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MGT520 - International Business - Lecture Handout 42

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INTERNATIONAL MARKETING

MARKET SIZE ANALYSIS:

Once companies decide to enter markets, they must then analyze data to determine their market potential in each country and their marketing mix to reach the potential.

Total Market Potential:

To determine potential demand, managers first estimate the possible sales of the category of products for all companies and then estimate its own company’s market-share potential. In order to do so, they estimate per capita consumption and move it along a trend line as per capita GNP increases.

Gap Analysis:

Once a company is operating in a country and estimates that country’s market potential, it must calculate how well it is doing there. Gap analysis is a method for estimating a company’s potential sales by identifying market segments it is not servicing adequately.

International market assessment:

  1. International marketing strategy starts with international market assessment, an evaluation of the goods and services that the multinational enterprise (MNE) can sell in the global marketplace. This assessment typically involves a series of analyses aimed at pinpointing specific offerings and geographic targets. The first step in this process is called the initial screening.
  2. Initial screening is the process of determining the basic need potential of the multination lent reprise’s (MNE’s) goods and services in foreign markets. This screening answers the question: who might be interested in buying our output? One way in which initial screening is carried out is by examining the current import policies of other countries and identifying those goods and services that are now being purchased from abroad. A second way is by determining local production. A third is by examining the demographic changes that are taking place in the country that will create new, emerging markets.
  3. Secondary screening is used to reduce the list of market prospects by eliminating those that fail to meet financial and economic considerations. Financial considerations include inflation rates, interest rates, expected returns on investment, the buying habits of customers, and the availability of credit. Economic considerations relate to a variety of market demand influences, including market indicators.
  4. Market indicators are used for measuring the relative market strengths of various geographic areas. These indicators focus on three important areas: market size, market intensity, and market growth. Market size is the relative size of each market as a percentage of the total world market. Market intensity is the “richness” of the market, or the degree of purchasing power in one country as compared to others. Market growth is the annual increase in sales. Quite often, these data are analyzed using quantitative techniques such as trend analysis, estimation by analogy, regression analysis, and/or cluster analysis.
  5. The third level of screening involves looking at political and legal forces. One of the primary considerations is an entry barrier in the form of import restrictions or limits on the local ownership of business operations.
  6. The fourth level typically involves the consideration of sociocultural forces such as language, work habits, customs, religion, and values. Multinational enterprises (MNEs) examine these sociocultural differences in determining where to locate operations.
  7. The fifth level of screening is typically focused on competitive forces. In some cases multinational enterprises (MNEs) decide to enter a competitive market because they believe the potential benefits far outweigh the drawbacks. By going head-to-head with the competition, the company can force itself to become more efficient and effective and thus improve its own competitiveness.
  8. Before making a final selection, multinational enterprises (MNEs) usually enhance their information by visiting on-site locations and talking to trade representatives or local officials. Such field trips are very common and can do a great deal to supplement currently available information.

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