Entering New Market

8/13/2019 Entering New Market

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Criteria for evaluating new markets

6. Evaluating new markets

Key figures Development of population Development of GDP Development of GDP per capita

Infrastructure Traffic infrastructure Telecommunications infrastructure Health care system

Criteria for evaluating

the geographical market in general

Key figures Development of quantit Development of prices Development of market

market

Market system Players

Flows of products and Flows of information

Producers and trade Sub-markets National and internatio Wholesalers and retaile Competitive intensity

Customers Customer segments Link between customer

industry segments Demand similarity

Criteria for evaluatin

inside the geograph

Legal restrictions for economic activities Possible legal forms

Conditions for profit repatriation Conditions for sales (e.g. local production) Operations risks

Society Political system Ethnic and religious groups Languages Demographic structure Cultural distance Political risks


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Process for evaluating new markets


1. Producing an initial list of potential new markets

2. Eliminating the less attractive markets

3. Selecting the most attractive markets


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China's BERI ratings 2001 to 2007


Year Combinedscore

Political r iskindex

Operationrisk index

2001 57 56 49

2002 58 56 50

2003 58 56 50

2004 59 56 51

2005 60 56 52

2006 61 57 53

2007 61 57 53

( BERI, 2009 )


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Capacity shares of Holcim, Lafarge and Ceme

markets in 1999


Country Holcim Lafarge Cemex

Argentina 38% 11% 0%

Canada 19% 33% 0%

France 13% 34% 0%

Indonesia 0% 3% 44%

Mexico 19% 4% 65%

Philippines 38% 21% 22%

South Africa 36% 26% 0%

Spain 10% 19% 27%

Venezuela 25% 24% 41%

(adapted from Bartlett/Beamish, 2011 )


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Init ial l ist of potential new markets


IndustriesGeo-

graphi-

cal market

Industrymarket I

Industrymarket II

Country A

Country BRegion C1 in country C

Rest of country C

Country D

Country group E, F and G

Country H

= potential new markets = no potential new market


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Summary of market data


Industries

Geo-

graphi-

cal market

General information for

geographical market

Industry

market I

Industry

market II

GDP per

capita

Real

annual

GDP

growth

Political

risk

Index

Opera-

tional

risk

Index

Profit

repatria-

tion

factor

… Market

size

Size of

relevant

sub-

market

… Market

size

Size

relev

sub-

mark

Country A

Country B

Region C1 in

country C

Rest of

country C

Country D

Country group

E, F and G

Country H

= potential new markets = no potential new market


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Comparison of three car part markets


Number

of cars

Average ageof cars

Country A

Country C

Country B


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Remaining markets after the first round


Industries

Geo-

graphi-

cal market

General information for geographical

market

Industry

market I

Industry

market I

GDP per

capita

Real

annual

GDP

growth

Political

Risk

Index

Opera-

tional

risk

Index

Profit

repatria-

tion

factor

… Market

size

Size of

relevant

sub-

market

… Market

size

Siz

rele

sub

ma

Country A

Country B

Region C1 in

country C

Rest of country

C

Country D

Country group

E, F and G

Country H

= potential new markets = no potential new market = elim


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Managing the cultural barrier in international m

research


Option A Company Agency

Option C

Company Foreign

agencies

Option B

Company Agency Local

branches

Cultural

barrier

(adapted from Cateora/Gilly/Graham, 2009)


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The five cultural indices of Hofstede for Switz

Germany, France and China

Indices

Countries

French - speaking

Switzerland70 64 58

German - speaking

Switzerland26 69 72

Germany 35 67 66

France 68 71 43

China 80 20 66


P o w e r

d i s t a n c e

i n d e x

M a s c u l i n i t y

i n d e x

I n d i v i d u a l i s m

i n d e x

U n c e r t a i n t y

(Hofstede/Hofstede, 2005)


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Cultural differences between regions of Switz

Germany, France and ChinaIndices

differences

Countries

Differences

German - French

Switzerland44 5 14 14

German Switzerland -

Germany 9 2 6 9

French Switzerland -

Germany35 3 8 5


France42 2 29 30


France2 7 15 16


China54 49 6 26


China10 44 8 40

D i f f e r e n c e s

i n p o w e r

d i s t a n c e


i n i n d i v i d u a -

l i s m


i n m a s c u l i n i t y


i n u n c e r t a i n t y

a v o i d a n c e



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Industry segments in the European market for

cars


Customer

group

Product

group

Families

with lowincome

Young

peoplebuying

their first

car

Purchasers

of a 2nd car

Retired

persons

Companies

providingcompany

cars

Crafts-me

etc.

