve

as the basis for

sound qualita-

tive assess-

ments

0 points 2 points 1 point

• Norway • France

• Germany

• Sweden

• Switzerland • Finland

• Denmark

Assessing "Market

attractiveness" –

Results


A dimension's weighting has very strong influence on final result

Avoid adjusting the weighting to achieve desired results

Assessment of "Ability

to win" – Results


Result - Ability to win

Ranking Total scoresFinancial/Opera

tional capability

Marketing

capability

Country

knowledge

France 1 78.0 24.0 29.0 25.0

Switzerland 2 65.0 23.0 24.0 18.0

Germany 3 59.0 23.0 21.0 15.0

Denmark 4 48.0 17.0 17.0 14.0

Norway 4 48.0 18.0 19.0 11.0

Sweden 6 43.0 15.0 18.0 10.0

Finland 6 43.0 15.0 19.0 9.0

Maximum score 100.0 35.0 35.0 30.0

Minimum score 0.0 0.0 0.0 0.0

Countries for short-list

Results of two scoring

models are summarised

in matrix


MA

RK

ET

AT

TR

AC

TIV

EN

ES

S

ABILITY TO WIN

High

Low

Medium

Low HighMedium

If you have a set of generally very attractive markets on your long-

list, you may raise threshold levels to produce your short-list

Finland

Sweden

Norway

Denmark Germany

Switzerland

France

Summary

Summary

BE SYSTEMATIC AND STRUCTURED

To assess the suitability of potential export markets for your company, we

recommend a three-step approach

- Lay the foundation: Export strategy + country long-list

- Evaluate potential markets: Scoring model + information research

- Conduct detailed research and initiate actions: Detailed market profiles + roadmap


1

BE THOROUGH AND OBJECTIVE

To assess market performance along "market attractiveness" and "ability to

win", you should develop two scoring models that cover all relevant criteria

for your company and measure performance based on clear KPIs

2

BE COMPANY-SPECIFIC

Dimensions, weightings, criteria and KPIs presented here may need to be

adjusted according to your company's specific requirements

3

Evaluating and prioritising

potential export markets

13th October 2009

Padraig Brennan

Documents

Evaluating and prioritising potential export markets · Market Attractiveness Index provides an initial assessment of markets, ... Current private label share Private label share