SECTION ONE BEFORE YOU GO GLOBAL

Chapter 4

Which Foreign Markets Will be successful for your products?

Chapter Objectives
To discuss how to choose and prioritize foreign

markets as part of international strategy To understand the approach typically uses past experience 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 BASED ON PREVIOUS EXPERIENCE

Identifying indicators based on previous experience is the first step toward determining which foreign markets should be successful for our company. This involves: Reviewing past leads, sales and competitive behavior Attending trade shows Talking with expert and customers

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DEVELOPING INDICATORS BASED ON PREVIOUS EXPERIENCE

Past leads indicate a trends can be extremely
useful when choosing foreign market for international plan Past sales can be used to indicate particular region or market profile Trade shows can be used in a number of ways to investigate your international sales potential Talking with expert and customers is the key to success Input from customers
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PROACTIVE VERSUS REACTIVE MARKET SELECTION

Past leads, past sales, trade shows, talking to
customer of experts is an important step toward defining list of foreign markets however the list only represents countries/markets that we have found from a reactive selection basis There maybe other markets that have not ordered our products or that our competitor has miss and it represent tremendous potential. We can only find these market by using proactive selection process
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Pitfalls of a Reactive market selection strategy

Loosing first mover advantage benefits Competitors and initial overseas customer

mislead us Product life cycle have an impact on foreing market selection Global product life cycle will also impact our product and market choice

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Question to help Identify Global Indicators for Foreign market success

Who use the product? Who supply the product to
end user? Why is the product used? What are the benefits? What triggers the purchase of the product? Do other events and conditions needs to be present? Will cultural differences limit sales What infrastructure is needed for this product to succeed? 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 society
that reflect attitudes, values, and beliefs
Major problems of cultural collision are likely to occur if: -a firm implements practices that do not reflect local customs and values and/or -employees are unable to accept or adjust to foreign customs.

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Cultural Influences on International Business

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GLOBAL ASSESSMENT-A PROACTIVE MARKET SELCTION STRATEGY

The indicators (population, gross domestic product, per capita income) which should be used for a global assessment depend on product and industry There are five types of indicators suitable for a global assessment of products international potential:

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GLOBAL ASSESSMENT-A PROACTIVE MARKET 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 important consideration 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

barriers Service 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 administrative regulations, policies, and procedures, i.e., quantitative and qualitative barriers, that directly or indirectly impede international trade.
While tariff barriers directly affect prices and subsequently the 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) traded
products, 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 final destination import tariffs , levied by the country of destination on imported products
[continued]

A tariff increases the delivered price of a product, and, at the higher price, the quantity demanded will be less.
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 A specific duty is a tariff that is assessed on a per unit basis. An ad valorem tariff is assessed as a percentage of the value of an item. If both a specific duty and an ad valorem tariff are
assessed on the same product, it is known as a

compound duty.

While raw materials frequently enter industrial countries tariff free, an ad valorem tariff is often applied to the total value of manufactured goods. Critics argue that the effective tariff on the manufactured portion, i.e., the value-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 a product that may be imported or exported in a given period of time
Voluntary export restraints (VERs): negotiated limitations of exports from one country to another Embargo: an outright ban on imports from or exports to a particular country
Because of the increase in the equilibrium price, a quota may increase per unit revenues for participants within the protected market.
[continued]

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 Buy local legislation Specific permission requirements Administrative delays Reciprocal requirements Restrictions on services
Essentiality Professional standards Immigration
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Import and export licenses Foreign exchange controls

Barter Offset

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 to greater efficiency and/or superior products trying to secure government protection
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