International Business Module 12: International Markets Assessment and Entry Mode

Market Screening Approaches and Techniques\n\n* Screening Approaches Overview\n * Environmental Screening: This involves looking for changes in the world that may impact business opportunities. Examples include:\n * The future demand for mobile commerce and associated devices.\n * Predicting if gas engine cars will be entirely replaced by Electric Vehicles (EV).\n * Market Screening: This is the process of looking for and identifying potential markets for specific products or services. For example, assessing if Taco Bell is suitable for the Chinese market.\n\n* Two Primary Levels of Market Screening\n * Country Screening (6 steps): Determining if a specific country is a favorable market for products. For instance, evaluating if India has a viable market for Uber services.\n * Segment Screening: Determining which specific segment within a country represents a good market. For example, assessing whether the population aged 22-40 in China will shop at Costco.\n\n# Step 1: Initial Screening—Basic Needs\n\n* Concept: Determining if there is a fundamental need for the product in a target country.\n* Key Examples and Considerations:\n * Dietary and Cultural Restrictions: Can beef be sold in India? Note: McDonald's in India uses different ingredients to adapt to local standards.\n * Climate and Utility: Selling ice makers to Iceland (considering the environment and existing natural resources).\n * Cultural Habits: Assessing whether Chinese consumers eat cheese, as dietary habits vary significantly.\n\n# Step 2: Second Screening—Financial and Economic Forces\n\n* Concept: Assessing if the potential target market can afford the product based on economic indicators.\n* Market Indicators (Examples from Table 12.1 and 12.2):\n * Market Size calculation: $\text{Size of Urban Population} \times \text{Electricity Consumption per Person}$.\n * Market Growth Rate calculation: $\text{Growth Rate in Commercial Energy Use} + \text{Real GDP Growth Rate}$.\n * E-commerce Readiness calculation: $\text{Mobile Phones per 1000 People} + \text{PCs per 1000 People} + \text{Internet Hosts per Million}$.\n* Market Indicator Analysis: Determining if these indicators show clear potential.\n * A high market growth rate typically indicates a high future demand for cars.\n * Lower e-commerce readiness indicates fewer potential e-commerce transactions.\n* Market Factors: Utilizing particular product replacement rates to estimate demand for similar, correlated products.\n * The number of computers connecting to the internet is a factor in determining potential e-commerce opportunities.\n * The total number of cell phones serves as an indicator for the number of phone batteries required in a market.\n\n# Step 3: Third Screening—Political and Legal Forces\n\n* Concept: Evaluating if the government allows entry and the stability of the environment.\n* Barriers to Entry: Analyzing regulatory hurdles. For example, determining if Genetically Modified (GMO) crops can be sold in China.\n* Government Control: Assessing state-run economies. For example, understanding what sectors are controlled by the Cuban government.\n* Stability of Government Policy: Evaluating the risks associated with changing trade relations. For instance, is it risky for U.S. farmers to grow more soybeans specifically for sale to China depending on current diplomatic relations?\n* Political Stability: Assessing the safety of investment in volatile regions, such as the current landscape in Venezuela.\n\n# Step 4: Fourth Screening—Cultural Forces\n\n* Concept: Understanding if the culture allows for the product and how it must be adapted to fit local norms.\n* Culture Differences and Localization Examples:\n * Coffee in China: Determining how to localize business models for a tea-dominant culture.\n * Tokyo Disneyland: Customizing food and beverage offerings to suit Japanese visitors specifically.\n * Advertising Sensitivity: Does the advertisement offend the other culture's values or norms?\n * Naming Conventions: Determining if a product name has an unintended or offensive meaning in another language.\n * Case Study of Failure: Analyzing why Walmart has struggled to find success in the Japanese market.\n\n# Step 5: Fifth Screening—Competitive Forces\n\n* Concept: Assessing the level of competitiveness in the market segment.\n* Factors to Analyze:\n * The number, size, and financial strength of current competitive forces.\n * Competitor market shares and brand positioning.\n * Competitor marketing strategies utilizing the 5Ps: Price, Place, Promotion, Product, and People.\n* Specific Competitive Scenarios:\n * Dubai: Assessing Taco Bell's competitiveness in Dubai.\n * Market Share Impact: If Starbucks holds 70% of a market, what is the realistic chance for Peet's Coffee to succeed? If Starbucks positions as high-end/luxury, should a new entrant position differently?\n * Incumbent Dominance: Evaluating the success chance for Burger King if McDonald's is already well-established in a country.\n * Foreign Auto Markets: How American cars can be sold in Japan, where local competitors dominate the automobile market.\n\n# Step 6: Final Screening—Observation and Visit\n\n* Concept: Final validation of market research through direct contact.\n* Field Trips: Visiting and observing the local market firsthand to gain a practical understanding of consumer behavior.