Expert answer:week 2 discussion 1 Africa’s IKEA
Expert answer:Read the “Africa’s IKEA” article and answer both questions below. Post one original contribution and one response/comment on someone else’s contribution.Questions:Assume you are the CEO of Steinhoff before making the decision to acquire Mattress Firm Holding. Prepare a list of all options available to Steinhoff to enter the US market, and give the advantages and disadvantages of each.Which of the options would you recommend? Why? Do you agree with Steinhoff’s entry mode?
chapters_12___14.pdf
Unformatted Attachment Preview
Assessing International Markets
Think locally, offer value, and be patient. That last one is key: You can make an elephant
dance. But it takes time to learn the right tune.
—Om Malik on Marketing to India, Business 2.0
International Marketing Consultant
In Focus: Faith Popcorn
Faith Popcorn, an international marketing consultant and
president of the BrainReserve firm, seems more like a
futurist, entertainer, or guru than a marketing consultant.
Just her last name itself (she was born a Plotkin)
suggests a playful cleverness and desire to be noticed
and remembered. A former advertising agency creative
director, she provides international businesses with
predictions of future trends and then connects these trends
to consumer behavior.
Some of her past predictions have been pretty accurate.
She identified the consumer trends of cocooning, food
coaches, and transcouture (using couture designs as a
source of material, a bit like musical mixing and sampling)—
all of which have come to pass. She also accurately
predicted the growth of the entertainment industry in the
recession. In her TrendBank, she includes the development
of these trends over the next few years (adapting her
descriptions):
•
•
99 lives: living many different lives at the same time—the rush and
role-multiplicity of the modern world, online, as a parent, as a student, as an organization member, and so on.
Anchoring: reaching back to our spiritual roots; taking what was
secure from the past to be ready for the future.
•
Atmosfear: consumer fear and uncertainty stirred up by concerns
about contaminated water, tainted food, and unclean air.
•
Being alive: awareness that good health extends longevity and
leads to a new way of life.
•
Cashing out: working men and women question career satisfaction and goals and opt for a simpler life.
•
Eveolution: the ways women think and behave are moving business from a hierarchical to a relational model.
•
EnGen: the end of gender differences.
A Los Angeles Times reporter tracked Popcorn’s predictions
over a five-year period, and his conclusions were that
she was bang-on in her predictions far and, hence, worth
listening to.a Other trackers mark her predictions at a 95
percent accuracy rate. In fact, major corporations check out
their marketing moves with her before they implement.
Her site, www.faithpopcorn.com, is worth a visit because
it lists her current trend predictions.
12
learning objectives
After reading this chapter, you should be
able to:
LO12-1
Discuss environmental
analysis and two types of
market screening.
LO12-2
Explain market indicators
and market factors.
LO12-3
Describe some statistical
techniques for estimating
market demand and grouping
similar markets.
LO12-4
Discuss the value to
businesspeople of trade
missions and trade fairs.
LO12-5
Discuss some of the
problems market researchers
encounter in foreign markets.
LO12-6
Discuss the different options
for conducting survey-based
research.
LO12-7
Explain the difference
between country screening
and segment screening.
a
Patrick Kevin Day, Los Angeles Times, September 30, 2008, http://latimes
.com (accessed June 14, 2011).
301
market screening
A version of environmental scanning
in which the firm
identifies desirable
markets by using
the environmental
forces to eliminate
the less desirable
markets
environmental
scanning
A procedure in
which a firm scans
the world for
changes in the environmental forces
that might affect it
As described in Section Two of this book, international environmental forces can complicate management efforts to assess the attractiveness of expanding into foreign markets.
Companies have used a broad range of approaches to assess international markets, some of
them rather unsystematic and prone to error. We think that many international managers
might prefer to use a more systematic approach, and in the following pages, we describe in
some detail a structured approach to the international market screening process.
The first step in the market screening process is determining the basic need potential.
We describe this process in the next section. Market screening is a modified version of
environmental scanning in which the firm identifies markets by using the environmental
forces to eliminate the less desirable markets.
