International Business: The Challenges of

Globalization
Ninth Edition, Global Edition

Chapter 12
Analyzing International
Opportunities

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Learning Objectives
12.1 Explain the importance of examining basic appeal
and national factors.
12.2 Describe how companies measure and select a
market or site.
12.3 Identify the main sources of secondary market
research data.
12.4 Describe common methods used to conduct primary
market research.

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Starbucks Causes Global Jitters
• Starbucks (www.starbucks.com)
– 24,000 retail stores in 70
countries
• Success rooted in market research
• Starbucks had struggled in recent
years
• Rebounded nicely
– A renewed focus on its core
product and on its image as a
socially responsible multinational
business

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Starbucks Causes Global Jitters

• Seattle, Washington—Starbucks (www.starbucks.com) began its

global journey in 1996 with its first coffeehouse in Tokyo, Japan.
Today, Starbucks has 24,000 retail stores in 70 countries.
• Starbucks carefully researched Europe’s markets before opening its
first European café in Zurich and then branching out to other nations.
• Starbucks had struggled in recent years, but the company now has
rebounded nicely as a leaner version of its former self. It has a
renewed focus on its core product, coffee, and on its image as a
socially responsible multinational with its “Shared Planet”
commitment.

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Screening Process for Potential
Markets and Sites
Figure 12.1 Screening Process for Potential Markets and Sites

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Basic Appeal and National Factors (1 of 2)
Step 1: Identify Basic Appeal
• Determining Basic Demand
• Determining Availability of Resources
– In Step 1, “identify basic appeal,” managers determine basic product
demand in markets and availability of resources in sites for operations.
– Determining basic product demand means exploring the general suitability
of a nation’s climate and whether the product is locally banned from sale.
– Determining the availability of resources means exploring the quality and
quantity of production factors including raw materials, labor, and financing.
– Markets and sites that fail to meet a company’s requirements for basic
demand or resource availability in Step 1 are removed from further
consideration.

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Basic Appeal and National Factors (2 of 2)
Step 2: Assess the National Business Environment
• Cultural Forces

• Political and Legal Forces

• Economic and Financial Forces

• Other Forces (Transport Costs and Country Image)

– In Step 2, “assess the national business environment,” managers explore differences in
cultures, politics, laws, and economies and incorporate their findings into market and site
selection decisions.
– Cultural elements such as language, attitudes toward business, religious beliefs, traditions, and
customs can influence product demand and how products are sold.
– Political and legal forces also influence the market and site-location decision. Important factors
include government regulation, government bureaucracy, and political stability.
– Managers must carefully analyze a nation’s economic policies before selecting it as a new
market or site for operations.
– Transportation costs and country image also play important roles in the assessment of national
business environments.
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Quick Study 1
1. What is the first step in the screening process for
potential markets and sites?
2. What forces should a company research when
assessing a nation’s business environment?
3. Evaluating a product from a certain country as superior
to similar products from other countries is an example
of what force at work?

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Measure and Select the Market
or Site (1 of 5)
Step 3: Measure Market or Site Potential
• Companies that enter the market in industrialized countries often have a great deal of
data available on that particular market. What becomes important then is the forecast for
the growth or contraction of a potential market. One way of forecasting market demand is
by determining a product’s income elasticity—the sensitivity of demand for a product
relative to changes in income.

• The biggest emerging markets are more important today than ever. With their large
consumer bases and rapid growth rates, they whet the appetite of marketers around the
world. Companies considering entering emerging markets often face special problems
related to a lack of information. Data on market size or potential may not be available.

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Measure and Select the Market
or Site (2 of 5)
Step 3: Measure Market or Site Potential
• The main variables commonly included in market-potential analyses are as follows:
• Market size provides a snapshot of the size of a market at any point in time.
• Market growth rate identifies whether a market is shrinking or expanding.
• Market intensity estimates the buying power of individuals and businesses.
• Market consumption capacity estimates a market’s spending capacity.
• Commercial infrastructure analyzes channels of distribution and communication.
• Economic freedom estimates the extent of free-market principles.
• Market receptivity estimates market “openness.”
• Country risk estimates the political, economic, and financial risks of doing business
in a market.

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Measure and Select the Market
or Site (3 of 5)
Step 3: Measure Market or Site Potential
Measuring Market Potential
• Industrialized Markets
– Data readily available
– Forecasting market demand
 Income elasticity
• Emerging Markets
– Biggest emerging markets are
more important today than ever
 Large consumer bases and
rapid growth rates
– Lack of information
Market-Potential Indicator
• Market Size
• Market Growth Rate
• Market Intensity
• Market Consumption
Capacity
• Commercial Infrastructure
• Economic Freedom
• Market Receptivity
• Country Risk
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Measure and Select the Market
or Site (4 of 5)
• Measuring Site Potential
– Labor and management
– Productivity
– Wage levels
– Training needs
– Local infrastructure
Measuring site potential in Step 3 involves determining whether a site has adequate
resources to carry out the proposed business activity. The most important issues include:
– The availability, productivity, and wage levels of labor and management.
– The cost of training local managers, which can mean substantial investments of
time and money.
– And the efficiency of local infrastructures, including roads, bridges, airports,
seaports, and telecommunications systems.

