Assessing Countries’
Attractiveness
Suresh George
Outline of the lecture
• In depth Analysis of Markets
• Market & Sales Potential
• Resources and databases for the search
Recap of Lecture 5
Introduction
• Micro Analyses of selected markets
• No Market is 100% attractive on all variables- Tradeoffs based on firm and market attractiveness
• Attractiveness is a fluid concept- Change over time
with macro-economic developments/country specific
events e.g Turkey in 2013
• The use of Industry specific variables to qualify
markets
Perform an in-Depth Market
Analysis of the two best markets
The deployment of resources in
target market
Source:Janavaras.B, Paladini .S and George S (2013). Going Global: A Practical Guide Pearson
Contacts
• Research potential agents, distributors,
foreign governments, associations, and
organizations that can help the company
establish itself in the new countries
• Select the strongest contacts by clicking on
the bubbles corresponding to the strongest
contacts in the software
• Evaluate each contact’s quality and strength
on a scale 1 – 5, 1 being least favorable and 5
being most favorable
Assess market Potential
Industry market potential = Likely sales for all firms in industry over specific
time
Variables
• Size and Growth of market and trends in the industry
• Tariff and non tariff trade barriers to entry
• Regulations
• Availability of distribution for your products
• Unique customer requirements and preferences
• Industry specific potential indicators of demand
Methods
• Simple trend Analysis
• Monitoring of Key industry specific indicators, Key customers
• Following your key customers around the world
• Supplier network data and information
• International Trade fairs
Market and Company Sales
Potential in GMMSO3
Total Market Potential (TMP)- Estimate the total market potential (TMP) in both selected top
country for your product by using the formula:
TMP = a x b x c
Where,
a = Number of potential (eligible/qualified) consumers:
b = Frequency of purchase on an annual basis:
c = Selling price of the product
Country 1
a = Number of potential
(eligible/qualified)
consumers:
b = Frequency of purchase
on an annual basis:
c = Selling price of the
product
TMP
Evaluation of the TMP on a
scale of 1-5
1
2
Country 2
3
4
5
1
2
3
Source:Janavaras.B, Paladini .S and George S (2013). Going Global: A Practical Guide Pearson
4
5
Company Sales Potential (CSP)
Estimate of share of the Annual Industry sales expected in a target market
Variables
• Pricing and financing of sales
• Financial Resources
• HR assets
• The partner capabilities
• Access to distribution Channels
• Market penetration timetable – Gradual ( cede market share to competition) /Vs
rapid market entry( FMA at expense of firm resources and capabilities0
• Special Links/Contacts with Market
• Firm Reputation/Brand Equity
Method
Analysis of the competitive environment
Trade Audits
Survey of customers/distributors
Estimates from local partners
Test Marketing
Finding CSP from known sources
Use of Proxy Indicators- Use information about a known category to infer
potential of another Product
Analogy method – Use of known statistics of one country correlated to
another
Estimate company sales potential (CSP) for the product:
CSP = Total Market Potential (TMP) x Desired Market Share %
Country 1
Total Market Potential (TMP)
Desired Market Share (%)
Company Sales Potential (CSP)=
TMP X desired market share
Source:Janavaras.B, Paladini .S and George S (2013). Going Global: A Practical Guide Pearson
Country 2
Source:Janavaras.B, Paladini .S and George S (2013). Going Global: A Practical Guide Pearson
Competitive Analysis
• Choose the top two competitors that the company
will have to compete with in each country
• Will local or international competitors be a bigger
threat to the company’s success?
• Do consumers in the specific countries favor local
companies over international companies?
• Rate the two counties threat of competition on a
scale of 1-5, 1 being the biggest threat and 5 being
the less threatening.
CSP on GMMSO3
Country Market X
Competitor Name:
Product/Service Name:
Competitor 1
Competitor 2
Location of Headquarters
(country):
Total Sales (countrywide):
Total Sales (worldwide):
Number of Employees
Profile
Distribution E-Commerce:
Pricing Strategy:
Product Attributes and
Benefits:
Promotion Strategy
Quality:
Service:
Target Market Profile:
Evaluation Criteria
Degree and Level of Market
Competition in each country
1
Country 1
2
3
4
5
1
Country 2
2
3
4
5
MARKET ENTRY CONDITIONS
Import Regulations
Use the matrix below to explain what types of
regulations are present in each country.
