International Market Selection: A Comprehensive Guide to Systematic Approaches and Entry Modes

International Market Selection: A Systematic Approach

Expansive Approach

Firms gradually move into international markets, starting with markets similar to their domestic market. This approach reduces perceived risk and information requirements.

• Lower cultural distance: increased confidence
• Lower costs associated with unfamiliar markets

Screening Approach

Involves systematically filtering the global market using criteria to identify the most suitable market for the firm.

Aim: Identify the market with the greatest marketing opportunity.

Stages of Screening Approach

Stage 1: Initial Screening

Objective: Identify national markets for further analysis.

Stage 2: Analysis of Potential Sales for an Industry in Country

Consider:

• Forecast of future sales
• Minimum scale
• Transport and infrastructure
• Free trade zones and special areas
• Distribution networks
• Labor laws

Stage 3: Firm's Potential Sales

Analysis of potential sales for the firm's product.

Consider:

• Information on product usage in the country
• Information on prices (price structure)
• Information on distribution
• Information on final users
• Information on promotion: sales forces, trade fairs

Stage 4: Identification of Market Opportunity

Market prospecting

Product adaptation to the market

International Entry Modes

Franchising

Arrangement where one party (franchiser) grants another party (franchisee) the right to use its trademark, business systems, and processes to produce and market a good or service.

Benefits to Franchisee:

• Immediate name recognition
• Tried and tested products, standard building design and decor
• Detailed techniques in running and promoting the business
• Training of employees
• Ongoing help in promoting and upgrading products

Patents

Limited legal monopoly granted to an individual or firm to make, use, and sell their invention, excluding others from doing so.

Joint Ventures

New firm formed to achieve specific objectives of a partnership, like a temporary arrangement between two or more firms.

Advantages:

• Risk reduction in new market penetration
• Pooling of resources for large projects

Acquisitions

Corporate action where a company buys most or all of the target company's ownership stakes to assume control.

Often made as part of a company's growth strategy:

• More beneficial to take over an existing firm's operations and niche
• Often paid in cash

Greenfield Investment

Venture where finances are employed to create a new physical facility for a business in a location with no existing facilities.

Originally referred to:

• Locating new company buildings on a pasture that was literally a green field
• Now used generally in modern business communication