Modulo 8

19
Market Evaluation and Selection

Transcript of Modulo 8

Page 1: Modulo 8

Market Evaluation and Selection

Page 2: Modulo 8

In small companies IMS is often a reaction to a stimulus.

IMS of a small company is based on:◦ Low uncertainty about foreign markets◦ Low perceived difficulty of acquiring information

about foreign markets◦ Low cultural distance◦ Low geographic distance

Page 3: Modulo 8

Without scanning a company may◦ Overlook opportunities and risks◦ Examine too many or too few possibilities http://globaledge.msu.edu

◦ Source for globalbusiness knowledge◦ a wealth of information on all countries◦ in-depth analysis of selected industries

Page 4: Modulo 8

Segmentation allows managers to focus on common aspects of countries and avoid information overload.

Segmentation Criteria◦ Geographic location: The location fo the market. (e.g.

Scandinavian countries, Middle East)◦ Political factors: Broad political characteristics (e.g. Iron

Curtain) ◦ Demography: Population characteristics◦ Economy: Economic development level ◦ Industrial Structure: Characteristics of business population◦ Technology: The degree of technological advancement◦ Cultural characteristics / Lifestyles / Attitudes ◦ .....

Page 5: Modulo 8

PEST ANALYSIS CAGE FRAMEWORK

* Benefits• Size of the market• Purchasing power of customers • Future prospects of a country

* Costs • Bribes• Relatively primitive or undeveloped

economy• Local laws and regulations setting

standards* Risks

• Political/Economic/Legal Risks Rate attractiveness of different

countries relative to each other.

Some companies are more compatible with the firm itself.

1. Cultural distance2. Administrative and

political distance3. Geographical distance4. Economic distance

Page 6: Modulo 8

Journey to “Sharahad”Journey to “Sharahad” Exploring cross-cultural differences

Role-playing Exercise

Page 7: Modulo 8

Voyage BeijingVoyage Beijing http://gel.msu.edu/voyagebeijing.htmlhttp://gel.msu.edu/voyagebeijing.html

Interactive Practice

Page 8: Modulo 8

Individualized reports prepared by market research and business consulting companies

Studies prepared by research organizations that are much cheaper than individualized reports

Government Agencies International Organizations (WTO, IMF, OECD) Trade Associations Information-service Companies (e.g. IGEME Library) Internet (e.g. www.intracen.org/marketanalysis/)

Page 9: Modulo 8

Opportunities Risks

Market Size Ease and Compatibility

of Operations◦ Geographic proximity◦ Share similar language,

culture and legal system◦ Similar market/economic

conditions Costs and Resource

Availability Bureaucracy

Competitive Risk◦ Find countries where

there is no significant competition

◦ Avoid overcrowded markets

◦ Clusters are an exception Political Risk BERI, BMI

(www.businessmonitor.com), Euromoney

Page 10: Modulo 8

Simulimpresa Exercise Your company that has to choose between

making a $100 million investment in Russia or the Czech Republic.

Both investments promise the same long-term return, so your choice is driven by risk considerations. Assess the various risks of doing business in each of these nations.

Which investment would you favor and why? http://globaledge.msu.edu/countries/czech-

republic/ http://globaledge.msu.edu/countries/russia/

Page 11: Modulo 8

Business Environment Risk Index - BERI

Criteria Weights Score (1-4)

Overall BERI Index

Political stabilityEconomic growthCurrency convertibilityLabor cost/productivityShort-term creditLong-term loans/venture capitalAttitude towards foreign investors 1.5Nationalization 1.5Monetary inflation 1.5Balance of payments 1.5Enforceability of contracts 1.5Bureaucratic delays 1Communications (phone, fax, internet access) 1Local management and partner 1Professional services 0.5TOTAL

Page 12: Modulo 8

Step 6: Compare Attractive Step 6: Compare Attractive Countries – Opportunity-Risk Countries – Opportunity-Risk MatrixMatrix

III II

IVV

Page 13: Modulo 8

Step 6: Compare Attractive Step 6: Compare Attractive Countries – Country Selection Countries – Country Selection GridGrid

