assessing and analyzing markets by dd

8/8/2019 Assessing and Analyzing Markets by DD

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Market Assessment Market Assessment

and Analysisand AnalysisDaniel F. DuranDaniel F. Duran

BSAD 350: International BusinessBSAD 350: International Business

Whittier CollegeWhittier College



Heineken Brews Up Global

Strategy

Within a few years of its founding, in 1864, Heinekenwas exporting beer to France, Italy, Spain, Germany,

and the Far East. In 1914 Heinekens managersdecided to export beer to the United States, andcontracted with Van Munching & Company todistribute its products in North America.

After World War II, Alfred Heineken came to New York to study marketing and advertising with VanMunching, and returned to the Netherlands in 1948with knowledge to help launch Heineken into otherforeign markets worldwide.



Heineken Brews Up Global

Strategy (cont.) Heineken has refused to establish a brewery in the

United States. Why?

Heineken learned from the experience of otherbreweries. Lowenbrau had begun to brew in the U.S.and sales began to drop. The beer was no longer animport and lost its cachet as an authentic Bavarianbeer. Heineken continues to ship its beer into theU.S. market even though it might be cheaper toproduce it there.

Heineken recently bought Van Munching & Company,and now owns its U.S. distribution arm outright.



Foreign Market Analysis

To successfully increase market share,revenue, and profits, firms must normally follow three steps:

Assess alternative markets

Evaluate the respective costs, benefits, and

risks of entering each Select those that hold the most potential

for entry or expansion



Selection of Foreign MarketsInitial Screening

Basic Needs Potential/Foreign Trade Investment

Second Screening

Economic and Financial Forces

Third Screening

Political and Legal Forces

Fourth Screening

Sociocultural Forces

Fifth Screening

Competitive Forces

Final Selection

Personal Visit



Initial Screening

Basic Need Potential Identify locales where product or service is

needed Foreign Trade and Investment

Assess similar products already in market

International Trade Statistics Yearbook (U.N.)

Limitations of Import data Foreign Exchange indexing

changing restrictions of liberties

import situation may change

political change



Assessing Alternative Foreign

Markets Market potential

The first step in foreign market selection is assessing market potential. Many publications provide data about population,GDP, per capita GDP, public infrastructure, and ownership of such goods as cars and televisions. Such data permit firmsto conduct a preliminary screening of foreign markets.

Levels of competition To assess the competitive environment, a firm should

identify the number and sizes of firms already competing inthe target market, their relative market shares, their pricingand distribution strategies, and their relative strengths andweaknesses, both individually and collectively.



Second Screening--

Financial and Economic Forces Inflation Rate

Exchange Rate Interest Rates (Nominal and Real)

Credit Availability

Volatility of all



Second Screening--

Financial and Economic Forces Market indicators

Measures of relative market strength

Market factors

Estimates demand for specific products



Second Screening--

Financial and Economic Forces Trend Analysis

Cluster Analysis All analysis should be updated regularly



Third Screening--

Political/Legal Forces Market entry barriers

Profit repatriation barriers Political instability

Taxes

Standards Price controls



Assessing Alternative Foreign

Markets (cont.) Legal and political environment

A firm may choose to forego exporting its goods to acountry that has high tariffs and other trade restrictions in

favor of exporting to one that has fewer or less significant barriers. Conversely, trade policies and/or trade barriers mayinduce a firm to enter a market via FDI.

Sociocultural influences Managers assessing foreign markets must also consider

sociocultural influences, which, because of their subjectivenature, are often difficult to quantify. To reduce theuncertainty associated with these factors, firms often focustheir initial internationalization efforts in countries culturallysimilar to their home markets.



Fourth Screening--

Sociocultural Factors Language

Regional Dialects

Education

Religious Attitudes

Holidays

Social Values



Fifth Screening--

Competitive Forces Size and strength of competitors

Competitors promotion methods Competitors product mixes

Prices

Distribution channels employed Market share distribution

Market coverage



Evaluating Costs, Benefits, and

Risks Costs

Two types of costs are relevant at this point: direct andopportunity. Direct costs are those the firm incurs in

entering a new foreign market and include costs associatedwith setting up a business operation. Opportunity costs arethose that result from entering one market as opposed toanothera firm forfeits or delays its opportunity to earnprofits in one market by dedicating its resources to another.

Benefits Among the most obvious potential benefits are the expected

sales and profits from the market. Others include loweracquisition and manufacturing costs, foreclosing of marketsto competitors, competitive advantage, access to newtechnology, and the opportunity to achieve synergy withother operations.



Evaluating Costs, Benefits, andRisks (cont.)

Risks

Generally, a firm entering a new market

incurs the risks of exchange ratefluctuations, additional operatingcomplexity, and direct financial losses dueto inaccurate assessment of market potential.



Final Selection Field Trip

Research local markets

Secondary data (UN IMF, WTO, et al)

Primary data Cultural problems

Technical problems

Research as a Reality Highly developed in Developed Countries

Less Developed Countries simpler and less of it

assessing and analyzing markets by dd

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