Managing Transnational Corporations Assessing and Analyzing Markets Prof. Vikram S Tyagi, JKBS1

15-2 Learning Objectives  Discuss environmental analysis and market screening  Explain market indicators and market factors  Describe some statistical techniques for estimating market demand and grouping similar markets  Appreciate the value to business people of trade missions and trade fairs

15-3 Learning Objectives  Discuss some of the problems market researchers encounter in foreign markets  Understand the differences between country screening and segment screening  Identify sources of information for the screening process  Appreciate the utility of the Internet as a source of market research data

Assessing and Analyzing Markets ……Quick Recapitulation (c) Dr. Azhar Kazmi 20084

Strategic Positioning  It is important for a firm to be explicit about its choice of strategic emphasis with regard to value creation Management must decide where the company wants to be positioned with regard to value and cost ( cost vs differentiation)  A central tenet of the basic strategy paradigm is: To maximize its profitability, a firm must do three things Pick a position on the efficiency frontier that is viable in the sense that there is enough demand to support that choice Configure internal operations so that they support that position Make sure that the firm has the right organization structure in place to execute its strategy

The Evolution of TNC Strategy

14-7 … Recapitulation Evolution of the International Company Structure

15-8 Assessing and Analyzing Markets  About 200 countries in world, to which country a TMC should expand ?  Market Screening A version of environmental scanning in which the firm identifies desirable markets by using the environmental forces to eliminate the less desirable markets  Environmental Scanning A procedure in which a firm scans the world for changes in the environmental forces that might affect it

15-9 Market Screening  Permits management to identify a small number of desirable by eliminating those judged to be less attractive

Market Screening 1-Initial Screening-Basic Needs 2-Economic / financial screening 3-Political/legal screen 4-sociocultural screen 5-Comparative screen 6- Final screening (c) Dr. Azhar Kazmi

15-11 Market Screening  Two Types of Screening  Country Screening Using countries as the basis for market selection  Segment Screening Using market segments as the basis for market selection

15-12 Initial Screening  Basic Need Potential (1.1) If the need is lacking, then no reasonable expenditure of effort and money will enable the firm to market its goods and services (Physical forces- Tractor; Air conditioners Etc. Easier for producers of specialized industrial materials or equipment than for widely consumed products

15-13 Initial Screening  Foreign Trade: Current imports- exports data  Imports Don’t fully measure market potential- Evaluatebcarefully  Resources to establish need potential International Trade Administration site on the Internet ( U.S. Exports of Merchandise on the National Trade Data Bank U.S. International Trade in Goods and Services (FT900) by the Department of Commerce Annual Worldwide Industry Reviews and International Market Research Reports prepared by various U.S. embassies  Imports/exports data websites of Government of a specific country

15-14 Second Screening: Financial and Economic Forces (2.0)  Measures of market demand based on economic and financial data Market indicators- Examples Population. Electricity consumption, Growth rate, GDP per capita, Ecommerce readiness- mobile+pc users+Internet users Market factors- Correlate to a product highly than indicators for a given product; car- tires; laptop population –replacements; find such indicators and use. Trend analysis- correlation-regression analysis; other forecasting models Cluster analysis - Stastical technique -divide market areas in to similar- individuals, customers, income, age, location, means reducing mountain in small piles

15-15 Third Screening: Political and Legal Forces  Entry Barriers Import restrictions, local participation requirements, local content restrictions, government-owned competition  Profit Remittance Barriers Undue restrictions on repatriation of earnings, limits to FDI, inability to provide foreign exchange  Policy Stability Political climate, government stability, public unrest

15-16 Fourth Screening: Sociocultural Forces  Screening on the basis of sociocultural factors is challenging  Sociocultural factors are fairly subjective  Data are difficult to assemble, particularly from a distance

Study relevance of - Determinants of Culture

Cultural dimension of business- Managerial Implications  Cross-cultural literacy  Culture and competitive advantage  Culture and business ethics

15-19 Fifth Screening: Competitive Forces, cont’d.  The source of their products-- imported or locally produced  Their pricing policies  The levels of their after-sales service  Their distribution channels  Their coverage of the market

15-20 Fifth Screening: Competitive Forces  The number, size, and financial strength of the competitors  Their market shares  Their marketing strategies  The apparent effectiveness of their promotional programs  The quality levels of their product lines

15-21 Final Selection of New Markets  P ersonal visit to potential markets is essential Field Trip, unhurried- Check warehousing facilties, media agencies, banking facilities,credit Government-Sponsored Trade Missions Trade Fairs- every country has trade fairs; stalls in 3 rd countries,

15-22 Final Selection of New Markets, cont’d  Research in Local Market Face-to-face interviews reveal information that would never be written Hire local research group  Person in charge of the project must have experience in that country or culturally similar one in same geographic area

15-23 Local Research Problems  Cultural Language Literacy Social desirability bias  Technical No up-to-date maps Streets have different names Houses not numbered Only wealthy have telephones Mail delivery issues

15-24 Research in Developing Nations  Less research performed  Often a seller’s market Competition is frequently less intense in developing nations because  fewer competitors  management struggling with problems other than marketing

15-25 Return to Segment Screening  Country segments or Market segment  Segment Screening Definable: identify and measure Large: to be worth the effort needed Accessible: for promotion and distribution Actionable: have control of marketing programs Capturable: potential exists

Next session Entry Strategy and Strategic Alliances Please read case: TESCO GOES GLOBAL (c) Dr. Azhar Kazmi

Some Useful Websites  Doing Business with –name of country ( very useful)  Import export data- name of country  CIA World facebook       Industry Associations of country of interest  WTO data bank on imports and exports of countries (c) Dr. Azhar Kazmi

Managing Transnational Corporations - Prof. Vikram Tyagi Prof. Vikram S Tyagi, JKBS28