Page 14: Modulo 8

Step 6: Compare Attractive Step 6: Compare Attractive Countries –Attractiveness – Countries –Attractiveness – Strength Matrix Strength Matrix

Page 15: Modulo 8

Invest / Grow Try HarderDivestment

orJoint Venture

Try Harder Proceed with care

“Harvest” / Generate Cash

Withdraw

HIGH MEDIUM LOW

LOW

MED

IUM

HIG

H

COMPANY STRENGTH

COU

NTR

Y AT

TRAC

TIVE

NES

SStep 6: Compare Attractive Step 6: Compare Attractive Countries –Attractiveness – Countries –Attractiveness – Strength Matrix Strength Matrix

Page 16: Modulo 8

Simulimpresa Exercise Your company wants considers

internationalizing. The options that you consider include: Egypt, Russia, Poland, Ukraine, Iran

Read the Euromonitor reports for these countries and conduct:◦ An environmental risk analysis◦ Market drivers analysis◦ Cost-Benefit analysis◦ Etc.

Finally decide which countries are more attractive.

Page 17: Modulo 8

Source: EuroMonitor reports

Simulimpresa Exercise – Country Comparison

1

2

3

4

5

Page 18: Modulo 8

High level scan of markets has identified some interesting similarities and differences:

◦ The forecasted market growth rate is highest in in ______ followed by _____ and _____.

◦ Consumers are considered to be most sophisticated in ______ followed by _____ and _____.

◦ ___ and ___ have the highest sensitivity to price, prioritizing functional benefits.

◦ Consumers are interested in modern, novel and advanced products in ___ and ___

◦ Western lifestyles are affecting customer trends in ___ and ___.◦ Economic factors affect purchasing decision negatively in ___ and

positively in ___. ◦ Legal factors became a major force in ___.◦ The effect of cultural factors and traditions on cosmetics and toiletries

spending is highest in ___.◦ Contraband products are threatening the cosmetics and toiletries

industry in ___.

Simulimpresa Exercise – Final Assessment

Page 19: Modulo 8

A high level scan of priority markets has identified some interesting similarities and differences:

Consumers are considered to be most sophisticated in Russia followed by Ukraine and Poland

Iran and Egypt have the highest sensitivity to price, prioritising functional benefits over emotional

Iran has high government control over retail development

Implications: Companies need to invest in obtaining specific

market and consumer insights to inform its business strategies

Each priority market needs to be handled discreetly The gathering of insights by market should consist of

desk based and primary research (qualitative and quantitative).

strongweak Im

porta

nce

of

Bat

h&S

how

er P

rodu

cts

in

Cos

me.

&To

iletri

es

Gro

wth

Per

form

ance

in

Bat

h an

d S

how

er P

rodu

cts

Man care

Hair care

Skin care

Skin care

Frag-rances

Hair care

Dom

inan

t Sub

sect

or in

C

osm

etic

s an

d To

iletri

es

Com

petit

ive

Land

scap

e

Turkey

Egypt

Iran

Poland

Ukraine

Russia

Bar

riers

to E

ntry

Gro

wth

Per

form

ance

in

Cos

met

ics

and

Toile

tries

Ret

ail D

evel

opm

ent

Pric

e S

ensi

tivity

Con

sum

er S

oph

istic

atio

n

Soc

io-M

acro

econ

omic

Le

vel

strongweak Im

porta

nce

of

Bat

h&S

how

er P

rodu

cts

in

Cos

me.

&To

iletri

es

Gro

wth

Per

form

ance

in

Bat

h an

d S

how

er P

rodu

cts

Man care

Hair care

Skin care

Skin care

Frag-rances

Hair care

Dom

inan

t Sub

sect

or in

C

osm

etic

s an

d To

iletri

es

Com

petit

ive

Land

scap

e

Turkey

Egypt

Iran

Poland

Ukraine

Russia

Bar

riers

to E

ntry

Gro

wth

Per

form

ance

in

Cos

met

ics

and

Toile

tries

Ret

ail D

evel

opm

ent

Pric

e S

ensi

tivity

Con

sum

er S

oph

istic

atio

n

Soc

io-M

acro

econ

omic

Le

vel

Priority markets (high level insight) What the data tells us …

Simulimpresa Exercise