Step 3: Identify / Select

Foreign Markets

 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?

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 independent

analysis

Global Indicators
Trade Barriers
Tariff Barriers
Non tariff Barriers

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

Market Selection Model (Proactive)

1.
2.
3.
4.

Develop indicators to assess market (s)

Rate indicators
Weight each indicator
Compare countries Analyze results

Market Selection Model

Country

Country
1

Country
2

Indicator 1

Weight

Points

Indicator 2

Weight

Points

Indicator 3

Weight

Points

Total

Key Identify
Best Indicators
Global Environment Indicators
Demographic
Macroeconomic
Government Policies
Environmental
Industry Specific

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

Indicators Suitable for Global Assessment

Macroeconomic Indicators
GDP
GDP growth
Inflation rate

(Figure 4.2 Foley,2004)

Indicators Suitable for Global Assessment

(Figure 4.2 Foley,2004)

Government Policies
Import tariffs
Currency exchange controls
Non tariff trade barriers (technical standadrs, labeling
requirements, documentation)
Intellectual property rights protection (patents,
copyrights, trademarks, trade secrets)
Political risk (stability)
Investment policies and protections
Labor practices and restrictions
Taxation

Indicators Suitable for Global Assessment

Environmental Indicators
Climate
Geography
Infrastructure (transportation,
telecommunications)

(Figure 4.2 Foley,2004)

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 to
consumer)
Substitute products (use of products not directly competing but
used as a substitute)
Growth of the industry
Stability of the industry
Risks of the industry

Narrow List of Indicators

Market Size
Market Growth
Market Accessibility
Economic Stability
Political Climate
Cultural Climate
Environmental Factors
Geographical Factors

Market Size

When examining market size, look at the overall population. Then, estimate
the percent of potential buyers within that population. Look at the numbers
that suggest how much the population spends on this type of import. While
doing so, identify if there are domestic or international competitors already
providing a similar product. If there are, what is the production rate of each?
If possible, determine the price your competitors are charging, and compare
your product's price and quality against theirs.
Entering smaller markets where few competitors have set up shop may give
you the opportunity to start at the "ground" floor and grow with the market.
However, if you enter smaller markets beware of the barriers you may
encounter as a result (e.g., transportation and political infrastructure
problems).
In researching demographics, look at the unemployment trends and
educational levels of consumers in the target market. The more
sophisticated the target market, the more difficult it may be to compete. Also
identify the language and dialects spoken within a particular

Market Growth

Examining the growth of the market over the last few years will tell you if it is
consistently growing or shrinking. Look at the last three to five years of
import history for your product (if available) within a given market. Also look
at trends and growth forecasts. What do they tell you about the market and
its potential for growth? Has it reached its peak? Is the market saturated
with like products? Are the number of imports increasing or decreasing? If
the numbers are increasing consistently, this indicates that the market is
expanding. Seriously consider markets that are larger with strong growth
potential to increase profit margins and reduce production costs.
Also consider the industrial development stage of your market. Those that
are just beginning to industrialize may not have need for the latest
technology. However, some markets developing industrially may take
advantage of the progress made in more developed markets and leap
ahead bypassing earlier innovations and adopting later technology to help
build their infrastructure (e.g. the Middle East is considering fiber optics for
telecommunications instead of copper wire due to its quality and price
structure).

Market Accessibility

Many factors influence market accessibility. The following is not an

exhaustive list, but it may help you assess how accessible the market is to
you 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 tariff
rate, contact a trade agent to help you identify the Harmonized Tariff section
which corresponds to your product. Remember, each country has its own
schedule of duty rates.
Local and foreign suppliers may influence your marketplace accessibility.
Be sure you know who your international competitors are. Compare the
price and quality of your product with the competition's.
Sales representatives located within the country to which you wish to export
can represent your product and act as an intermediary. Representatives
may be able to give you ideas of the best ways to access the market and
customers 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 (and know
about) your product.

Economic Stability

Many factors affect economic stability of a marketplace (and country).

Determine if the economic climate is thriving or diving? Recessing or
growing? If possible, identify the GNP growth rate and per capita income.
Also, ascertain the unemployment rate of the country. This will affect how
much of the market can actually spend money to buy your product. Markets
that are stable and growing are obviously more attractive to conduct
business 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 in
which you will sell your product? Besides unequal access to the dollar,
another factor that may keep your customers from purchasing your product
may be a trade deficit, which could be important if customers are able to
obtain import permits.
Lastly, note that foreign countries undergoing economic and industrial
development may not collect and disseminate trade statistics. If they do,
these statistics may be in a form that cannot be easily interpreted. When
such important market information is missing or not understandable, consult
a trade agent or eliminate the market.

