Market Assessment

and Analysis
Daniel F. Duran
BSAD 350: International Business
Whittier College
 Heineken Brews Up Global
Strategy

 Within a few years of its founding, in 1864, Heineken

was exporting beer to France, Italy, Spain, Germany,
and the Far East. In 1914 Heineken’s managers
decided to export beer to the United States, and
contracted with Van Munching & Company to
distribute its products in North America.

 After World War II, Alfred Heineken came to New

York to study marketing and advertising with Van
Munching, and returned to the Netherlands in 1948
with knowledge to help launch Heineken into other
foreign markets worldwide.
 Heineken Brews Up Global
Strategy (cont.)
 Heineken has refused to establish a brewery in the
United States. Why?
 Heineken learned from the experience of other
breweries. Lowenbrau had begun to brew in the U.S.
and sales began to drop. The beer was no longer an
import and lost its cachet as an authentic Bavarian
beer. Heineken continues to ship its beer into the
U.S. market even though it might be cheaper to
produce it there.
 Heineken recently bought Van Munching & Company,
and now owns its U.S. distribution arm outright.
 Foreign Market Analysis

 To successfully increase market share,

revenue, and profits, firms must
normally follow three steps:
– Assess alternative markets
– Evaluate the respective costs, benefits, and
risks of entering each
– Select those that hold the most potential
for entry or expansion
Selection of Foreign Markets
Initial Screening
Basic Needs Potential/Foreign Trade Investment

Second Screening
Economic and Financial Forces

Third Screening
Political and Legal Forces

Fourth Screening
Sociocultural Forces

Fifth Screening
Competitive Forces

Final Selection
Personal Visit
 Initial Screening

 Basic Need Potential

 Identify locales where product or service is needed
 Foreign Trade and Investment
 Assess similar products already in market
 International Trade Statistics Yearbook (U.N.)
 Limitations of Import data
 Foreign Exchange indexing

 changing restrictions of liberties

 import situation may change

 political change
 Assessing Alternative Foreign
Markets
 Market potential
– The first step in foreign market selection is assessing market
potential. Many publications provide data about population,
GDP, per capita GDP, public infrastructure, and ownership of
such goods as cars and televisions. Such data permit firms
to conduct a preliminary screening of foreign markets.
 Levels of competition
– To assess the competitive environment, a firm should
identify the number and sizes of firms already competing in
the target market, their relative market shares, their pricing
and distribution strategies, and their relative strengths and
weaknesses, both individually and collectively.
Second Screening--
Financial and Economic Forces
 Inflation Rate
 Exchange Rate
 Interest Rates (Nominal and Real)
 Credit Availability
 Volatility of all
Second Screening--
Financial and Economic Forces
 Market indicators
 Measures of relative market strength
 Market factors
 Estimates demand for specific products
Second Screening--
Financial and Economic Forces
 Trend Analysis
 Cluster Analysis
 All analysis should be updated regularly
 Third Screening--
Political/Legal Forces
 Market entry barriers
 Profit repatriation barriers
 Political instability
 Taxes
 Standards
 Price controls
 Assessing Alternative Foreign
Markets (cont.)
 Legal and political environment
– A firm may choose to forego exporting its goods to a
country that has high tariffs and other trade restrictions in
favor of exporting to one that has fewer or less significant
barriers. Conversely, trade policies and/or trade barriers may
induce a firm to enter a market via FDI.
 Sociocultural influences
– Managers assessing foreign markets must also consider
sociocultural influences, which, because of their subjective
nature, are often difficult to quantify. To reduce the
uncertainty associated with these factors, firms often focus
their initial internationalization efforts in countries culturally
similar to their home markets.
 Fourth Screening--
Sociocultural Factors
 Language
 Regional Dialects
 Education
 Religious Attitudes
 Holidays
 Social Values
 Fifth Screening--
Competitive Forces
 Size and strength of competitors
 Competitors’ promotion methods
 Competitors’ product mixes
 Prices
 Distribution channels employed
 Market share distribution
 Market coverage
 Evaluating Costs, Benefits, and
Risks
 Costs
– Two types of costs are relevant at this point: direct and
opportunity. Direct costs are those the firm incurs in
entering a new foreign market and include costs associated
with setting up a business operation. Opportunity costs are
those that result from entering one market as opposed to
another—a firm forfeits or delays its opportunity to earn
profits in one market by dedicating its resources to another.
 Benefits
– Among the most obvious potential benefits are the expected
sales and profits from the market. Others include lower
acquisition and manufacturing costs, foreclosing of markets
to competitors, competitive advantage, access to new
technology, and the opportunity to achieve synergy with
other operations.
 Evaluating Costs, Benefits, and
Risks (cont.)

 Risks
– Generally, a firm entering a new market
incurs the risks of exchange rate
fluctuations, additional operating
complexity, and direct financial losses due
to inaccurate assessment of market
potential.
 Final Selection
 Field Trip
 Research local markets
 Secondary data (UN IMF, WTO, et al)
 Primary data
 Cultural problems
 Technical problems
 Research as a Reality
 Highly developed in Developed Countries
 Less Developed Countries simpler and less of it