The New

Global Marketing

Country Selection and Market

Research

Chapter 6
 Outline
Preliminary Considerations
I. The Country Screening Process
II. Local Market Research
III. Local Sales Forecasting
IV. Takeaways
 Marketing and Materialism
• Consider the cultural belief that more goods
increase consumers’ standard of living,
satisfaction, and perhaps even happiness.
• There are cultural limits on the relationship
between material affluence and happiness.
– “Money can’t buy you love.”
• Will a new culture respond in a similar way to a
new product as the home country culture?
Average Annual Hours Worked Per Worker
Why work these hours? Individual wealth, improve society, family concerns…
How do “desirable” products change as free time changes?
Source: Organization for Economic co-operation and development
2400

2200

2000

1800

1600

1400

1200

Netherlands
Italy

Canada
Mexico

Japan

Denmark
Chile

United States
Israel

Finland
Portugal
Greece

Sweden
Korea

Ireland

Slovak Republic

Germany
Costa Rica

Russian Federation

Czech Republic
Poland

New Zealand

Switzerland
France
Spain

Australia

Austria
United Kingdom
I. The Country Screening Process
COUNTRY IDENTIFICATON reject

accept
PRELIMINARY SCREENING reject

accept

IN-DEPTH SCREENING reject

accept

FINAL SELECTION
(personal visit) reject

accept
Sales Forecasting
 Where Should IKEA Go Next?

IKEA store in Guangzhou, China

IKEA operates 370 stores in 47 countries with 2016 revenue of 35.1
Euros ($37.3 billion). Germany and the U.S. represent 28% of sales.

Ex. 6.1: Copyright © 2006 by Shutterstock/Rob Crandall.

 COUNTRY SELECTION PROCESS

KEY VARIABLES TASK STAGE DATA

SOURCES

Environment: Publ. country

data: Stage 1.

Political Risk ID set of candidate World Bank,

IMF countries

Terrorism United Nations

Preliminary Economic regime Pew, OECD

Trade bloc members KEEP REJECT

Screening Economic development Secondary data

Regulations Stage 2. Industry size,

growth
Preliminary
Tariff barriers screening Market shares,
Competitive intensity domestic
shares

KEEP REJECT

In-depth Cultural barriers Market

research Stage 3.
Market Social environment In-depth Consumer data
(on- screening
Screening Cultural distance line focus groups,

Country image Surveys)

KEEP REJECT

Stage 4.
Local trade practices Personal visit
Final
selection
Country Selection Process: Stages 1-2
KEY VARIABLES TASK STAGE DATA SOURCES

Environment: Publ. country data:

Stage 1.
Political Risk World Bank, IMF
ID set of candidate
Terrorism countries United Nations

Economic regime Pew, OECD

Trade bloc members KEEP REJECT

Economic development Secondary data

Regulations Stage 2. Industry size, growth

Tariff barriers Preliminary Market shares,

Competitive intensity screening domestic shares

KEEP REJECT
 Preliminary Screening: A Business
Environment?
• Data collected quickly for preliminary assessment
of a product or service:
– Physical environment (climate)
• Is there a market for the product and will it function well?
– Ex: Air conditioning for cars in Norway
– Sociocultural environment
• Are cultural and social factors aligned with product usage?
– Ex: Bikinis in Muslim countries
– Economic environment
• Is the level of development and infrastructure conducive?
– Ex: Big SUVs in Europe
– Trade blocs
• Does the country belong to a desirable trade bloc?
– Ex: Dell in Ireland-EU
 Country ID: Unpredictable Risk
• Terrorism, including kidnapping executives
• Epidemics
– Risk of outbreaks
• Political
– Political and military upheaval can change economic
rules and regulations overnight
– Expropriation, currency exchange and more.
Demonstration in Taksim Square, Istanbul, sparked by
plans to build on the Gezi Park.
Regardless of the cause, political unrest is
negative when evaluating a potential market.

Ex. 6.3: Copyright © 2013 by Shutterstock/Thomas Koch.

Country Selection Process: Stages 3-4
Cultural barriers Market research
Stage 3.
Social environment Consumer data (on-
In-depth
Cultural distance line focus groups,
screening
Country image Surveys)

KEEP REJECT

Stage 4.
Local trade practices Personal visit
Final
Finding agents, distributors selection Trade fairs,
Gov’t publications

