Ch 4
Export Market Selection
Export Market Selection
The process of opportunity evaluation leading to the selection of foreign markets in which to compete.
Identifying the right market is important
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 companys ability to coordinate them. Establishing bases at appropriate foreign markets can be a major dimension in global positioning strategy.
Market Segmentation
Breaking down the market for a particular product or service into segments of customers which differ in terms of their response to marketing strategies. Export Market Segmentation : 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:
Measurability
Accessibility
Profitability
Actionability
Measurability
Is the degree to which segments can be identified and to which the size and purchasing power of the segments can be measured
Fx : is there statistic on age 16-26 in Europe
Accessibility
Is the degree to which the resulting segments can be effectively reached and served
Fx : are there medias to promote our business
Profitability
Is the degree to which the resulting segments are large / profitable enough to be worth considering for seperate marketing attention
Fx: Quality standard ,Tax
Actionability
Is the degree to which seperate effective programs can be formulated for attracting and serving the segments.
Fx: resource and companies capability
Market Expansion Policy
Market Selection Process Market Selection Procedure Market Selection Strategy
REACTIVE
- Exporter acts passively in choosing markets by filling unsolicited order on the part of foreign buyers - Selection process is informal, unsystematic and purchase oriented
PROACTIVE
- Exporter acts actively in initiating the selection of foreign markets - Selection process is systematic and formalized
Cont
- Exporter apply the proactive strategy to what are considered primary markets - Exporter apply the reactive strategy to what are considered secondary markets
Market Selection Procedures
Expansive Methods Contractible Methods
MARKET SELECTION PROCEDURES 1. Expansive Method - Select market based on similarities - Minimum adaptation
- Approaches: a. Geographic proximity b. Trade policy proximity
a. Geographic Proximity
- Nearest neighbor approach - Similarity in economic, political, sociological and cultural standing - Less adaptation needed - Targeted market can be treated as base market area - Fx : Asian (Malaysia, Singapore, Thailand) b. Trade Policy Proximity - Established a common market and economic union structure - The exporter has essentially a home market situation in all member countries - Tax conditions
MARKET SELECTION PROCEDURES
2. Contractible Method Starting with large number of markets then the markets are first organised on the basis of general market and product by screening and ranking
Steps for market screen
Geographic segmentation Customer segmentation
MARKET SELECTION STRATEGIES a. Market Concentration Strategy
b. Market Spreading Strategy
Market Concentration Strategy
Market A
Market B
Marketing resources
a. Market Concentration Strategy
- Slow and gradual rate of growth in number
of market served by a company - Channeling available resources in to a small number of market - Devoting relatively high levels of marketing effort and resources - To win significant market share
b. Market Spreading Strategy
- Fast rate of growth in the number of market
served at the early stage of expansion. - Allocating marketing resources over a large number of markets - To reduce risks of concentrating resources - Exploit the economics of flexibility
Market Spreading Strategy
Market A
Market B
Market C
Market D
Market E
Marketing resources
Concentration vs. Spreading
Concentration
Advantages: - power of specialization, and market penetration; - greater market knowledge; - higher degree of control; - learning of the export process and the experience curve
Spreading
Advantages: - flexibility; - less dependence on particular markets; - lower perception of risk.
Marketing Factors
Factors favoring market spreading
Factors favoring market concentration
- Low communication costs for additional markets; - Low order handling costs for additional markets - Low physical distribution costs for additional markets - Standardized communication in many markets
- High communication costs for additional markets; - High order handling costs for additional markets - High physical distribution costs for additional markets - Communication requires adaptation to different market
Market Factors
Factors favoring market spreading
Factors favoring market concentration
- Small markets-specialized segments - Unstable markets - Many similar markets - New or declining markets - Low growth rate in each market - Established competitors have large share of key markets - Low source loyalty
- Large markets-high volume segments - Stable markets - Limited number of comparable markets - Mature markets - High growth rate in each market - Large markets are not excessively competitive - Key markets are divided among many competitors
Company Factors
Factors favoring market spreading
Factors favoring market concentration
- High management risktaker - Objective of growth through market development; - Little market knowledge
- Low management riskconsciousness; - Objective of growth through market penetration; - Ability to pick best markets.
Product Factors
Factors favoring market spreading Factors favoring market concentration
- Limited specialist uses; - Low volume; - Non-repeat; - Early or late in product life cycle; - Standard product salable in many markets
- General uses; - High volume; - Repeat-purchase product; - Middle of product life cycle; - Product requires adaptation in different markets
Foreign market portfolios: techniques and analysis
Standardized approach to portfolio analysis
Portfolio analysis is to evaluate degree and nature of international involvement. BCG (Boston Consulting Group) model considers market strength and market attractiveness. Portfolio model to export market selection decisions Standardized portfolio models do not include risk dimension. Advantages: early consideration of companys strengths/weaknesses helps determine primary role of each market.
