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Foreign Market Selection Model - Macro and Micro Factors Influencing Entry Strategies

This model provides a strategic framework for selecting foreign markets, considering macro-level research on market potential and micro-level research on specific factors affecting the product. It evaluates existing and potential competition, ease of entry, reliability of information, sales projections, cost of entry, and profit potential, among others. The model also considers general market factors, such as growth trends, cultural acceptance, market size, taxes and duties, and the state of development. It assists in identifying target markets, prioritizing countries, and assessing business and political risks. Various entry strategies, including trading companies, exporting, licensing, manufacturing, and joint ventures, are evaluated based on external and internal criteria, time orientation, and market potential. The model guides the decision-making process by providing strategic parameters and an entry plan, including motivation, mode of entry, site selection, operational and resources implementation, competitor analysis, market intelligence, and IP protection. The regional focus, including the "Triad" (Japan, North America, Europe), emerging markets (Latin America, Pacific Basin, Middle East), and less developing regions, is also taken into consideration.

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Foreign Market Selection Model - Macro and Micro Factors Influencing Entry Strategies

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  1. A Model For Selecting Foreign Markets • 1. Macro Level Research • (General Market Potential) 3. Micro Level Research (Specific Factors Affecting the Product) Existing and potential competition Ease of entry Reliability of information Sales Projections Cost of Entry Probably product acceptance Profit potential “Feel” Economic statistics The political environment Social structure Geographic features Preliminary Opportunities Rejected Countries 2. General Market Relating to the Product Probable Opportunities Growth trends for similar products Cultural acceptance of such products Availability of market data Market size State of development Taxes and duties 4. Target Markets Corporate factors affecting implementation Country Priority Listings Possible Opportunities

  2. Opportunity Matrix L M H Market Opportunity H M L Business & Political Risk Measured Over Time

  3. Market Stage Infancy Developing Mature • Customers • Product Introduction • Distribution • Price • Competitive Strategies (Types of after markets.)

  4. Criteria Used in Choosing Entry Strategies External Criteria Internal Criteria Time orientation Need for control Degree of internationalization Urgency of going international Ability to handle international risk Market risk factor Competition in the market Political conditions Market conditions Future market potential Availability of desired distribution outlets Availability of venture capital Availability of know-how

  5. Entry Decisions: Strategic Parameters InputProcessOutput A strategic plan including: • * Motivation(s) for entry  Decision rules for  * Mode of entry • site(s) selection (risks control, legal issues) * Inventory of own * Operational and resources implementation programs * Inventory of competitors resources * Market intelligence * IP protection

  6. International Market Entry – Funnel Approach Regional FocusMode of EntryRegional Focus Identification of A Lead Country (Function of the Firm Size) Trading companies Exporting Licensing Manufacturing Joint Ventures Strategic Alliances Management Contracts Using an entry into one National marketing as a stepping stone for launching market Penetration into other markets • The “Triad” • Japan • North America • Europe • Emerging Markets • Latin America • Venezuela • Argentina • Brazil • Columbia • Chile Pacific Basin China India Middle East Or various clustering schemes e.g. “seekers” vs. Climbers* • Less Developing Regions *A popular clustering approach consists of criteria such as development level (urbanization, life expectancy, infant mortality, literacy rte, per capita GDP), Economic Performance (GPD, inflation, investment foreign trade and debt, etc., and Political and Economic Liberalization.

  7. The Spectrum of International Business Involvement Inactive Exporting Licensing Joint Venture Strategic Alliance Franchising Proactive Exporting Turnkey Contract Management Contract Direct Investment Less involved More involved Contractual Relations/Arrangements

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