Environmental scanning, from which market screening is derived, is a procedure in
which a firm scans the world for changes in the environmental forces that might affect it.1 For
some time, environmental scanning has been used by managers during the planning process
to provide information about world threats and opportunities. Those who do environmental scanning professionally may belong to such organizations as the Society of Competitive
Intelligence Professionals (www.scip.org). In addition, environmental scanning services are
available from a number of private firms. Examples of such service providers include Smith
Brandon International (www.smithbrandon.com) and Stratfor (www.stratfor.com).
Market Screening
LO12-1 Discuss
environmental analysis
and two types of
market screening.
Market screening is a method of market analysis and assessment that permits management
to identify a small number of desirable markets by eliminating those judged to be less attractive. This is accomplished by subjecting the markets to a series of screenings based on the
environmental forces examined in Section Two. Although these forces may be placed in any
order, the arrangement suggested in Figure 12.1 is designed to progress from the least to the
most difficult analysis based on the accessibility and subjectivity of the data. In this way,
the smallest number of candidates is left for the final, most difficult screening.
Market screening assists two different kinds of firms. One is selling exclusively in the
domestic market but believes it might increase sales by expanding into overseas markets.
The other is already a multinational but wants to avoid missing potential new markets. In
both situations, managers require an ordered, relatively fast method of analyzing and assessing the nearly 200 countries (and multiple market segments within countries) to pinpoint the
most suitable prospects.
FIGURE 12.1
1
Selection of
Foreign Markets
Unfavorable
Basic needs
Favorable
2
Unfavorable
Economic/Financial
screen
3
Unfavorable
Political/Legal
screen
4
Unfavorable
Sociocultural
screen
5
Unfavorable
Competitive
screen
6
Unfavorable
302
Section IlI
The Organizational Environment
Final
selection
Two Types of Market Screening—
Country and Segment
In this chapter, we will look at two types of market screening procedures. The first, country
screening, uses countries as the relevant unit of analysis. The second, segment screening,
is based on a subnational analysis of groups of consumers.
Country Screening
INITIAL SCREENING—BASIC NEEDS POTENTIAL
Basic Need Potential An initial screening based on the basic need potential is a logical
first step, because if the need is lacking, no reasonable expenditure of effort and money will
enable the firm to successfully market its goods or services. For example, the basic need potential of certain goods is dependent on various physical forces, such as climate, topography, and
natural resources. If the firm produces air conditioners, the analyst will look for countries with
warm climates. Manufacturers of large farm tractors might not consider Switzerland a likely
prospect because of its mountainous terrain. Manufacturers of large yachts might consider a
landlocked country such as Paraguay to be an unattractive potential market, and only areas
known to possess gold deposits are probable markets for gold-dredging equipment.
Generally, producers of specialized industrial materials or equipment experience little
difficulty in assessing their basic need potential. A list of firms in an industry, often on a
worldwide basis, is available either from the specific industry association for that industrial
sector or from specialized trade journals. A builder of cement kilns, for example, can obtain
the names and addresses of cement plants worldwide through the website of the Portland
Cement Association. What about less specialized products that are widely consumed? For
example, it is problematic to establish a basic need for chocolate and harder still to do so for
MP3 players, consumer robots, or movies on Blu-ray discs. In these cases, we are moving
from needs to wants.
Assessing International Markets
Chapter 12
country screening
Using countries as
the basis for market
selection
segment screening
Using market segments as the basis
for market selection
303
Foreign Trade Analysts who want to know where American competitors are exporting their products can go to the Web site of the International Trade Administration (ITA),
www.ita.doc.gov. The U.S. Department of Commerce also has the report U.S. Exports of
Merchandise on the National Trade Data Bank (NTDB), which is available online for a
subscription fee. This report’s information is especially useful because it includes both
units and dollar values, permitting the analyst to calculate the average price of the unit
exported. The Department of Commerce compiles and releases foreign trade statistics on a
monthly and cumulative basis in its report U.S. International Trade in Goods and Services,
commonly referred to as the FT900. It is published as a press release and can be found at
www.census.gov/foreign-trade/Press-Release/current_press_release/index.html.
For help in their search for markets, analysts can obtain from the nearest Department of
Commerce office numerous studies prepared by U.S. embassies. Annual Worldwide Industry Reviews and International Market Research Reports indicate major markets for many
products.
The Country Market Surveys indicate products for which there is a good, established
market in a given country. Other countries publish similar data. For example, the data office
of the European Union (Eurostat) publishes an annual, External Trade, and JETRO (the
Japanese External Trade Organization), publishes a wide assortment of trade and industry
data, many of which are put on its Internet site.
