Chapter Eight

Global Market Participation

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Evaluating National Markets

• Where in the world do we look for markets?

• What should we consider when assessing market opportunities?

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Market Considerations

• Stand-alone market attractiveness• Strategic importance of markets

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Stand-Alone Market Attractiveness

• Factors– Market and target segment(s) size– Growth rate– Market share potential– Government incentives

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Strategic Importance of Markets

• Current and future battlegrounds where global competitors engage each other

• May not currently be attractive but are strategically important nonetheless

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Targeting Lead Markets

• Have demanding customers who push for quality and innovation

• Examples:– Plastics = Japan– Italy = Textiles, Clothing– France = Wine

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Geographic Market Choices

• Developed Economies

versus • Developing

Economies

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Attractiveness of Developed Economies

• Triad – Europe, Japan, USA• 10 developed countries account for 50%

world international trade and 90% of FDI• Consumers with considerable disposable

income • 80% of sales for many industries • Global competitors should have positions in

all three areas• Few are strong in more than two!

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Challenges of Developed Markets

• High competition• Market fragmentation• Established brand and product loyalty• Aging populations• Labor costs are high• Government regulation (highest

product quality standards)

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Attractiveness of Developing Markets

• Latin America, Africa, the Middle East and parts of Asia

• Trade and investment liberalization• Market growth may be higher • Middle class growth• Competition may be less intense

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Challenges of Developing Markets

• Political risk• Weaker distribution infrastructures• Economic risk – Big fluctuations in

economies; currency and market volatility• Some trade and investment restrictions

remain• Middle class may still be small –

Predominated by small elite and large impoverished classes

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The Search Begins…

• Macrovariables – Describe total market in terms of

economic, social, geographic, political information

• Macrovariables are especially useful for determining which countries to reject!

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Geographic Indicators

• Size of country, in terms of geographic area

• Climatic conditions• Topographical characteristics

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Demographic Characteristics

• Total population• Population growth

rate• Age distribution of

the population• Degree of

population density

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Economic Characteristics

• Total gross national product• Per-capita income (also income growth

rate)• Personal or household disposable

income• Income distribution

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The Search Continues…

• Microindicators– Indicators (proxies) for specific markets

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Microindicators of Market Size

Televisions Scientists and

engineers Hospitals Physicians Coffee

consumption Hotel beds

Steel production Rice production Number of farms Electricity

consumption Passenger cars Telephones

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Other Criteria

• Political conditions• Competition• Market similarity

– The less the psychic distance the lower the risk

– But similarities can be overestimated• Canadian retailers in the USA (service levels

and pricing)

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Similarity to the United

States

Position in Investment Sequence

Canada 1 2United Kingdom 3 1France 5 4Japan 8 5Argentina 10 15Mexico 11 8Brazil 14 7Philippines 16 17South Korea 17 18