Potential Market Assessment

Faculty:

KUSHAL KATARIA

Potential Market Assessment

Political Risk Research Environmental Research Researching Competitors Entry Evaluation Procedure Country Data Sources

Political Risk Research

POLITICAL RISK FACTORS

Factors Level 1: General Instability

Level 2: Expropriation Level 3: Operations Level 4: Finance

Examples Revolution, External Aggression

Nationalization, Contract Revocation Import Restrictions, Local Content Rules, Taxes, Export Requirements Repatriation Restrictions, Exchange Rates

If at any of the levels the risk is deemed unacceptable, the investment project receives a no-go. International terrorism is a new type of political risk. Ex: Iraq, Pakistan

Environmental Research
Environmental variables affect how products are used and how they affect customer choices.
Ex: Small homes => Home furniture Electric watches in India Buying determinants that work at group level, ex: fashion goods some such factors are hidden & unconscious to the buyer himeslf.

Environmental Research (contd..)

Physical Environment

PHYSICAL ENVIRONMENT
Humidity and heat in the region => Air Conditioning Market But in South East Asia the soft housing construction (due to the regions propensity to natural disasters) makes AC installation an issue Impact of climate on clothing habits and garment industry use of fur in Russia and cotton in tropical countries.

Socio-cultural Environment

Economic Environment

Regulatory
Environment

Environmental Research (contd..)

Physical Environment

SOCIO-CULTURAL ENVT.
Social & cultural influences are less obvious than physical factors. Expert opinions First hand experiences

Socio-cultural Environment

Economic Environment

Regulatory
Environment

Environmental Research (contd..)

Physical Environment

ECONOMIC ENVIRONMENT
Disposable income Income-per-household Observing Paradox (color televisions and double door fridges in shanties) Literacy levels define how marketing research will be administered

Socio-cultural Environment

Economic Environment

Regulatory
Environment

Environmental Research (contd..)

Physical Environment

REGULATORY ENVIRONMENT
Enables or prohibits certain business practices Impacts advertising, in-store promotions, etc. Need to identify who the real movers and shakers are and how their network operates.

Socio-cultural Environment

Economic Environment

Regulatory
Environment

Researching Competitors
Getting a sense of the financial capabilities of the competitors. Strategic importance of the market for the competitor.
Overall importance for domestic players is usually higher. FDI in manufacturing by a foreign company makes it an insider and behave similar to a domestic player

Understanding competitors organization structures and integration of MNC subsidiaries with parent company. Marketing strategies of competitors. Price vs. Differentiation based strategy; Strength or Weakness of Distribution Network; After-sales service systems and standards. Competitive Signaling forecasting competitors behavior.

Likely Competitive Responses

HIGH CAPACITY Sleeping Dogs LOW CAPACITY By-standers
For now, you dont need to worry about these competitors

LOW CORPORATE COMMITMENT

May fight Track them should they decide that the arena is attractive, they can mobilize fast.

Combatants HIGH CORPORATE COMMITMENT

Will fight

Skirmishers
Will fight, but can be beaten

Possible Competitive Engagements: Onslaught Gorilla Campaign Feints Gambits

Entry Evaluation Procedure

FOUR STAGES:
STAGE 1 Country Identification STAGE 2 Preliminary Screening STAGE 3 In-Depth Screening STAGE 4 Final Selection

Entry Evaluation Procedure (contd..)

STAGE 1 Country Identification
Typically a company decides to enter a particular trade area. They then do a more in-depth analysis within each of the regions to identify where to place their sales headquarters and which countries to enter first. The statistical variables typically define level of development and cultural similarity of the countries. Population comparisons are important but at the same time a tricky variable.

Entry Evaluation Procedure (contd..)

STAGE 2 Preliminary Screening
Rating the identified countries on macro-level indicators such as political stability, geographic distance and economic development. The idea is to weed out countries Ex: Look at issues like profit repatriation, currency convertibility, signs of political instability, exchange rate volatility.

Entry Evaluation Procedure (contd..)

STAGE 3 In-Depth Screening
This is the core of the attractiveness evaluation. Data analyzed here is specific to the industry and product markets, if possible, even specific to the market segment. This stage involves assessing:
market potential and actual market size market growth rate strengths and weaknesses of exiting and potential competition height of entry barriers.

Entry Evaluation Procedure (contd..)

STAGE 4 Final Selection
Company objectives are brought to bear for a match. Forecasted revenues and costs are compared to find the country market that best leverages the resources available. Typically, countries similar to those the company has already entered show lower entry costs, less risk and quicker returns on the investment required to build up the market. Ranking of countries from highest to lowest attractiveness for the firm. (How do you make forecasts for a new product / new market?)

Country Data Sources

OECD WTO UN Publications CIA Economist Intelligence Unit (EIU) Business Environment Risk Intelligence (BERI) Eurostat HSBC Country Reports Consulates (own countrys and target countrys) ICREAR (India specific) - Indian Council for Research on International Economic Relations