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6. Evaluating new markets 6.

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Criteria for evaluating new markets
Criteria for evaluating Criteria for evaluating industry markets
the geographical market in general inside the geographical market
Key figures Key figures
 Development of population  Development of quantities in total and per sub-market
 Development of GDP  Development of prices in total and per sub-market
 Development of GDP per capita  Development of market volume in total and per sub-
market

Legal restrictions for economic activities Market system
 Possible legal forms  Players
 Conditions for profit repatriation  Flows of products and services
 Conditions for sales (e.g. local production)  Flows of information
 Operations risks

Society Producers and traders
 Political system  Sub-markets
 Ethnic and religious groups  National and international competitors
 Languages  Wholesalers and retailers
 Demographic structure  Competitive intensity
 Cultural distance
 Political risks

Infrastructure Customers
 Traffic infrastructure  Customer segments
 Telecommunications infrastructure  Link between customer segments and sub-markets;
 Health care system industry segments
 Demand similarity

© 2012 R. Grünig/D. Morschett

6. Evaluating new markets 6.2

Process for evaluating new markets
= usual
1. Producing an initial list of potential new markets sequence
of steps
= most
important
possible
2. Eliminating the less attractive markets loops

3. Selecting the most attractive markets

© 2012 R. Grünig/D. Morschett

Morschett .6. Evaluating new markets 6. 2009) © 2012 R.3 China's BERI ratings 2001 to 2007 Year Combined Political risk Operations Remittance score index risk index and repatriation factor 2001 57 56 49 66 2002 58 56 50 67 2003 58 56 50 69 2004 59 56 51 70 2005 60 56 52 71 2006 61 57 53 72 2007 61 57 53 73 (BERI. Grünig/D.

2011) © 2012 R.4 Capacity shares of Holcim. Evaluating new markets 6. Lafarge and Cemex in selected markets in 1999 Country Holcim Lafarge Cemex Total Argentina 38% 11% 0% 49% Canada 19% 33% 0% 52% France 13% 34% 0% 47% Indonesia 0% 3% 44% 47% Mexico 19% 4% 65% 88% Philippines 38% 21% 22% 81% South Africa 36% 26% 0% 62% Spain 10% 19% 27% 56% Venezuela 25% 24% 41% 90% (adapted from Bartlett/Beamish. Grünig/D. Morschett .6.

F and G Country H = potential new markets = no potential new market © 2012 R. Evaluating new markets 6. Grünig/D.5 Initial list of potential new markets Industries Industry Industry Industry Geo.6. market I market II market III graphi- cal market Country A Country B Region C1 in country C Rest of country C Country D Country group E. Morschett .

Grünig/D. F and G Country H = potential new markets = no potential new market © 2012 R. Morschett . Profit … Market Size of … Market Size of … Market Size of … graphi. sub- cal market growth Index factor market market market Country A Country B Region C1 in country C Rest of country C Country D Country group E.6 Summary of market data Industries General information for Industry Industry Industry geographical market market I market II market III Geo. GDP per Real Political Opera.6. Evaluating new markets 6. capita annual risk tional repatria. sub. size relevant size relevant size relevant GDP Index risk tion sub.

7 Comparison of three car part markets Number of cars Country A Country C Country B = current situation Average age = expected position in of cars five years © 2012 R. Grünig/D. Morschett . Evaluating new markets 6.6.

sub. Morschett .6. Grünig/D. Evaluating new markets 6. Profit … Market Size of … Market Size of … Market Size of … graphi. GDP per Real Political Opera.8 Remaining markets after the first round Industries General information for geographical Industry Industry Industry market market I market II market III Geo. size relevant size relevant size relevant GDP Index risk tion sub. capita annual Risk tional repatria. sub- cal market growth Index factor market market market Country A Country B Region C1 in country C Rest of country C Country D Country group E. F and G Country H = potential new markets = no potential new market = eliminated in the first round © 2012 R.

competitors Company Foreign Customers.6. Option A traders. Option B branches traders. competitors Company Agency Local Customers.9 Managing the cultural barrier in international market research Company Agency Customers. 2009) © 2012 R. Evaluating new markets 6. Morschett . competitors Cultural barrier (adapted from Cateora/Gilly/Graham. Option C agencies traders. Grünig/D.