Political Climate

Many questions must be asked regarding the political climate of a potential

market. Such questions include:
On what type of political system is the country and market based? Is the
system 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

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 your
target markets will increase your success in the international marketplace.
Although the international business language is English, it may not be that
way for long. It is to your advantage to speak the native language of your
customer and understand his or her culture in order to communicate more
effectively. Make sure you utilize your staff resources to their fullest to
accomplish this task.
Customs and culture also affect consumption of goods. Factors like colors,
numbers, and communication fit this category. For example, when
considering product or promotional gift colors, keep in mind that white is the
color of death in China and Korea, whereas purple is seen in the same light
in Spain. In the U.S. yellow implies cowardice, whereas it takes on religious
and mystical undertones in India. Study the cultural differences of the target
markets and of your own. You may be surprised how a product that is fully
accepted by a U.S. market is negatively rejected by its foreign counterparts.

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 in
transit or as it is used or consumed.

Geographic Factors
Geographic factors can also affect your success
in a given foreign market. Such factors include,
transportation to the country or market and legal
restrictions 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 and
more remote the distance is to the market, the
more the transportation and travel costs will be.

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

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. of

Commerce
Trade Associations
Publications, Industry Journals & Periodicals
Foreign Phone Books
Networking

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 industries
considered "best-prospects" worldwide, based
on recommendations of U.S. commercial officers
in each country. BMRs identify the
largest/fastest growing markets for selected
industries in one convenient matrix and give a
brief rationale for each country's selection as a
"best prospect."

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 in
particularly promising countries. ISAs are product-and
country-specific market surveys written by U.S.
commercial staff abroad. They discuss overall demand
trends; best sales prospects within the subsector; key
end-user segments; major competitors; and relevant
business conditions, practices and market barriers. They
also identify useful government and industry contacts,
including importers and distributors. ISAs offer
corroborating information for columns 8-10 in the Export
Promotion Matrix (market share, product receptivity,
competitive situation, and market access) and are even
more telling than BMRs because of their product
specificity

The "best" markets to export offer a combination of high

comfort for your company and high potential for your
products.
High-comfort markets are those you're personally close
to in 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 to

be:

large,
emerging or fast-growing markets,
high receptivity to products like yours;
limited local or foreign competition;
no significant market barriers.

Criteria For High Potential Markets

1. Where are comparable products
exported? 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 USITC DataWeb
for official U.S. export/import statistics by
commodity and country.
http://dataweb.usitc.gov/

Criteria For High Potential Markets

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 Statistics
http://www.intracen.org/menus/products.htm;
Best Market Reports and Industry Subsector
Analyses.

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.

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 market
barriers.
Source: Best Market Reports and Industry
Subsector Analyses.

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-tariff
barriers include import quotas or restrictions on quality of imports.
International Standards promoted by the International Standards
Organization (ISO) involves establishing quality manufacturing and
service standards, and certification and monitoring world wide.
Originally advocated by the European Union, around 100 nations are
now considering adopting ISO processes, as seen in the IS0 9000 (a
generic family of standards and quality control systems).
Communication may be a problem if you do not speak your potential
customer's language.
Distribution arrangements may present barriers if the market has
not yet been explored by other U.S. businesses.
Whether or not patents and trademarks exist on similar products or
property in that country

Approaches to identifying foreign

market opportunities
Use existing distributors as a source of information about
developing market opportunities. There is no better way
to learn about viable export chances than through
someone who is already participating in exporting.
Direct promotion to prospective distributors or other
customers. Getting your name and desires out to people
you would like to work with is a good way to generate
business opportunities.
Participate in overseas trade fairs and shows. This
exposes you to more potential business partners than
you might have thought of, and vise versa.

Market Potential Matrix

1

Country 1 XX
Country 2 X

Country 3

XX

XX

XX

XX

XX

XX

XX

Key: Columns/Criteria
1. Largest export markets, latest year
2. Fastest growing export markets, latest year
3. Largest importing countries, latest year
4. 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:

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" markets

of interest, identify the major supplier countries,
and compare competitor country market shares.
Each country compiles and publishes its own
import statistics. The United Nations also
consolidates and publishes the data, but in
broader product categories and on a less current
basis. Alternative sources are specific market
research reports that extract and analyze the
data (e.g., Best Market Reports and Industry
Subsector Analyses).

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/import statistics compiled by the U.S. Census
Bureau. The Commodity-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. The Country-by-Commodity series shows all
products exported to or 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 and fastest growing U.S. exports to a
particular country. Individual tables can be downloaded to a
spreadsheet. Once in the spreadsheet, you can do whatever
calculations and sorting you wish (e.g., growth rates, rank
ordering, projections, etc.)..