Global Entrepreneur Chapter 4

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SECTION ONEBEFORE YOU GO GLOBAL

Chapter 4

Which Foreign Markets Will besuccessful for your products?


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Chapter Objectives

To discuss how to choose and prioritize foreignmarkets as part of international strategy

To understand the approach typically uses pastexperience for potential market To discuss how to identify indicators using to

scan all the world markets for suitable targets of

international expansion plan To understand trade barriers


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DEVELOPING INDICATORS BASEDON PREVIOUS EXPERIENCE

Identifying indicators based on previousexperience is the first step toward determining

which foreign markets should be successful for ourcompany. This involves:

Reviewing past leads, sales and competitivebehavior

Attending trade showsTalking with expert and customers


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DEVELOPING INDICATORS BASEDON PREVIOUS EXPERIENCE

Past leads indicate a trends can be extremelyuseful when choosing foreign market for

international planPast sales can be used to indicate particularregion or market profile

Trade shows can be used in a number of ways to

investigate your international sales potentialTalking with expert and customers is the key tosuccess

Input from customers


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PROACTIVE VERSUS REACTIVEMARKET SELECTION

Past leads, past sales, trade shows, talking tocustomer of experts is an important step toward

defining list of foreign markets however the listonly represents countries/markets that we havefound from a reactive selection basis

There maybe other markets that have not

ordered our products or that our competitor hasmiss and it represent tremendous potential. Wecan only find these market by using proactiveselection process


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Pitfalls of a Reactive marketselection strategy

Loosing first mover advantage benefits

Competitors and initial overseas customermislead us

Product life cycle have an impact on foreingmarket selection

Global product life cycle will also impact ourproduct and market choice


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Question to help Identify GlobalIndicators for Foreign market success

Who use the product? Who supply the product toend user?

Why is the product used? What are the benefits?

What triggers the purchase of the product? Doother events and conditions needs to be present?

Will cultural differences limit salesWhat infrastructure is needed for this product tosucceed?

Is the market growing, decreasing or stagnant?What is the US Industry? How dependent is

product usage on environmental conditions?


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Culture Defined

Culture: the specific learned norms of a societythat reflect attitudes, values, and beliefs

Major problems of cultural collision are likely to occur if:

-a firm implements practices that do notreflect local customs and values and/or

-employees are unable to accept or adjustto foreign customs.


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Cultural Influenceson International Business


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GLOBAL ASSESSMENT-A PROACTIVEMARKET SELCTION STRATEGY

The indicators (population, gross domesticproduct, per capita income) which should

be used for a global assessment dependon product and industry

There are five types of indicators suitable

for a global assessment of productsinternational potential:


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GLOBAL ASSESSMENT-A PROACTIVEMARKET SELCTION STRATEGY

Demographic Macroeconomic

Government policies Environmental Industry specific


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Physical and Societal Influences on

International Business


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TRADE BARRIERS

Trade barriers are an importantconsideration for international

companies as they expand globally.These trade barriers include:

Tariff barriers

Nontariff barriers

Import license


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TRADE BARRIERS

Government standards and testing

Product labeling

Quotas

Government procurement

barriersService and investment barriers


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Instruments of Trade Control

Instruments of trade control can:-directly limit the amount that can be traded-indirectly affect the amount traded by directly

influencing prices

Tariffs(also called duties) are taxes levied on(internationally) traded products.

Nontariff barriers (NTBs)represent administrativeregulations, policies, and procedures, i.e., quantitative

and qualitative barriers, that directly or indirectlyimpede international trade.

While tariff barriers directly affect prices and subsequentlythe quantity demanded, nontariff barriers may directly affect

price and/or quantity.


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Comparison

of Trade Restrictions


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Instruments of Trade Control:Tariffs

Tariffs, i.e., taxes levied on (internationally) tradedproducts, include:

exports tariffs, levied by the country of origin

on exported products transit tariffs, levied by a country through

which goods pass en route to their finaldestination

import tariffs, levied by the country ofdestination on imported products

A tariff increases the delivered price of a product, and,at the higher price, the quantity demanded will be less.

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Aspecific dutyis a tariff that is assessed on a perunit basis.

An ad valorem tariffis assessed as a percentageof the value of an item.

If both a specific dutyand an ad valoremtariff areassessed on the same product, it is known as a

compound duty.

While raw materials frequently enter industrial countriestariff free, anad valorem tariff is often applied to thetotal value of manufactured goods. Critics argue that theeffective tariffon the manufactured portion, i.e., thevalue-added portion, is higher than the published tariff.


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Instruments of Trade Control:Nontariff BarriersQuantity Controls

Quota: a numerical limit on the quantity of aproduct that may be imported or exported in a

given period of time Voluntary export restraints (VERs): negotiatedlimitations of exports from one country to another

Embargo: an outright ban on imports from or exportsto a particular country

Because of the increase in the equilibrium price,a quota may increase per unit revenues for participants

within the protected market.

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Buy local legislation

Specific permission requirements Importand export licenses

Foreign exchange controls

Administrative delays

Reciprocal requirements Barter

Offset

Restrictions on services Essentiality

Professional standards

Immigration


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Dealing with Government Intervention

Firms can deal with trade restrictions by:

moving operations to lower-cost countries concentrating on market niches that

attract less international competition

adopting internal innovations that lead togreater efficiency and/or superior products

trying to secure government protection

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Global Entrepreneur Chapter 4