Chapter 5 Analyses of National Markets

1. Chapter 5Analyses of National Markets John S. Hill

2. Figure 5-1: National Markets Analysis topic outline Analysis of National Markets • The Shaping of National Cultures • Historic Factors • Geographic Factors • Macro Analysis • Political Factors • Economic Factors • International Position Business & Market Analysis Operating Conditions Industry Analysis Product-Market Fit

3. Chapter Outline • Essential Background • Current Position Analysis • Commercial Analysis • Cultural Analysis

4. Essential Background • Historic Influences on National Culture Development • Geographic Influences on National Culture Development

5. Essential Background • Historic Influences on National Culture Development • Political trends, power bases and sensitivities: powerful families; key leaders • Industrialization, Economic Change and Development: agriculture-industrial-service sector breakdowns as key indicators • Cultural development, Ethnic, cultural and linguistic differences: size of groups and extent of rivalries • External influences on country behaviors

6. Essential Background • External Influences on Country Behaviors • National participation and membership of global treaties and conventions: UN, IMF, WTO, World Bank, IMO, ICAO and so on • Participation in Regional Political Organizations: Organization of American States (OAS), Organization of African Unity (OAU). • Historic Events and National Rivalries: China and Taiwan; North versus Southern Ireland

7. Essential Background • Geographic Influences • Geographic Influences on National Development • Country location on world map: affects political, trade, commercial relationships • Climate: affects population concentrations, food supplies, work conditions, national mindsets (e.g. fatalism in developing nations) • Population concentrations: affects market demand and marketing approaches (e.g. ethnic groups) • Resources: agricultural food supplies, energy sources, mineral supplies • Topography: affects population, distribution

8. Essential Background • Geographic Influences • Geographic Influences on Infrastructure Development: necessary in foreign, especially developing markets • Utility and Energy Assessments: water, sewer, energy availabilities • Communication infrastructures: telephones, radio, TV, print media availabilities • Transportation infrastructures: extent of development of highways, waterways, rail, port, harbor and airport facilities

9. Current Position Analysis • Current Political Situation • Current Economic Position • Current International Position • How Managers use Balance of Payments Data

10. Current Position Analysis • Current Political Situation • Political system: democracy v.s. authoritarian systems: extent of democracy (1 party democracies) • Parliamentary Assemblies: who has power; frequency of elections • Key political parties: and philosophies (right, left wing, special interests) • Political risk, elections, and the likelihood of political change

11. Current Position Analysis • Political Risk, Elections and the Likelihood of Political Change • Internal frictions: ethnic or religious groups and their influence on national politics • External influences: impact of globalization, westernization, privatization • Economic problems: inflation, unemployment, growth, trade (e.g. protectionism) • Political problems: government expenditure priorities; taxation levels, social welfare, corruption, business legislation

12. Current Position Analysis • Current Economic Position • Comparative economic analyses: country versus regional performance puts national economic performance into perspective • Country-specific economic analyses • General economic indicators: GDP size, GDP per capita; government income/expenditures; growth, inflation • Private-sector performance: public/private expenditures; agriculture-industry-services; key industries and sectors • International economic and trade policies: tariff levels, WTO, trade bloc membership

13. Current Position Analysis • Current International Position • Analyzing Country Balance of Payments • Current Account: merchandise trade balance, goods and services balance, income account, unrequited (one-time) transfers • Capital Account: capital account, direct investments, portfolio investments, monetary transactions • Financial Account=direct investments + portfolio investments + financial derivatives + other investments • Net Errors and Omissions • Reserves and related items show how B/P surpluses are used or how deficits are financed

14. Current Position Analysis • How Managers use Balance of Payments Data • Merchandise trade balance: Imports and exports: protectionist tendencies, currency adjustments • Services: laws requiring local carriers • Investments: restrictions for ‘capital flight’ • Balance of payments effects on currency values: B/P surpluses (currency strengthening); B/P deficits (currency weakening) • Inflation rate effects on balance of payments and currency values: high inflation = likely currency devaluations

15. Commercial Analysis • Industry analysis • Demand Analysis • Supply Chain Analysis • Business Environment Analyses

16. Commercial Analysis • Industry analysis • Market size, growth • Market structure: # firms; global, regional, national competitors; profitability; change; key success factors; industry characteristics • Demand Analysis: Customer and Marketing Considerations • Customer concentrations: where located • Customer segmentation issues: profiles, location • Marketing research services: availability

17. Commercial Analysis • Supply Chain Analyses • Supplier considerations; location, quality • Manufacturing Investment and Site-Location Decisions • Investment permissions: fit with government plans • Investment incentives: for undeveloped regions • Infrastructure connections: roads, energy • Labor quality and availability: education system • Labor laws: wages, work hours, safety, benefits • Information technology/E-commerce issues • Cost chain considerations: wage rates, depreciation rates, taxes

18. Commercial Analysis • Business Environment Analyses • Financial Aspects: Capital Markets, Taxation Policies, and Currency Issues • National capital markets: long, medium, short term capital sources (stock markets, banks) • Corporate taxation and taxes: rates, exemptions • Currency considerations: convertibility; stability; preferences for depreciating currencies for exports and investments • Legal Infrastructures

19. Commercial Analysis • Business Environment Analyses • Legal Infrastructures • Industry ownership limitations: ‘off limits’ sectors; ownership restrictions • Monopoly and anti-trust laws: affects acquisitions • Intellectual property laws: procedures, effectiveness, enforcement • Consumer protection laws: warranties, advertising, deceptive practices • Environmental laws: recycling, pollution, chemical use • Local company organization: affects shareholder/owner responsibilities, liabilities, obligations

20. Cultural Analysis • General national backgrounds: climate, history, government, education, population, religion, language • Interpersonal relations: family unit, dating, appearance, visiting, greetings, eating habits, tipping, gender relations, body language, gestures • Lifestyles: eating habits, recreational sports, diet, refreshments (alcohol) • General attitudes: family, friends, punctuality, modesty, religiosity, surprises, materialism, social classes, ethnic identities, male-female relations

21. Key Points • Thorough examinations of national markets entail… • Reviewing background info on country history and geography • Assessing the current political, economic, and international situations • Evaluating its commercial environment and national culture

22. Key Points • Historic background traces national political development and economic change. • Geographic factors affect national economic and infrastructure development. • Managers examine the current political, economic, and international situations.

23. Key Points • National economic positions should be assessed in their regional context first, followed by examinations of economic indicators, private sectors, and memberships of international organizations. • Analyses of country balances of payments show how nations are performing in international trade.

24. Key Points • Commercial analyses comprise examinations of national industry conditions. • Business environment analyses review general factors affecting operations in foreign markets. • Cultural analyses look at national backgrounds and behaviors.