Screening Potential Markets and Sites
1. Identify Basic Appeal
- Basic Demand - For a potential market this step entails determining basic demand for a product.
- Available Resources - For a potential site this step involves determining the availability of resources required to undertake production, R&D, or some other operations.
Determining Available Resources
2. Access the National Business Environment
- Government Regulations - A nations attitude towards trade and investment, types of restrictions on imports, types of investment barriers, and environmental regulations can attract or discourage foreign investment.
- Government Bureaucracy - Lean and smoothly operating bureaucracy can encourage investment while an inefficient, cumbersome, or corrupt one can discourage it.
- Political Stability - Companies must monitor political events that threaten operations and future earnings. Political risk can threaten activities of any international business activity.
- Cost of Transporting Materials and Goods - Can affect where manufacturing facilities are located. Logistics is managing the physical flow of products from point of origin as raw materials to end users as finished products.
- Country Image - Embodies all facets of a nation’s business environment and affects the selection of sites for any activity. Country image can be good for certain products but unfavourable for others.
- Names, production volumes, and market shares of largest competitors.
- Volume of exports and imports of the product.
- Structure of wholesale and retail distribution networks.
- Market background, including population, social trends, and marketing approaches used.
- Total expenditure on product (and similar products).
- Retail sales volume and market prices of product.
- Future market outlook and potential opportunities.
- Market Size - snapshot of market size at the moment.
- Market Growth Rate - Identify large (but shrinking) markets and small (but expanding) markets.
- Market Intensity - Estimate a market’s wealth or buying power (both individuals and businesses).
- Market Consumption Capacity - Estimate a market’s spending capacity.
- Commercial Infrastructure - Assess channels of distribution and communication.
- Economic Freedom - Estimate extent that free-market principles predominate.
- Market Receptivity - Estimate market “openness.”
- Country Risk - Estimate risk of doing business, including political, economic, and financial risks.
- Managers must assess the quality of resources they will employ locally. For many companies, the most important resource will be labour and management.
- Wages are lower if labour is abundant, relatively less skilled (though perhaps well-educated), or both. Yet, training local managers requires a substantial investment of time and money.
- Companies must assess the productivity of local labour and managers; low wages may reflect low productivity levels.
- Managers should examine local infrastructure, including roads, bridges, airports, seaports, and telecommunications systems; each can impact efficiency.
- Number of competitors in each market (domestic and international).
- Market share of each competitor
- Whether each competitor’s product appeals to a small market segment or has mass appeal
- Whether each competitor focuses on high quality or low price
- Whether competitors tightly control channels of distribution
- Customer loyalty commanded by competitors
- Potential threat from substitute products
- Potential entry of new competitors into the market
- Competitors’ control of production inputs (labour, capital, raw materials, etc.)