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Measure and Select the Market
or Site (5 of 5)
Step 4: Select the Market or Site
• Field Trips
• Competitor Analysis—Should address the following issues:
– Number of competitors in each market (domestic and international)
– Market share of each competitor
– Whether each competitor’s product appeals to a small market segment
or has mass appeal
– Whether each competitor focuses on high quality or low price
– Whether competitors tightly control channels of distribution
– Customer loyalty commanded by competitors
– Potential threat from substitute products
– Potential entry of new competitors into the market
– Competitors’ control of key production inputs (such as labor, capital,
and raw materials)
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Quick Study 2
1. The sensitivity of demand for a product relative to changes
in income is called what?
2. What variable is commonly included in a market potential
indicator?
3. How important is it for top managers to pay a visit to a
market or site before making a final decision?

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Secondary Market Research
• Process of obtaining information that already exists within
the company or that can be obtained from outside sources
• Relatively inexpensive

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Secondary Market Research
• The process of obtaining information that already exists
within the company or that can be obtained from outside
sources is called secondary market research. Managers
often use information gathered from secondary research
activities to broadly estimate market demand for a product
or to form a general impression of a nation’s business
environment.
• Secondary data are relatively inexpensive because they
have already been collected, analyzed, and summarized
by another party.

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Main Sources of Secondary Data
• International Organizations
• Government Agencies
• Industry and Trade Associations
• Service Organizations
• Internet

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Main Sources of Secondary Data
• International organizations are excellent sources of free and
inexpensive information about product demand in particular countries.
These include the United Nations, International Trade Center, World
Bank, International Monetary Fund, and Asian Development Bank.
• Government agencies including commerce and trade departments,
trade libraries, and embassies can supply information on import/export
regulations, product quality standards, overall market size, and
customs procedures.
• Industry and trade associations cover industry events and new
opportunities. They may also offer specialized studies of their industry.
• International service organizations in banking, insurance, management
consulting, and accounting offer information on cultural, regulatory,
financial conditions, and global trends.
• Finally, the World Wide Web can be a source of inexpensive secondary
data, news reports, executive profiles, and financial information.
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Problems with Secondary Research
• Availability of Data
– In many emerging and developing countries
 Information is hard to obtain
 Reliability is questionable
• Comparability of Data
– Terms differ greatly from one country to another
– Different ways in which countries measure data

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Problems with Secondary Research
• Two problems with secondary data can arise when researching
potential markets and sites.
• Availability of Data: There tends to be plenty of excellent sources
of secondary data in highly industrialized countries. In many
emerging and developing countries, however, previously gathered
quality information is hard to obtain. Even when market data is
available, its reliability is questionable.
• Comparability of Data: Data obtained from other countries must
be interpreted with great caution. Because terms such as poverty,
consumption, and literacy differ greatly from one country to
another, such data must be accompanied by precise definitions.

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Quick Study 3
1. Obtaining information that already exists within or
outside the company is called what?
2. What is a possible source of secondary research data?
3. What is a potential problem that can arise with the use
of secondary research data?

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Primary Market Research
• Trade Shows and Trade Missions
• Interviews and Focus Groups
• Consumer Panel
• Survey
• Environmental Scanning

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Primary Market Research
• Primary market research: process of collecting and analyzing original data and applying
the results to current research needs.

• Common methods of primary research used by companies in the location-screening

process:
• Trade show: Exhibition at which members of an industry or group of industries
showcase their latest products, study activities of rivals, and examine recent trends
and opportunities.
• Trade mission: An international trip by government officials and businesspeople
that is organized by agencies of national or provincial governments for the purpose
of exploring international business opportunities.
• Focus group: Unstructured but in-depth interview of a small group of individuals (8
to 12 people) by a moderator in order to learn the group’s attitudes about a company
or its product.
• Consumer panel: Research in which people record in personal diaries information
on their attitudes, behaviors, or purchasing habits.
• Survey: Research in which an interviewer asks current or potential buyers to
answer written or verbal questions in order to obtain facts, opinions, or attitudes.
• Environmental scanning: Ongoing process of gathering, analyzing, and dispensing
information for tactical or strategic purposes.
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Problems with Primary Research
• Cultural variables
• Language
• Illiteracy rates among the local population
- Marketers who conduct research in unfamiliar markets
must pay attention to the ways in which cultural variables
influence information. Perhaps the single most important
variable is language.
- Researchers might also need to survey potential buyers
through questionnaires written in the local language.

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Quick Study 4
1. Collecting and analyzing original data and applying
the results to current research needs is called what?
2. A trade show is the same thing as what?
3. A firm researching a very unfamiliar but potentially
very profitable market might be best to do what?

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Copyright

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