COUNTRY SELECTED REJECT

 In-Depth Screening Criteria
• Market Size

• Market Growth

• Competitive Intensity

• Local trade regulations

 Market Size
• Size of potential target segment
– Population, age-groups, no. of households (B2B
number of businesses)
– Disposable income per capita
– Per capita spending on product category
• Product life cycle
– Stage of the PLC
– Potential saturation level
– Percent of saturation potential sold (penetration)
 Market Growth
• New potential buyers
– Population growth
– Growth in disposable income
• Market penetration (new actual buyers)
– Per capita spending growth in product category
– Growth in percent of total potential sold
• Existing buyers
– Growth in buying frequency
– Growth in buying amounts
 Competitive intensity
• Number of competitors, domestic and foreign
– Domestic companies, market shares
– Multinational competitors, market shares
• Market shares in the product category
– Domestic competitors
– Multinational competitors
• Own strength
– Competitive advantages
– Actual and potential market shares
 Local Trade Regulation
• Local barriers
– Infrastructure barriers (e.g. local transport)
– Cultural diversity, cultural distance
• Artificial barriers
– Regulatory barriers for the product category
– Non-tariff barriers (e.g. customs procedures)
– Preferential treatments by country of origin
Summarizing Country Attractiveness
• In-depth screening uses managerial judgment
based on research findings.
• Managers assign numerical scores to the most
important factors for market potential in each
country.
• Weighting factors on importance to success or
failure, each candidate country gets a
comparable summary score.
– Ex: How attractive is China to Under Armour?
 Country Factors Example
Preliminary Screening - China - Under Armour

Importance Rating
Weight Score(*)
Country factors 60%

Regulatory and Legal constraints 0.25 10

Tariffs, custom duties 0.25 20
Middleman barriers 0.15 20
Cultural barriers (religion, attitudes) 0.05 50
Infrastructure (incl. transportation, shopping malls) 0.30 30

Summed country score 100% 22.0

The score is a judgment rating from zero (extremely poor)

to 100 (extremely favorable) with 50 as a neutral rating.
 Market Factors Example
In-depth Screening - China - Under Armour

Market Attractiveness Factors Importance Rating

Weight Score(*)
Market factors 40%

Potential demand (willingness to buy, stage of PLC) 0.25 90

Current segment size (share of population able to buy) 0.20 50
Segment growth (combine existing, new buyers) 0.35 80
Your Competitive strength (brand, country-of-origin) 0.20 80
Summed market score 100% 76.5
Total Attractiveness Score 43.8
The market potential is high at a score of 76.5,
but the country-level constraints lower the overall
attractiveness to 43.8, negative.
 Country Characteristics
Vary by Product Life Cycle
[Type a quote from the document or
Feature Emerging New growth Mature

Life cycle stage Intro Growth Mature

Tariff barriers High Medium Low

Nontariff barriers High High Medium

Domestic competition Weak Getting stronger Strong
Foreign competitors Weak Strong Strong
Financial institutions Weak Strong Strong
Consumer markets Embryonic Strong Saturated
Industrial markets Getting stronger Strong Strong
Political risk High Medium Low
Distribution Weak Getting stronger Strong
Media advertising Weak Strong In-store
promotion
 II. Local Market Research
Problem Secondary data
definition
Exploratory Qualitative
research
Research Descriptive Consumer
design
surveys
Causal Trade surveys
Measurement/
scaling
Observation
Questionnaire
construction Experiments

Sampling Causal Models

Data
Fieldwork analysis
 Major Data Sources
• The Economist Intelligence Unit (EIU): Marketing in
Europe
• Business International: Consumption patterns
• Frost & Sullivan: Syndicated market research
• Euromonitor: European marketing data and statistics
• Bates Worldwide: Global scan, spending patterns, media
habits
• US Department of Commerce: Global market surveys,
overseas marketing reports
 Two Categories of Data
Primary Data
Data collected for your specific
purpose
• Tailored to the question
• Firsthand experience
• New/original research
• Time consuming
• Expensive
Secondary Data
Data collected by someone
else for some other purpose
• Saves time
• Large data possible
• Historical data
• Background work done
• May have some degree of
reliability and validity
• Provides a baseline
 A Five Step Process
1. Define the Problem

