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Foreign Market Selection Process

Foreign Market Selection Process. Kelly E. Fish, Ph.D. International Business Workshop. Overview. Market Entry Strategies Exporting Foreign Market Selection How IBRC can help with the process. Foreign Market Entry Strategies. Low risk/reward. High risk/reward. Contract manufacturing.

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Foreign Market Selection Process

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  1. Foreign Market Selection Process Kelly E. Fish, Ph.D. International Business Workshop

  2. Overview • Market Entry Strategies • Exporting • Foreign Market Selection • How IBRC can help with the process

  3. Foreign Market Entry Strategies Low risk/reward High risk/reward Contract manufacturing Indirect exporting Joint venture Wholly owned subsidiary Sales subsidiary Local production Franchising/Licensing Local assembly Direct exporting

  4. Strategy Trade-offs Control Asset Variable Fixed Market Overall Entry Strategy Level Costs Costs Share Cost Indirect Exporting Direct Exporting Sales Subsidiary Franchising/Licensing Contract Manufacturing Local Assembly Joint Venture Local Production Wholly owned subsidiary

  5. Indirect Export – Trading Companies (TCs)Advantages • Open new markets without expertise or investment • TCs cover market well and service products they sell

  6. Indirect Export – Trading Companies (TCs)Disadvantages • TCs control market selection and marketing • More of a foreign concept (Japan, South Korea, Brazil, Western Europe) • Product may not get attention it deserves

  7. Indirect Export – Export Management CompaniesAdvantages • Instant foreign market knowledge and contacts • Sales are on commission basis (variable cost) • Potentially better feedback than TC

  8. Indirect Export – Export Management CompaniesDisadvantages • EMCs may spread themselves too thin with too many customers • Product may not get attention it deserves • Market expertise/contacts can be limited to one or two countries

  9. Indirect Export – Piggyback ExportingAdvantages • Rider benefits from carrier’s established export and distribution facilities • Shared expenses • Rider benefits from carrier’s reputation

  10. Indirect Export – Piggyback ExportingDisadvantages • Carrier seldom assumes any risk on rider’s product • Rider subject to carrier’s strategy/reputation

  11. Direct ExportingAdvantages • Usually yields higher sales than indirect exporting • Company has greater control, better market information • Company develops in-house expertise • Company has greater freedom to choose entering markets

  12. Direct ExportingDisadvantages • Costs are higher than with indirect exporting • It may take longer to establish market entry, distribution network, etc.

  13. Foreign Market Selection • The two most widespread mistakes of market selection are: • ignoring or missing markets that offer • good potential for a firm’s products • and • 2) spending too much time researching • markets that are poor prospects for • the firm

  14. Foreign Market Screening Target

  15. Foreign Market Screening • 1. Macro-level research • 2. General market factors • relating to the product • 3. Micro-level factors specific • to the product • 4. Final screening Target

  16. Foreign Market Screening Screening techniques range from simple minimum criteria thresholds (Example A) to clustering techniques using artificial intelligence (Example B). Target

  17. 1. Macro-level research GDP over $15 billion GDP per capita over $1,500 Political stability Example A – Targeting Countries for Kidney Dialysis Equipment

  18. 2. General market factors relating to the product Less than 200 people/hospital bed Less than 1,000 people/doctor Govt. expenditures over $100 million for healthcare Govt. expenditures over $20 per capita for healthcare Example A – Targeting Countries for Kidney Dialysis Equipment

  19. 3. General market factors relating to the product Kidney-related deaths over 1,000 Patient use of dialysis equipment – over 40% annual growth Example A – Targeting Countries for Kidney Dialysis Equipment

  20. 4. Final screening Number of competitors Distributor reputation Example A – Targeting Countries for Kidney Dialysis Equipment

  21. GDP GDP per capita Total health expenditure per capita Total Health expenditure as a % of GDP Political Risk Index Cultural score Self-Organizing Map Example B – Targeting Countries for Kidney Dialysis Equipment

  22. Example B – Targeting Countries for Kidney Dialysis Equipment India Malaysia Philippines

  23. How the IBRC can help your business

  24. Provide export assistance to NEA businesses • NEA Business Contacts the IBRC • IBRC matches ASU Intern with NEA Business • Intern Researches International Markets and Develops • Export Strategy for the NEA firm under direction of IBRC • 4. Intern makes Final report and end of semester

  25. Provide export assistance to NEA businesses • We have the expertise for oversight (Drs. Fish & Guha) • We have the manpower (Students are cheap – free!) • We have the country data • We are committed to working with the U.S. Export Assistance Center

  26. Visit the ASU International Business Resource Center on the Web at:ibrc.astate.edu

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