CHAPTER FOURTEEN REVIEW MATERIALS

We have discussed environmental scanning as a part of the process of International Strategic Planning. It is a process of looking at different countries and analyzing their environments (e.g., political, economic, etc. etc.) and eliminating those that have the worst environment in which to do business. Environmental Scanning then is a procedure in which a firm scans the world for changes in the environmental forces that might affect it. (not natural resource scanning). Environmental Scanning truly provides a company with information about world opportunities and threats. So, environmental scanning is mostly used 1. during the overall planning process, and 2. to gather information on opportunities and threats, and not to gather information on market weaknesses Market Screening is a version of environmental scanning in which a company identifies desirable markets by using the environmental forces to eliminate the less desirable markets. Market Screening, therefore, is a method of market analysis and assessment that permits management to identify a small number of desirable markets by eliminating those judged to be less attractive. Market Screening is necessary to look at the nearly 200 countries (and multiple markets within each country) around the world and to identify the most attractive opportunities, from a country and a market point of view. Market Screening, therefore, eliminates those markets which are judged to be less attractive. Indeed, Market Research involves customized research, general surveys, nonprofit surveys and the internet, as well as country visits to get data. Country and Segment are units of analysis for market screening. Country Screening is when management uses countries as the basis for making market selections, while Segment Screening is when management uses market segments as the basis for market selection. When the basic need for a product is absent, no reasonable expenditure of effort is likely to enable a firm to market its goods or services. Initial Screening is looking at the basic needs potential for your firms products, and also the foreign trade and investment potentials. Study the chart on page 410 to see and understand the process managers go through to identify and select foreign markets!!!! Basic needs can be found out in various ways, including market research activities, reading industry associations reports and reading specialized trade journals. Assessing the basic need potential and foreign trade and investment potential are both part of the initial screening. Knowing the number and amount of imports to a specific country does not give a company a complete measure of market potential. Much more information is required.

Trade Flows are good indicators of the magnitude of present sales within a country. Imports into a country are not good indicators of the potential demand for a new product. This data only shows a company what a market has been buying with no guarantee that it will continue to do so. Mail surveys are not a good way to understand basic needs, because mail sometimes takes weeks to get to and from certain countries, sometimes mail is not even delivered, and response rates are often low. After the Initial Screening to look at basic needs the number of countries will be greatly reduced. Then comes the Second Screening which relates to Financial and Economic Forces. Market indicators and Market factors measure Market demand. Market indicators are economic data used to measure relative market strengths (and weaknesses) of countries or geographic areas (including market size, market growth rates, and E-commerce readiness). Market Factors are economic data that correlate highly with market demand for a product. Trene analysis and Cluster analysis are used in the Second Screening process. As indicated, the second step in the selection process, after studying the basic needs is to look closely at the economic and financial aspects of countries and markets. Such issues as trends in inflation rates, trends in interest rates, exchange rates, and interest rates should be clearly analyzed and understood. The third step (Third Screening) is a close look at political and legal forces of a country. Three major factors to fully understand are 1. entry barriers, 2. profit remittance barriers, and 3. policy stability within the government, including public unrest. If a country allows an international company to exercise repatriation/remittance of profits that is a good thing. It is not an entry barrier into a country. If they are not allowed this, then it is an entry barrier. Management of international companies should take the attitude that the stability of government policy is more important than is the particular form of government of a country. The Fourth Screening step is to understand the sociocultural aspects of the country and the market (s) of interest. Sociocultural forces are definitely subjective. The Fifth Screening step is to clearly understand the competition for your products within the country and the market (s) of interest. Remember from earlier discussions in class we indicated that having competition in a country is actually a good thing. Sometimes company management makes a decision to enter a market where strong local competition exists in order to

discourage them (distract them) from entering their own home domestic market. Finally, before the Final selection of the country is made a series of visits should be made by the management to fully understand all of the variables before making the decision to invest and undertake business in a country. Do not rely just on written information pertaining to the five steps in the selection processgo and verify everything yourself! Make a field trip. Trade Missions are comprised of a group of people in search of business opportunities. Trade Missions and attending Trade Fairs are good ways to get a better understanding of the country and markets you are about to select to enter. Benefits of attending Trade Fairs is that you get information on potential sales, you make good future contacts, and you can have a good opportunity to collect competitive information (intelligence). Trade Missions are organized by export oriented organizations, state governments, and the Department of Commerce of the federal government. Visiting the USA Embassy to gather information from their business library and from the Commercial Officer is very important as well. And, visit the USA Chamber of Commerce offices located in the country to gather information, etc. All of these personal visits are important to management. Getting desk market informationby an Analyst from your company is good, but often it is necessary to visit a country specifically to do market research to get final information. This is sometimes difficult in some countries as some governments must pre-approve the questions, etc. This is a practice that is true in strong socialistic countries like China, but even there doing market research is becoming easier.