2. Analyze the Situation

Possible solutions
develop early
3. Collect Data

Avoid the typical

4. Interpret the Data mistake of collecting
data as the first step
“to see what we have”

5. Develop a Conclusion
Detailed Market Research Process
 Local Market Research
•Focus groups are standard for exploratory
research, often done online.
•Pros: Relatively inexpensive in foreign markets, can
be completed quickly, and can reach local pockets.
•Cons: Sample is unrepresentative because typical
screening criteria are incorrect in the new
environment or are not implemented correctly.
 The Internet and Big Data
• Online foreign market research speeds up data
collection and lowers the costs.
• Risks unrepresentativeness of the sample.
• Combine with face-to-face and intercept
interviews.
• Social media in emerging markets increases data
availability, especially verbal exchanges.
• “Big data” can provide a snapshot view of
consumer sentiments (“liked” brands, popular
spokespersons, reactions to new products, etc.)
Internet Usage Varies Widely So Secondary Data
Availability Varies Widely
• 1st 96.5% Iceland • 14th 86.3% Japan
• 15th 85.8% Canada
• 2nd 95.3% Bermuda
• 16th 85.3% Qatar
• 3rd 95.1% Norway
• 17th 84.8% Korea (Rep. of)
• 4th 94.8% Sweden • 18th 84.2% United States
• 5th 94.6% Denmark • 19th 84.0% Germany
• 20th 83.0% Australia
• 6th 94.0% Netherlands
• 57th 61.4% Russia
• 7th 94.0% Andorra
• 64th 58.5% Italy
• 7th 93.8% Liechtenstein • 74th 51.6% Brazil
• 8th 93.8% Luxembourg • 80th 48.9% South Africa
• 86th 45.8% China
• 8th 91.5% Finland
• 139th 15.1% India
• 9th 90.7% Monaco
• 173rd 1.9% Ethiopia
• 10th 90.0% Bahrain
http://www.internetsociety.org/map/global-internet-report/
Source: Internet Society Global Internet Report 2014 “Open and Sustainable Access for All”
 Survey Research
• Consumer surveys: Surveys of large (n = 500 and
above) random samples drawn from a sampling
frame of product users are vital.
• Cultural problems with consumer surveys:
– In high context cultures, one cannot fully understand
consumers from their responses to standard survey
questions.
– Informal face-to-face interviews are prone to bias due to
demand characteristics.
• Although problematic, surveys can still be useful.
 Trade Surveys
• Trade surveys of distribution channels and trade
associations provide a starting point for further
data gathering and analysis.
• In the U.S., the use of middlemen for information
about consumers is limited to sales and scanner
records of retailers and wholesalers.
• In countries with less social mobility and less
diversity than the U.S., key informants in the trade
are good sources of information about buyers.
 Measurement and Scaling
• In attitude scaling, basic factors can create
difficulties.
• Cognitive and emotional concepts measured
might not be equivalent across cultures.
• Measurement equivalence is questionable.
• Pre-test against native speakers’ understanding of
the concepts.
 Questionnaire Construction
• The questionnaire employed in typical consumer
surveys needs to be carefully pre-tested and
translated into the foreign language.
• It should then be back-translated for verification
and adjustment.
• In high context cultures, questionnaires are
typically longer to establish the proper context
for the questions.
 Uncertain Questionnaire Wording
British vs American English “Blanket” in Spanish
• Boot: Trunk • Spain: Manta
• Chips: French fries • Argentina: Acolchado
• Nappy: Diaper • Chile, Dominican Republic,
• Chemist: Pharmacist Peru: Frazada
• Fairy cake: Cupcake • Columbia, Ecuador,
Venezuela: Cobija
• Cuba: Colcha
• Costa Rica, Mexico: Sabana
http://www.speakinglatino.com/the-matrix-spanish-
http://www.english-zone.com/vocab/ae-be.html words-comparisons
Culture Influences the Simplest Questions
Q: Religion plays an important role and I go to
church regularly YES NO
• 75% in UK answered YES, yet only 10% attend church
regularly (religious is politically correct.)
• 30% of Italians answered YES, yet 55% attend church
regularly (Going to church has a big social component.)
Other
• Italians circle towards the ends of a scale.
• Germans circle toward the middle of a scale.
Source: Williams. S (1991) Constant questions or constant meaning, Marketing and Research Today.

How to compare results between these countries?

 Sampling
• Lack of comprehensive and reliable sampling
frames is a long-time problem.
• Firms that specialize in developing lists for direct
marketing and survey research is helping.
• Still, sampling equivalence can be questionable
because the appropriate profiles differ.
– “High” income in one country might not be “high” in
another.
 Fieldwork
• Typically handled by a subcontracting
marketing research firm, sometimes a full-
service advertising agency
• As economic growth occurs, mature markets
with differentiated demand requiring formal
and scientific market research applications
emerge.
Market researcher intercepting a shopping center customer.
On-the-spot interviews require pleasant interviewers and short questions.
Issue: What type of questions are you comfortable answering for this
researcher?
Ex. 6.6: Copyright © by Bigstock/andres.
 Market Research Companies Help
• Over 7000 market research companies
worldwide
• Insert new updated exhibit 6.7

Typical market search reports on the Microwave oven markets

http://www.euromonitor.com/microwaves
Source: Statista.com 2015
 III. Local Sales Forecasting
• Market potential: What could potentially be
achieved under “ideal” conditions
• Sales forecast: What is likely to be obtained
given the probable situation and contemplated
strategies
 Industry Sales and Company Share
• Industry sales: To develop a forecast of industry
sales, use determinants such as economic growth,
disposable incomes, social and political
development, and stage of the product life cycle.
– Because of currency fluctuations, unit sales are more
informative than dollar sales.
• Market share: The company market share forecast
is based on competitive advantages and
marketing effort
Sales Forecasting: Basic Equation

