Challenge 3: Assessing IB Opportunities

Global Market Opportunity

A favorable combination of circumstances, locations, or timing that offer prospects for exporting, investing, sourcing, or partnering in foreign markets

Global Market Opportunities (Examples)

-sell products and services;

-establish factories or other production facilities to make offerings more competently or cost-effectively;

-procure raw materials or components, services of lower cost or superior quality; and

-enter collaborative arrangements with foreign partners.

The Six Tasks of Global Market Opportunity Assessment (GMOA)

1. Analyze organizational readiness to internationalize.

2. Assess the suitability of the firm's products and services for foreign markets.

3. Screen countries to identify attractive target markets.

4. Assess the industry market potential, or the market demand, for the product(s) or service(s) in selected target markets.

5. Choose qualified business partners, such as distributors or suppliers.

6. Estimate company sales potential for each target market.

Task 1 Organizational Readiness

Analyze organizational readiness to internationalize with an objective assessment of the firm's preparedness to engage in international business

Task 2 Product Suitability

- Assess suitability of the firm's products and services for foreign markets by conducting a systematic assessment of company offerings for international customers.

- For each possible target market, identify the factors that may hinder market potential.

Task 3 Country Screening

-Screen countries to identify target markets

-Identify five or six countries that hold the best potential by assessing each country regarding such criteria as:

--size and growth rate,

--"market intensity" (customers' buying power),

--"consumption capacity" (size and growth rate of the middle class),

--country's receptivity to imports,

--infrastructure for doing business,

--economic freedom,

--country risk

The Global Connectedness Index

provides insights into the interconnectedness of countries through trade, investment, and information flows. Understanding this index can help firms identify potential markets and assess their global engagement

Gradual Elimination

the firm starts with numerous prospective target countries and narrows the choices by examining increasingly specific information. Initially, the researcher obtains macro-level indicators like population, income, and economic growth before delving into specific information.

Indexing and Ranking

The firm assigns scores to countries based on their overall market attractiveness

Task 4 Assess Industry Market Potential

The firm estimates the most likely share of sales that can be achieved in each target country, including consideration of market entry barriers. Firm should develop a 3 to 5-year forecast of industry sales.

Methods for Estimating Industry Market Potential

-simple trend analysis

-monitoring key industry-specific indicators

-monitoring key competitors

-following key customers around the world

-tapping into supplier networks

-attending international trade fairs

Task 5 Choose foreign business partners

The firm decides on the type of foreign business partner, clarifies ideal partner qualifications, and then crafts an appropriate market entry strategy

Licensing

partners are independent businesses that apply intellectual property to produce products in their own country

Franchising

partners are franchisees - independent businesses abroad that acquires rights and skills from the focal firm to conduct local operations

International collaborative ventures

include joint venture and strategic alliance partners

Task 6 Estimate Company Sales Potential

The firm estimates the most likely share of industry sales that the company can achieve, over a specific period of time, for each target market

Factors That Determine Company Sales Potential

-Intensity of the competitive environment

- Pricing and Financing of sales

- Human and Financial resources

-Partner capabilities

-Access to distribution channels

- Market Penetration timetable

- Risk Tolerance of Senior Managers

-Special links, Contacts, Capabilities of the firm

-Reputation

Methods for Estimating Company Sales Potential

- Survey end-users and intermediaries

- Trade audits

- Competitor assessment

- Obtaining estimates from local partners

- Limited marketing efforts to 'test the waters'

- Analogy method

- Proxy indicators

Middle Class in Emerging Markets

used to determine consumption capacity

BRICS

five major emerging national economies: Brazil, Russia, India, China and South Africa

CAGE Distance Framework

a strategic tool used to identify and address the differences between countries that can impact international business strategies

(cultural, administrative, geographic, economic)

Cultural Distance

Differences in language, ethnicity, religion, and social norms

Administrative Distance

Differences in laws, policies, and institutions

Geographic Distance

Physical distance, time zones, and climate

Economic Distance

Differences in economic development, income levels, and resources

PESTEL Analysis

Political

Economic

Social

Technological

Environmental

Legal

PESTEL technique steps

1. Brainstorm issues

2. Identify issues

3. Rate importance

4. Assess likelihood

5. Consider implications

Market consumption capacity

size and growth rate of the country's middle class

___ is used by some firms to gauge long-term sales potential without fully committing to a foreign market

test marketing

when using the process of gradual elimination, a researcher should first:

obtain general information on macro-level indicators such as population, income, and economic growth

In order to estimate industry market potential, managers most likely require

market size and growth rates specific to the industry

The estimate of the share of annual industry sales the firm expects to generate in a particular target market is known as

company sales potential

According to the Market Potential Indicators Index, _____ is an indicator of market size

urban population and electricity consumption

what should be done by a company planning to internationalize when it assesses market industry potential?

Develop a 3-5 year forecast industry sales for each target market

Advances in communications and transportation technology have changed the internationalization tendencies of firms by

reducing the risk and difficulty of doing business in markets with unfamiliar cultures

Trade audits may provide managers insight regarding ________.

competitors' offerings and pricing