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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Indicators Suitable for Global Assessment(Figure 4.2 Foley,2004)
Macroeconomic Indicators
GDP
GDP growth Inflation rate
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Indicators Suitable for Global Assessment(Figure 4.2 Foley,2004)
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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Indicators Suitable for Global Assessment(Figure 4.2 Foley,2004)
Environmental Indicators
Climate
Geography
Infrastructure (transportation,
telecommunications)
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Indicators Suitable for Global Assessment(Figure 4.2 Foley,2004)
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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Source: Center for International Trade
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."
Source: Center for International Trade
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Source: Center for International Trade
Development Exporting Basics
http://www.citd.org/startup/eb/page.cfm?
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.
Criteria For High Potential Markets
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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Criteria For High Potential Markets
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
Industry Subsector Analyses.
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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Criteria For High Potential Markets
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
Industry Subsector Analyses.
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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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
Source: Center for International Trade
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Source: Center for International Trade
Development Exporting Basics
http://www.citd.org/startup/eb/page.cfm?
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).
Source: Center for International Trade
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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Source: Center for International Trade
Development Exporting Basics
http://www.citd.org/startup/eb/page.cfm?
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/