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Foreign Market

Selection Process
Kelly E. Fish, Ph.D.
International Business
Workshop

Overview
Market Entry Strategies
Exporting
Foreign Market Selection
How IBRC can help with the process

Foreign Market Entry Strategies
Low risk/reward High risk/reward
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Strategy Trade-offs
Control Asset Variable Fixed Market Overall
Entry Strategy Level Costs Costs Share Cost
Indirect Exporting
Direct Exporting
Sales Subsidiary
Franchising/Licensing
Contract Manufacturing
Local Assembly
Joint Venture
Local Production
Wholly owned
subsidiary
Indirect Export Trading Companies (TCs)
Advantages
Open new markets without expertise
or investment
TCs cover market well and service
products they sell

Indirect Export Trading Companies (TCs)
Disadvantages
TCs control market selection and
marketing
More of a foreign concept (Japan,
South Korea, Brazil, Western Europe)
Product may not get attention it
deserves
Indirect Export Export Management Companies
Advantages
Instant foreign market knowledge
and contacts
Sales are on commission basis
(variable cost)
Potentially better feedback than TC
Indirect Export Export Management Companies
Disadvantages
EMCs may spread themselves too
thin with too many customers
Product may not get attention it
deserves
Market expertise/contacts can be
limited to one or two countries
Indirect Export Piggyback Exporting
Advantages
Rider benefits from carriers
established export and distribution
facilities
Shared expenses
Rider benefits from carriers
reputation
Indirect Export Piggyback Exporting
Disadvantages
Carrier seldom assumes any risk on
riders product
Rider subject to carriers
strategy/reputation
Direct Exporting
Advantages
Usually yields higher sales than
indirect exporting
Company has greater control, better
market information
Company develops in-house
expertise
Company has greater freedom to
choose entering markets
Direct Exporting
Disadvantages
Costs are higher than with indirect
exporting
It may take longer to establish
market entry, distribution network,
etc.
Foreign Market Selection

The two most widespread mistakes of
market selection are:

1) ignoring or missing markets that offer
good potential for a firms products

and

2) spending too much time researching
markets that are poor prospects for
the firm
Foreign Market Screening
Target
Foreign Market Screening
Target
1. Macro-level research

2. General market factors
relating to the product

3. Micro-level factors specific
to the product

4. Final screening
Foreign Market Screening
Target
Screening techniques
range from simple
minimum criteria
thresholds (Example A)
to clustering techniques
using artificial
intelligence (Example B).
Example A Targeting Countries
for Kidney Dialysis Equipment
1. Macro-level
research
GDP over $15
billion
GDP per capita
over $1,500
Political stability
Example A Targeting Countries
for Kidney Dialysis Equipment
2. General market
factors relating to
the product
Less than 200
people/hospital bed
Less than 1,000
people/doctor
Govt. expenditures
over $100 million for
healthcare
Govt. expenditures
over $20 per capita
for healthcare
Example A Targeting Countries
for Kidney Dialysis Equipment
3. General market
factors relating to
the product
Kidney-related
deaths over 1,000
Patient use of
dialysis equipment
over 40% annual
growth
Example A Targeting Countries
for Kidney Dialysis Equipment
4. Final screening
Number of
competitors
Distributor
reputation
Example B Targeting Countries
for Kidney Dialysis Equipment
GDP
GDP per capita
Total health
expenditure per
capita
Total Health
expenditure as a %
of GDP
Political Risk Index
Cultural score
Self-Organizing
Map
Example B Targeting Countries
for Kidney Dialysis Equipment
Hong Kong
Jamaica
Singapore
Australia
Austria
Canada
Ireland
New Zealand
Switzerland
United Kingdom
United States
Japan
Ecuador
Guatemala
Indonesia
Pakistan
Turkey
Venezuela
Yugoslavia
Iran
Mexico
South Africa
France
Italy
Denmark
Finland
Netherlands
Norway
Sweden
Chile
Panama
Peru
South Korea
Thailand
Brazil
Colombia
Argentina
Costa Rica
Greece
Portugal
El Salvador
Spain
Uruguay
Israel
India
Malaysia
Philippines
How the IBRC can help
your business
Provide export assistance to NEA businesses
1. NEA Business Contacts the IBRC
2. IBRC matches ASU Intern with NEA Business
3. Intern Researches International Markets and Develops
Export Strategy for the NEA firm under direction of IBRC
4. Intern makes Final report and end of semester
Provide export assistance to NEA businesses
We have the expertise for oversight (Drs. Fish & Guha)
We have the manpower (Students are cheap free!)
We have the country data
We are committed to working with the U.S. Export
Assistance Center


Visit the ASU International
Business Resource Center on
the Web at:

ibrc.astate.edu