Forecasted company Forecasted industry Forecasted market

= X
sales (units) sales (units) share (proportion)

Forecasted Sales = Forecasted Industry Sales (units) X

Forecasted Market Share (proportion; ex: 23% share =
.23)
 Industry Sales: Role of the PLC
• Forecasting technique depends on the stage
of the product life cycle in the country market.
• Early stage: Lack of data means forecasting
becomes more subjective.
• Later stage: With data available, quantitative
forecasts are feasible.

[Type a quote from the document or

 Early PLC: Three Methods
• “Build-up” method
– Market sales estimated separately by individuals
knowledgeable about certain market segments .
• Judgmental method
– Experts are used and their estimates pooled (e.g.
Delphi method).
• Forecasting by analogy
– Sales of the product in one “lagging” country will show
similarities to sales in another “leading” country.
 Early PLC: “Build-up” Method
• Very early stage: Lack of data means
forecasting by each “expert” becomes more
subjective.
• Early stage: With data available, quantitative
forecasts are feasible.
– How many will each dealer sell?
– Where are sales people located and what is each
quota?
 Early PLC: Judgmental Method
• New and unique market conditions.
• “Experts” attempt to add rigor to arbitrary
guesses.
• Delphi method uses several rounds of
numerical forecasts towards a consensus.
Forecasting by Analogy: Lagging the PLC
Example: Yearly growth in ownership of TV sets
1945-1970
15

10

0
1945 1950 1955 1960 1965 1970

United United Germany,

States Kingdom West
 Mature PLC
• Forecasting industry sales can be more
mathematical and systematic.
• Time series extrapolation
–Method by which a time series of (sales) data observed
over periods in the past extends into the future.
–Primary requirements for statistical extrapolation of
foreign sales are:
• Data are available.
• Past events will continue into the future.
 Extrapolation by Regression
• Regression analysis for extrapolation:
– Sales = f (time)
– Run data: Sales = Y Years = X Y= c + bX
– c = starting level (the intercept)
– b = annual growth rate (slope)
• Ex: Industry sales = starting level + growth rate
x years
Mature PLC: Time Series
Regression
 Forecasting Market Share
• Forecasting market share requires forecasting competition.
• Strengths and weaknesses
– Financial capability of global competition from annual reports,
10K or corresponding stock exchange filings.
– Analyzing organizational structure and annual reports of global
competitors helps gauge their local strengths.
– For domestic competitors, interviews with local channel members
will be informative.
• Competitive signaling
– Monitor competitive signals in newspaper reports and public
announcements to gauge competitors’ intentions.
 A Simple Market Share Forecast
• Identify competitors.
• Forecast domestic competitors.
– One critical figure is the proportion of the market
available to favored domestic competitors.
• Foreign competitors.
– Forecast foreign competitors’ share.
– Include firms from the entrant’s home country.
• Own share.
– How much share can the company take from home
competitors?
Domestic and Import Shares Forecast
Domestic Share Import Country A

Import Country B

Import Country C

Firm 1 (Country C)

Firm 2 (Country C)

Firm 3 (Country C)

Import Country D
Summary: Basic Forecasting Equation

Forecasted company Forecasted industry Forecasted market

= X
sales (units) sales (units) share (proportion)

Forecasted Sales = Forecasted Industry Sales (units) X

Forecasted Market Share (proportion; ex: 23% share =
.23)
 IV. Takeaways
Evaluate country attractiveness by looking at:
• Market potential and growth
• Political developments
• Trading bloc membership
• Competitive intensity
• Entry barriers
 Takeaways
• Assess a country’s attractiveness by
weighing various factors against each
other. Calculate a summed score
comparable across countries.
• Consider alternative scenarios of
political developments and competitive
reactions to gauge how accurate the
summed score might be.
 Takeaways
• Local market research uses traditional methods
such as focus groups and survey research.
• Exercise care with language and cultural
differences in how people respond to surveys.
• Translate and back-translate questionnaires for
validity.
• Pre-tested concepts used against native
speakers to ensure measurement equivalence.
 Takeaways
• Local market research has benefited from the
broad penetration of the Internet.
• Online research has cut costs and increased
speed.
• The popularity of social media in new
countries has made big data available,
making it possible to analyze and track
foreign consumer sentiments in real time.
 Takeaways
• In sales forecasting, separate the industry
sales forecast from the market share
forecast.
• Whether quantitative data are useful
depends on the stage of the product life
cycle.
• For an entirely new market, forecasting by
analogy is often the best.