Micro cars X X

Sub-

compacts X X X X X

Compacts X X X X X X4-wheel

sub-comp. X X X X X

4-wheel

compacts X X X X X X

Cheap

minivans X

Cheap

cabriolets X X XSecond

hand cars X X

X = important in terms of volume = industry segments

(Grünig, 2012)


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The largest retailers for food and near food


Company Country oforigin

Revenue fromfood and near

food 2004

Wal-Mart USA 288

Carrefour France 99

Tesco UK 65

Total for top ten - 839

Total world

market- 3,500

Figures in billion USD

(Deloitte, 2011; ETC group, 2005)


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Scoring model for selecting the most attractiv


Option Criteria

Geo-

graphical

market

Industry

market

Cultural

distance

Size of the

target sub-

markets

Growth of

the target

sub-

markets

Competi-

tive

intensity

Access t

distribu-

tion

channel

Importance of the criteria

2 3 2 2 3

A I 2 4 3 4 3

III 2 2 2 3 3

C1 I 3 2 2 1 2

II 3 3 1 2 1

III 3 1 3 2 1

Rest of C III 3 2 2 3 1

E, F + G I 2 4 2 4 3

II 2 3 3 3 3H I 2 1 2 2 2

II 2 4 3 2 4

Scores: 4 = very positive, 3 = positive, 2 = negative, 1 = very negative

Importance of the criteria: 3 = high, 2 = medium, 1 = low


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Different alternatives within exporting

7. Evaluating market entry modes

Manufacturer

Manufacturer

Manufacturer

Manufacturer

Manufacturer

Manufacturer

Buyer

Buyer

Buyer

Buyer

Buyer

Buyer

Agent

Distributor

Salesrepresentative

Sales branch/subsidiary

Export firm

Border

= Company = Partners/customers


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Process for evaluating market entry modes


1. Eliminate the less suitable entry modes based on external andinternal conditions

2. Select the best suitable entry modes based on a detailed

evaluation


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Matching market attributes, internal attr ibutes

modes


Market

barriers

Market

attractiveness

Market

attractiveness

low

low

high

high

Production

subsidiary

Joint

venture

(Direct)

export

Licensing

Joint

venture

Indirect

exportlow

high

low

(Zentes, 1993)


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Process for developing an internationalization

new markets

8. Developing an internationalization strategy for new markets

3. Developing feasibility studies for entering the attractive country markets3. Developing feasibility studies for entering the attractive country markets

0. Preparing the strategy planning project

2. Determining the market entry modes for the attractive markets

3. Developing feasibility studies for entering the attractive country markets5. If needed: Signing agreements with partners

4. Developing the internationalization

strategy

1. Evaluating potential markets and selecting the most attractive ones

3. Developing feasibility studies for entering the attractive country markets6. Developing the market entry programs


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Market - entry mode combinations as result of


Most attractive markets Entry modes

Geographical

markets

Industry markets Production

subsidiary

Sales

subsid

A I

III

E, F + G I

II

H II

= selected entry mode

= entry mode which would fit best


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Table of contents of a feasibili ty study for ente

country market1. Served industry markets2. Market entry mode(s)3. If needed: Partner(s)4. Marketing plans for the served industry markets

4.1 Industry market A4.2 Industry market B

5. Resources needed5.1 Human resources5.2 Assets

5.3 Working capital6. Quantitative objectives

6.1 Industry market A6.2 Industry market B

7. Measures7.1 Order of entering the industry markets7.2 Steps and time needed for building up activities in industry7.3 Steps and time needed for building up activities in industry

8. Responsibilities9. Budget

9.1 Expenses including investments9.2 Revenues

10. Economic evaluation



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Net present values of market entry options


Market entry

options

Free cash flows

Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year

Market A with

wholly owned

production

subsidiary

-1,500 +150 +200 +250 +250 +250 +250 +250

Market E, F + G

with sales

subsidiary

-600 +90 +120 +150 +150 +150 +150 +150

Market H with

sales subsidiary-400 +60 +80 +100 +100 +100 +100 +100

Figures in 1,000 EUR

NPV = net present value


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Table of contents of an internationalization str

markets

1. Country and industry markets to build up

2. Entry modes and, if needed, partners

3. Quantitative market objectives

4. Timetable

5. Responsibilities

6. Investment budgets and free cash flow targets



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Entering New Market