Topic 2, MARKET ANALYSIS AND SELECTION

Question 1

Discuss why it is important to identify the right market to enter

Answer 1

1. It can be a major determinant of success or a failure
2. This decision influences the nature of foreign marketing programmes in the selected countries
3. The nature of geographic location of selected markets affects the firm’s ability to coordinate foreign operations

Question 2

Identify the potential environmental determinants of the firm’s choice of foreign markets

Answer 2

Environmental determinants:

• International industry structure
• Degree of internationalization of the market
• Host country (market potential, competition, psychic/geographic distance, and market similarity)

Question 3

Provide 3 examples of preliminary screening criteria and 3 examples of fine-grained screening criteria

Answer 3

3 examples of preliminary screening (macroenvironment):

• Gross National Product per Capita
• Restrictions in the export of goods from one country to another
• Political risks

3 examples of fine-grained screening criteria:

• Market size (total and segments)
• Market growth (total and segments)
• The buying power of customers
• Psychic distance

Question 4

Identify the main factors of the political/legal environment in the host country that may threaten/facilitate the exporting firm business

Answer 4

1. Political risks
   - Import restrictions
   - Currency exchange-rate controls
   - Market / price / tax controls
   - Nationalization or domestication
   - Labour restrictions related to unions
2. Tariff barriers (Tariff barriers and Non-tariff barriers)
   - To protect domestic producers
   - To generate revenue

Question 5

Describe the two main decisions regarding the market expansion strategies

Answer 5

First decision: Incremental vs Simultaneous entry

Within this decision exists the waterfall (preferred when firms lack experience in foreign markets and shower approach (rapid entry to the world market)

Second decision: Concentration vs. Diversification

Concentration: concentrate the resources in a limited number of countries / segments.

Diversification: diversify the resources in several countries / segments