Germany. Grünig/D. 2005) © 2012 R.speaking 26 69 72 56 40 Switzerland Germany 35 67 66 65 31 France 68 71 43 86 39 China 80 20 66 30 118 (Hofstede/Hofstede.6.10 The five cultural indices of Hofstede for Switzerland. Evaluating new markets 6. Morschett . France and China Individualism Indices Uncertainty Masculinity orientation Long term avoidance distance Power Countries index index index index index French .speaking 70 64 58 70 40 Switzerland German .

Germany. Grünig/D.11 Cultural differences between regions of Switzerland.French 44 5 14 14 0 77 Switzerland German Switzerland - 9 2 6 9 9 35 Germany French Switzerland - 35 3 8 5 9 60 Germany German Switzerland - 42 2 29 30 1 104 France French Switzerland - 2 7 15 16 1 41 France German Switzerland - 54 49 6 26 78 213 China French Switzerland - 10 44 8 40 78 180 China © 2012 R. Morschett . Evaluating new markets 6. France and China in individua- Indices in long term masculinity Differences Differences Differences Differences Differences uncertainty differences orientation avoidance differences in power distance Countries Total lism Differences in in German .6.

2012) © 2012 R. car sharing income buying company companies Product their first cars group car Micro cars X X Sub- compacts X X X X X X Compacts X X X X X X X 4-wheel sub-comp. Grünig/D.12 Industry segments in the European market for low budget cars Customer Families Young Purchasers Retired Companies Crafts-men Car rental + Farmers group with low people of a 2nd car persons providing etc. X X X X X X 4-wheel compacts X X X X X X X X Cheap minivans X X Cheap cabriolets X X X Second hand cars X X X X = important in terms of volume = industry segments (Grünig. Morschett .6. Evaluating new markets 6.

ETC group. Evaluating new markets 6. 839 1. Morschett .500 4.6.800 market Figures in billion USD (Deloitte. Grünig/D.13 The largest retailers for food and near food Company Country of Revenue from Revenue from origin food and near food and near food 2004 food 2009 Wal-Mart USA 288 405 Carrefour France 99 120 Tesco UK 65 90 Total for top ten . 2011. 2005) © 2012 R.087 Total world . 3.

the target tive distribu. Morschett .14 Scoring model for selecting the most attractive markets Option Criteria Overall evaluation Industry Cultural Size of the Growth of Competi.5 II 2 4 3 2 4 38 Scores: 4 = very positive.6.market graphical graphical markets sub. 3 = positive. intensity tion market market markets channel Importance of the criteria 2 3 2 2 3 A I 2 4 3 4 3 39 32 III 2 2 2 3 3 25 C1 I 3 2 2 1 2 26 II 3 3 1 2 1 24 24 III 3 1 3 2 1 22 Rest of C III 3 2 2 3 1 25 25 E. 1 = low © 2012 R. 2 = medium. F + G I 2 4 2 4 3 37 35. Grünig/D. Access to Industry Geo- Geo- market distance target sub. 1 = very negative Importance of the criteria: 3 = high.5 II 2 3 3 3 3 34 H I 2 1 2 2 2 21 29. 2 = negative. Evaluating new markets 6.

Morschett .1 Different alternatives within exporting Manufacturer Export firm Buyer Manufacturer Buyer Agent Manufacturer Buyer Manufacturer Distributor Buyer Sales representative Manufacturer Buyer Manufacturer Sales branch/ Buyer subsidiary Border = Company = Partners/customers © 2012 R.7. Evaluating market entry modes 7. Grünig/D.

Evaluating market entry modes 7. Eliminate the less suitable entry modes based on external and internal conditions 2. Grünig/D.7. Morschett .2 Process for evaluating market entry modes 1. Select the best suitable entry modes based on a detailed evaluation © 2012 R.

