Lecture 4 Export Market Selection Export Market Selection

Lecture 4 Export Market Selection

Export Market Selection n The process of opportunity evaluation leading to the selection of foreign markets in which to compete.

Identifying the right market is important n n n Target market decisions are antecedent to the development of foreign marketing programs and thus, cost of marketing. The nature and location of its markets will affect a company’s ability to coordinate them. Establishing bases at appropriate foreign markets can be a major dimension in global positioning strategy.

Market Segmentation n n Breaking down the market for a particular product or service into segments of customers which differ in terms of their response to marketing strategies. The firm can tailor its marketing policies to the need of each specific segment, hoping to obtain greater profits than are possible by following a uniform strategy aimed at the entire market. (Switzerland, USA)

Export Market Segmentation n Because of differences in the economic, cultural and political environments between countries, international markets tend to be more heterogeneous than domestic markets.

Export Market Segmentation Evaluation should be done by means of: n Measurability n Accessibility n Profitability n Actionability

Measurability n is the degree to which segments can be identified and to which the size and purchasing power of the segments can be measured

Accessibility n is the degree to which the resulting segments can be effectively reached and served

Profitability n is the degree to which the resulting segments are large / profitable enough to be worth considering for seperate marketing attention

Actionability n is the degree to which seperate effective programs can be formulated for attracting and serving the segments.

Bases of Segmentation n n General market indicators Specific product indicators

Market Selection Process n Reactive Market Selection: characterizes a situation where the exporter acts passively in choosing markets by filling unsolicited orders or awaits initiatives on the part of foreign buyers, represantatives or other export change agents who indirectly select the market for the company.

n Proactive Market Selection: is marketing oriented. The exporter is active in initiating the selection of foreign markets and the further customers segmentation of these markets.

Market Selection Procedures n n Expansive Methods Contractible Methods

Expansive Methods n Market selection over time is based upon similarities between the national market structures of a political, social, economic or cultural nature, so that the export marketer expands from one market to the next, introducing a minimum of further adaptation to the product as well as other export marketing parameters.

Experience based market selection n n Nearest neighbour approach Temperature-gradient approach

Nearest neighbour approach n n n n n Immediate neighbouring markets seem to be the optimal expansion area because of a high degree of similanty in economic, political, sociological and cultural standing. No need to adapt products. Scandinavian British Isles South Pasific Area (Austria+N. Zealand) North America North Africa Gulf Andean (Bolivia, Chile, Ecuador, Peru, Colombia) Asian

Temperature-gradient approach n n Cluster the countries as super hot/moderate/cold. (Papadopulos&Jansen 94) According to 7 variables: Political stability + market opportunity + economic development and performance + cultural unity +legal barriers + physiographic barriers + geocultural distance Markets become poorer, GNP declines Economic indicators: such as steal & energy consumption decrease

7 screening criteria(Russow 1993) n n n + Market size growth (Product specific) + trade + level of economic developments + population density + infrastructure +capital spending

Contractible Methods n n Optimal market selection starts with the Total # of or a large # of national markets, which are eventually broken down into regional groupings on the basis of political economic, language, or other criteria Eliminate least promising markets.

In summary 1. 2. List feasible countries (by preliminary screening) Determine which country char’s are to be used and how to weigh them? ¡ ¡ ¡ 3. 4 Types of variables are examined Operating risk Market potential Cost Potential local and foreign competition. Score the countries according to step (2) and Rank them.

Market Selection Strategies 1 - Market concertration 2 - Market spreading

Market Expansion Strategies by market concertration : drawn by power of market specialization 1. ¡ ¡ ¡ by market spreading: based on greater flexibility 2. ¡ ¡ n n n scale&market peretration greater market knowledge higher degree of control less dependence on patricular export markets lower perception of risks and uncertainity Product factors: Volume, frequency, diversity. Life cycle, repeat purchase. Environmental factors: Market size, growth, stability, degree of market uncertainity, heterogerity, competition, loyalty of buyers. Export marketing factors: Cost of sewing a market, nature of these losts, operational cost.