Imports Do Not Completely Measure Market Potential
Even when a basic
need is clearly indicated, experienced researchers will still investigate trade flows in order
to have an idea of the magnitude of present sales. Of course, imports alone seldom measure
the full market potential. Myriad reasons are responsible, among which are poor marketing,
lack of foreign exchange, and high prices (potentially caused by transportation, duties and
markups). Neither can imports give much indication of the potential demand for a really
new product.
Moreover, import data indicate only that a market has been buying certain products
from abroad and are no guarantee that these imports will continue. A competitor may
decide to produce locally, which, in many markets, will cause imports to cease. Change
in a country’s political structure also may reduce or eliminate imports, as we saw in the
case of Iran after the revolution there, when orders worth billions of dollars were suddenly
canceled. Nevertheless, import data do provide the firm with an indication of how much
product is currently being purchased and provide managers with a conservative estimate
of the immediate market potential at the going price. If local production is being considered and calculations show that goods produced in the country could be sold at a lower
price, the firm might reasonably expect to sell more than the quantity currently being
imported.
SECOND SCREENING—FINANCIAL
AND ECONOMIC FORCES
After the initial screening, the analyst will have a much smaller list of prospects. This list
may be further reduced by a second screening based on the financial and economic forces.
Trends in inflation, currency exchange rates, and interest rates are among the major financial points of concern. The analyst should consider other financial factors, such as credit
availability, paying habits of customers, and rates of return on similar investments. It should
be noted that this screening is not a complete financial analysis. That will come later if the
market analysis and assessment disclose that a country has sufficient potential for capital
investment.
Economic data may be employed in a number of ways, but two measures of market
demand based on them are especially useful. These are market indicators and market factors. Other methods for estimating demand that depend on economic data are trend analysis
and cluster analysis.
304
Section IlI
The Organizational Environment
TABLE 12.1
E-Commerce Potential: Rankings for Latin America
Countries
South America
Argentina
Bolivia
Brazil
Chile
Colombia
Ecuador
Paraguay
Peru
Uruguay
Venezuela
Caribbean
Dominican
Republic
Haiti
Jamaica
Market Size
Market Growth
Rate
E-Commerce
Readiness
Overall
E-Commerce
Potential
4
17
5
1
11
14
12
12
7
2
17
5
12
5
7
1
16
3
20
19
3
15
3
1
9
9
15
15
9
7
6
15
4
1
9
6
17
11
12
9
10
9
9
9
20
3
18
14
20
2
19
3
6
15
17
15
6
17
5
2
13
11
4
15
10
6
3
9
9
19
3
15
7
2
12
12
15
6
17
4
Central America
Costa Rica
El Salvador
Guatemala
Honduras
Mexico
Nicaragua
Panama
Source: Michael S. Minor and Alexandra Brandt, “A Possible Index of E-Commerce Potential for Latin America,” working paper, January 8,
2002, updated June 2006 by Adesegun Oyedele and October 2008 by Michael S. Minor. Reprinted with permission of the authors.
Market Indicators Market indicators are economic data that serve as yardsticks for
measuring the relative market strengths of various geographic areas. As an example, we
developed an index of e-commerce potential for Latin America so that the countries in the
region could be compared. The results appear in Table 12.1. In this methodology, we assembled data on 20 Latin American countries and then ranked the countries against each other.
We wanted to include indicators of the strength and growth rate of the overall economy, as
well as factors related more specifically to e-commerce or to communications that would
aid the growth of e-commerce. We developed three indices. Each indicator is given equal
weight in each index.
Market size
5 Size of urban population 1 Electricity consumption
Market growth rate
5 Average growth rate in commercial energy use 1 Real growth
rate in GDP
LO12-2 Explain
market indicators and
market factors.
market indicators
Economic data used
to measure relative
market strengths of
countries or geographic areas
E-commerce readiness 5 Mobile phones per 1,000 1 Number of PCs per 1,000 1 Internet
hosts per million people
The rankings on these three indexes were then used to form a composite ranking. We
called this composite ranking the “e-commerce potential.” As you can see in Table 12.1,
by using our methodology, the countries with the most e-commerce potential appear to be
Chile, Costa Rica, Jamaica, and Brazil, while Paraguay, Nicaragua, and Haiti appear to have
the least potential.