\n* Final Validation: Identifying and meeting with potential local partners to facilitate entry.\n\n# Segment Screening\n\n* Characteristics of a Market Segment: A segment may span multiple countries, or a single country may contain multiple distinct segments. To be viable, segments must be:\n * Definable: The segment must be able to be identified and measured.\n * Large: The segment must be large enough to justify the financial and operational effort.\n * Accessible: The target segment must be reachable via marketing and distribution channels.\n * Actionable: The 4P actions (Price, Product, Promotion, Place) must be permitted and executable within the segment.\n * Capturable: There should be manageable competition levels to increase the likelihood of success.\n\n# Trade Missions and Trade Fairs\n\n* Trade Missions: Market visits conducted by business people and/or government officials specifically searching for new business opportunities.\n* Trade Fairs: Large-scale exhibitions where companies promote their products and services to potential partners and consumers.\n * Examples: CeBIT (a major computer trade show) and the Paris Air Show.\n\n# Local Market Research Challenges\n\n* Barriers to Effective Research:\n * Low Literacy: Difficulties in using written surveys in regions with low education levels.\n * Respondent Identification: Deciding whether to interview the person who uses the product or the person who actually purchases it.\n * Sensitive Information: Resistance to answering tax-related questions.\n * Distrust: General pushback against external researchers or foreign companies.\n * Social Desirability Bias: The tendency for respondents to provide answers they believe will please the interviewer rather than their true feelings. \n * Example: Asking if it is unethical to buy tuna caught with non-dolphin-safe methods versus asking if they are actually willing to buy such fish.\n\n# Entry Modes for Foreign Markets\n\n* Non-equity Modes of Entry:\n * Turnkey Project: The export of technology, management expertise, and capital equipment where the facility is given to the client once it is ready for operation.\n * Licensing: A firm (licensor) grants another company (licensee) the right to use expertise, patents, or intellectual property for the licensee's products.\n * Franchising: A form of licensing where one firm (franchisor) contracts with another (franchisee) to operate a business under an established name and according to specific rules.\n * Management Contract: An arrangement where one firm provides managerial personnel to another.\n * Contracted Manufacturing: An arrangement where one firm contracts with another to produce products according to specific technical specifications.\n* Equity-based Modes of Entry:\n * Joint Venture: A cooperative effort between two or more organizations that share a common interest and ownership in a business undertaking, often resulting in the creation of a separate legal entity.\n * Strategic Alliance: Collaboration with competitors, customers, or suppliers. Unlike full joint ventures, these focus on the agreement and the relationship and tend to be less formal.\n\n# Global Debate Case Study: Clotaire Rapaille and Cultural Codes\n\n* The Persona: Clotaire Rapaille is a former psychologist for autistic children who now operates as a high-level marketing consultant from a mansion in upstate New York.\n* The Concept of "The Code": Rapaille seeks the psychological "code" that allows access to the psyche of different nationalities (Indian, French, Norwegian, etc.).\n* The Cheese Paradigm: \n * In France, cheese is viewed as "alive." It is not refrigerated, much like one would not put a cat in a refrigerator.\n * In the U.S., cheese is viewed as "dead." It is sealed in plastic "caskets" (packaging) and placed in a refrigerator (a "morgue").\n * Americans prioritize safety and sanitation over taste, whereas the French prioritize sensual experience and taste over cleanliness. This result is more deaths from cheese in France but a sterile product in the U.S.\n* The Reptilian Brain: Rapaille focuses on the "reptilian brain"—a deep level of psychological motivation. He ignores what people say in favor of understanding why they do what they do.\n* Professional Successes:\n * Claimed influence on the development of the Chrysler PT Cruiser (a successful retro-themed car).\n * Consults for 50 of the Fortune 100 companies.\n * Procter & Gamble (P&G) has utilized his services 35 times.\n * Claims to have broken codes for "China," "Seduction," "Teen Internet," and "Anti-Americanism."\n* Cultural Archetypes: \n * He defines the Indian caste system not as a problem, but as a "practical solution" for social signaling.\n * The German code for Americans is "John Wayne."\n* Research Methods: He avoids standard focus groups. Instead, he has participants discuss topics, tap into emotions, and eventually reach a state (sometimes lying in a fetal position) to relive childhood memories to find archetypes that outlast opinions.\n\n# Questions & Discussion\n\n* Question 1: Is Rapaille's code system a short-cut code to understanding the complexities in culture and a way to make market research easier? Or is it a superficial hoax sold by a charlatan?\n* Question 2: As a manager, would you hire Clotaire Rapaille or his company to assist you in assessing and interpreting international market opportunities?", "title": "International Business Module 12: International Markets Assessment and Entry Mode"}