Regulations
Administrative Barriers
Import Licensing Requirements
Quotas
Tariffs
Any additional regulations
Explanation for each of the
regulations and your perception
of its impact on your product
1
Country 1
2
3
4
5
1
Country 2
3
4
2
5
Foreign Direct Investment (FDI)
Screening
•
•
•
•
•
•
•
•
•
•
Can foreign companies borrow locally?
Does the government restrict the amount or type of investment?
Does the government restrict the Repatriation of Earnings
Are foreign based companies allowed 100% Equity ownership of domestic firms?
Are foreign companies allowed to establish their own retail establishments?
Long Term Prospects for Growth & returns
The cost of doing Business vs. Market potential – Consider price, availability of
commercial infrastructure, tax rates, wages, skills and capital markets
Country Risk including regulatory, financial, political, cultural barriers and legal
environment for IPP
The intensity of competition from other firms present in the market or those who
can move there
Government Incentives – Tax holidays /Low cost Loans etc
Source: A.T. Kearney 2012 FDI confidence Index
FINANCIAL AND MARKET ENTRY
CONDITIONS
Tax Rates
Tax Rates
Country 1
1
Corporate Tax rates are
favorable
Personal Tax rates are
favorable
Any additional regulations
Explanation for each of the Tax
rates and your perception of its
impact on your product/service
Country 2
2 3 4 5 1 2 3 4
5
Foreign Exchange Performance
Foreign exchange rate
performance
Country 1
1
The country’s currency is
convertible
The country’s current account is
in good standing (Balance of
Payments)
The currency of the country has
been stable
Any additional regulations
Explanation for each of the
statements and your perception
of its impact on your
product/service
2
3
Country 2
4
5
1
2
3
4
5
Labor issues
Labour Issues
1
Child labor issues
Labor wage rates )
Management-labor relations
Strength of labor unions
Any additional regulations
Explanation for each of the issues
and your perception of its impact
on your product/service
Country 1
2
3
4
5
1
Country 2
2
3
4
5
Country Infrastructures
Country Infrastructure
Banking system
Energy
Internet connections
Telecommunications system
Transportation systems
Any additional regulations
Explanation for each of the
infrastructure issues and your
perception of its impact on your
product/service
1
Country 1
2
3
4
5
1
Country 2
2
3
4
5
Market
Channel
Conditions
Market channel conditions
Country 1
Country 2
Distribution channels are
regulated by the government
Existing channels provide
adequate national market
coverage
The company will be able to
distribute its product/service
using existing channels
Any additional regulations
Explanation for each of the
market channel conditions and
your perception of its impact on
your product/service
1
2
3
4
5
1
2
3
4
5
Overall Market Ranking
VARIABLES
WEIGHT
AVERAGE RANK
Country 1
Country 2
WEIGHTED TOTAL
Country Country
1
2
CONTACTS (average)
MARKET & COMPANY SALES
POTENTIAL
COMPETITION
COUNTRY ENTRY CONDITIONS
FINANCIAL & MARKET
CONDITIONS
Total
weight
(100%)
Average rank sum
Country 1
Country 2
Weighted Total
Country 1
Country 2
TOOLS AND RESOURCES
Market Potential Index
http://globaledge.msu.edu/knowledge-tools/mpi
Industry potential Data Sources
•
•
•
•
•
•
•
•
•
Global Edge
Export.Gov
UKTI
UNCTAD
WTO
DoingBusiness.org
IMF
AT Kearney
US Commercial Service - Market Research Libraryhttp://www.buyusainfo.net/adsearch.cfm?search_type=int&loadnav=no
• Country Commercial Guides http://www.state.gov/e/eb/rls/rpts/ccg/
References
• Janavaras.B, Paladini .S and George S (2013). Going Global: A Practical
Guide Pearson