Market Potential Indicator

1

This paper will present a brief introduction about the Market Potential Indicatior (MPI) and its components. Moreover, a hypothetical case study of company that markets laptop computers will be analyzed with respect to the indicators of MPI. Lastly, the paper will evaluate which countries would be an ideal market for such a company. MPI has been formulated after considering a number of indicators and is used to compare emerging markets with one another. The significance of MPI has increased due to the effect of globalization, as companies are looking to invest in new and emerging markets. For this purpose MPI has become vital for such companies and greatly influences their decision to market their products in foreign countries. There are eight components or indicators in total that define MPI, which includes market size, commercial infrastructure, economic freedom, country risk, market consumption capacity, market growth rate, market intensity and market receptivity (Banks and Banks, 2005, Heisinger, 2009). The first indicator, market size, signifies the percentage of the population living in urban areas and their average electricity consumption. The second indicator is growth rate, which presents the historical data on a particular product. The third indicator of market consumption capacity presents an analysis of national consumption and income. The fourth indicator is the commercial infrastructure, which demonstrates the technological capabilities of the target market. The fifth indicator is the economic freedom and relates with the degree of political freedom for the residents of the target nation. The sixth indicator is the market intensity and provides a summary of the consumption of gross domestic product in the private sector. The seventh component of MPI is country risk, which signifies the factors that can deem an investment low-risk or high-risk for a particular country. Political, religious and other similar factors account for this. The final indicator is the market receptivity, which measures the amount of imports with respect to gross

Market Potential Indicator

2

domestic product to determine the willingness of country to foreign products. The combination of all these indicators is used to formulate the MPI (Heisinger, 2009). For the hypothetical case study of a company that market laptop computers to international consumers, I believe that the most important indicators are the market consumption capacity and market growth rate. As laptop computers have become a necessity all around the world but the pricing of their product is very important. The market consumption capacity should be used to set the prices, otherwise the company might find it difficult to attract consumers. The growth rate will demonstrate how well other similar companies are performing and will help the selected company to measure the competition in the market. Moreover, the commercial infrastructure is also important because countries with less developed infrastructure might not be willing to make use of all the features introduced by the company in their products. So they might have to produce custom laptop computers to meet the requirements. Lastly, country risk is always an important indicator for any foreign company. As political uncertainly will always make it difficult for foreign investors to invest in a particular region (Vance, 2003). Comparing the MPI indexes from the list of countries and emphasizing mostly on the four indicators mentioned above, it can be said that the markets of India, South Africa, and Singapore are the most well suited for this company to market their laptop computers. These countries have shown positive figures in the market growth rate and consumption and have a sufficient market consumption capacity. The technological state of these countries is perfectly apt for laptop computers and the political scenario in these regions is very stable. Overall, the MPI index for these countries is also very good.

Market Potential Indicator

3

References Banks, N. and Banks, A. 2005. Management Accounting: Principles and Applications, McGraw-Hill Australia. Heisinger, K., 2009. Essentials of Management Accounting, South-Western Cengage Learning. Vance, D. E., 2003. Financial Analysis and Decision Making, The McGraw Hill Companies Inc

Sign up to vote on this title
UsefulNot useful