Evaluating market entry modes 7.3 Matching market attributes. Morschett . Grünig/D.7. internal attributes and entry modes Market Market attractiveness attractiveness Production Joint Joint Production high subsidiary venture high venture subsidiary (Direct) Licensing Indirect Direct export/ low low export export Licensing low high Market low high Compe- barriers titive (Zentes. 1993) strengths © 2012 R.

4 Scoring model for selecting the market entry mode Criteria Importance of Options the criteria Export via Export via sales Licensing distributor subsidiary Control over marketing 2 1 4 2 Control over after-sales service 2 2 4 2 Required financial resources 3 4 2 4 Requires management resources 1 4 2 3 Production costs 3 1 1 4 Custom duties to be paid 2 1 1 4 Flexibility to switch entry modes 1 2 3 2 Access to distribution channels 3 4 2 4 Risk of knowledge dissemination 2 2 4 1 Overall evaluation 45 46 59 Scores: 4 = very positive. Grünig/D. 3 = positive. 2 = medium. 1 = low (adapted from Mühlbacher/Dahringer/Leihs.7. 2 = negative. 2006) © 2012 R. Evaluating market entry modes 7. 1 = very negative Importance of the criteria: 3 = high. Morschett .

Grünig/D.8.3.Developing Developingthe feasibility market studies for entering the attractive country markets entry programs © 2012 R. Developing the internationalization strategy 5. Determining the market entry modes for the attractive markets 3. Preparing the strategy planning project sequence of steps = most important 1.3. Developing an internationalization strategy for new markets 8. Morschett .Developing Developingfeasibility feasibilitystudies studiesfor forentering enteringthe theattractive attractivecountry countrymarkets markets 4.IfDeveloping feasibility needed: Signing studies for agreements entering with the attractive country markets partners 6.3. Evaluating potential markets and selecting the most attractive ones possible loops 2.1 Process for developing an internationalization strategy for new markets = usual 0.

F + G I II H II = selected entry mode = entry mode which would fit best © 2012 R.entry mode combinations as result of Step 2 Most attractive markets Entry modes Geographical Industry markets Production Sales Distributor markets subsidiary subsidiary A I III E. Grünig/D. Morschett .8.2 Market . Developing an internationalization strategy for new markets 8.

Developing an internationalization strategy for new markets 8.1 Order of entering the industry markets 7. Morschett .2 Steps and time needed for building up activities in industry market A 7.1 Human resources 5. Budget 9.2 Revenues 10. Responsibilities 9.8.2 Assets 5. Served industry markets 2. Economic evaluation © 2012 R. Market entry mode(s) 3. Resources needed 5. Marketing plans for the served industry markets 4.3 Working capital 6. If needed: Partner(s) 4.3 Table of contents of a feasibility study for entering a country market 1.1 Expenses including investments 9.1 Industry market A 4.1 Industry market A 6.2 Industry market B 7. Quantitative objectives 6. Measures 7.2 Industry market B 5.3 Steps and time needed for building up activities in industry market B 8. Grünig/D.

NPV options count rate Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Market A with wholly owned -1. Grünig/D. F + G with sales -600 +90 +120 +150 +150 +150 +150 +150 +150 9% +160 subsidiary Market H with -400 +60 +80 +100 +100 +100 +100 +100 +100 8% +131 sales subsidiary Figures in 1. Morschett . Developing an internationalization strategy for new markets 8.000 EUR NPV = net present value © 2012 R.8.500 +150 +200 +250 +250 +250 +250 +250 +750 10% -58 production subsidiary Market E.4 Net present values of market entry options Market entry Free cash flows Dis.

Responsibilities 6.8. Entry modes and. Morschett . Quantitative market objectives 4. Country and industry markets to build up 2. if needed. Developing an internationalization strategy for new markets 8. partners 3. Grünig/D. Investment budgets and free cash flow targets © 2012 R.5 Table of contents of an internationalization strategy for new markets 1. Timetable 5.

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