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- Trade-offs 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 Country 2 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 3 4 5 Source:Janavaras.B, Paladini .S and George S (2013). Going Global: A Practical Guide Pearson

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 Country 2 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

Source:Janavaras. B, Paladini. S and George S (2013) 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 1 Competitor Name:   Product/Service Name: 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 Country 1 Country 2 Degree and Level of Market Competition in each country 1 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 Country 1 Country 2 Administrative Barriers  1 2 3 4 5 Import Licensing Requirements    Quotas  Tariffs  Any additional regulations Explanation for each of the regulations and your perception of its impact on your product

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 Country 2 1 2 3 4 5   1 2 3 4 5 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

Foreign Exchange Performance Foreign exchange rate performance Country 1 Country 2   1 2 3 4 5 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

Labor issues Labour Issues Country 1 Country 2 1 2 3 4 5   1 2 3 4 5 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 Infrastructures   1 2 3 4 5 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

Market Channel Conditions Country 1 Country 2   1 2 3 4 5 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

Overall Market Ranking VARIABLES WEIGHT AVERAGE RANK WEIGHTED TOTAL   Country 1 Country 2 Country 1 Country 2 CONTACTS (average) MARKET & COMPANY SALES POTENTIAL COMPETITION COUNTRY ENTRY CONDITIONS FINANCIAL & MARKET CONDITIONS Total weight (100%) Average rank sum Weighted Total

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 Library- http://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