Assessing International Markets
Chapter 12
305
market factors
Economic data that
correlate highly with
market demand for a
product
estimation by
analogy
Process of using a
market factor that
is successful in one
market to estimate
demand in a similar
market
Market Factors Market factors are similar to market indicators except that they tend
to correlate highly with the market demand for a given product. If analysts of a foreign market have no factor for that market, they may be able to use one from the domestic market
to provide an approximation for the foreign market. Moreover, analysts who work for a
multinational firm may be able to obtain market factors developed by comparable subsidiaries. To be able to transfer these relationships to the country under study, the analysts must
assume that the underlying conditions affecting demand are similar in the two markets.
We can illustrate this process, which is called estimation by analogy, by using the
following example. If a supplier of laptops knows that one-fifth of all laptops are replaced
every year in the United Kingdom, he or she might use the same relationship to estimate
demand for replacement computers in a new overseas market. If there are 3 million existing laptops in the new market, the analyst might forecast that 3 million 3 0.20, or 600,000,
replacement laptops will be sold annually. The constant in the country under study may
be somewhat different (it usually is), but with this approach, the estimates will represent a
reasonable approximation and a base from which further analysis can be conducted. Many
such factors exist, and generally research personnel, either at the home office or in foreign
subsidiaries, are familiar with them.
trend analysis
Statistical technique
by which successive
observations of a
variable at regular
time intervals are
analyzed to establish
regular patterns that
are used for establishing future values
Trend Analysis When the historical growth rates of either the pertinent economic
variables or the imports of a product are known, future growth can be forecast by means
of trend analysis. A time series may be constructed in a manner similar to the way a
regression model is made, or the arithmetic mean of past growth rates may be applied to
historical data. Caution is advised when using the second method because if the average
annual growth rate is applied mechanically, in just a few years the dependent variable may
reach an incredible size. For example, a 5 percent growth rate, compounded annually, will
result in a doubling of the original value in only 15 years. Because trend analysis is based
on, the assumption that past conditions affecting the dependent variable will remain constant, analysts will generally modify the outcome to take into account any changes that
can be foreseen or to create alternate scenarios for use in the company’s analyses. Often,
there are obvious constraints that will limit growth. One of these constraints is the near
certainty that competitors will enter the market if large increases in demand continue for
very long.
306
Section IlI
The Organizational Environment
Cluster Analysis and Other Techniques As multinationals extend their presence to more markets, managers are searching for ways to group countries and geographic
regions by common characteristics. Cluster analysis divides objects (market areas, individuals, customers, and other variables) into groups so that the variables within each group
are similar. For example, a team of college softball players sitting at a table in a restaurant
might be a “cluster.” Marketers, for example, use cluster analysis to identify a group of markets where a single promotional approach can be employed; attorneys can use it to group
nations according to similarities in certain types of laws; and so forth. In other words, cluster
analysis is used to classify a “mountain” of information into meaningful “piles.”
Periodic Updating If the estimates are altered appreciably in the periodic updatings
that all long-term forecasts undergo, managers may change the extent of the firm’s involvement to be in line with the new estimates. Fortunately, the alternative forms of participation
in a market permit the firm to become progressively more involved, with corresponding
increases in investment. As discussed in Chapter 13, most companies can enter a market in
stages, perhaps in this sequence: exporting, establishment of a foreign sales company, local
assembly, and, finally, local manufacturing.
Even when the decision is whether to produce overseas, management may plan to
assemble a combination of imported and domestically produced parts initially and then progressively to manufacture more components locally as demand rises. Automobile manufacturers have begun a number of foreign operations employing this strategy.
LO12-3 Describe
some statistical
tec …
Purchase answer to see full
attachment
How it works
- Paste your instructions in the instructions box. You can also attach an instructions file
- Select the writer category, deadline, education level and review the instructions
- Make a payment for the order to be assignment to a writer
- Download the paper after the writer uploads it
Will the writer plagiarize my essay?
You will get a plagiarism-free paper and you can get an originality report upon request.
Is this service safe?
All the personal information is confidential and we have 100% safe payment methods. We also guarantee good grades