July 26, 2010

Where In The World?

by Jennifer Blissent, Ph.D. for Vendor Strategy Professionals

Making Leaders Successful Every Day

For Vendor Strategy Professionals

Where In The World?

July 26, 2010

a Structured methodology For Prioritizing Geographic market Entry

by Jennifer Blissent, Ph.D. with christopher mines and Edward radcliffe

ExEcuT I V E S u m ma ry
Many technology vendors are going global, seeking new markets to make up for the maturation of traditional ones. And rightly so; our Forrsights Budgets And Priorities Tracker Survey, Q2 2010, found that more than twice as many IT decision-makers in emerging markets, compared with more mature markets, thought that 2010 would be a good year for their industry. And that optimism has translated into IT budgets; higher percentages of emerging-market IT decision-makers expect to increase their IT spending relative to their peers in the UK and US. But market expansion is not necessarily right for all vendors, and, even when it is, identifying the specific opportunities is not straightforward. With their size and economic growth, Brazil, Russia, India and China the BRIC countries often top vendors target lists. But market characteristics, local catalysts, and local business concerns and priorities that drive technology adoption make the calculation more complex. Deciding that geographic expansion is the right strategy comes first, then using a transparent and structured market opportunity assessment helps to identify and prioritize potential target markets.

TaBl E o F co nTE nTS

2 Setting The Tech Industry Stage For Market Opportunity Assessment 2 Growth In Emerging Markets Makes Them More Attractive 8 But When And Where (And If) Isnt Always Obvious 12 Know Thy Markets, But Know Thyself First 14 If Yes, Then Assess
rEcommEnDaTIonS

n oT E S & rE S o u rcE S
Forrester interviewed numerous high-tech companies of a range of size and product type, including atos origin, Baynote, cisco Systems, comarch, ESET, FatWire, Fujitsu Services, HP, Kaspersky lab, linkedIn, logicalis Group, and research In motion.

Related Research Documents olympic opportunities In Emerging markets march 10, 2010
Building B2B Technology markets December 21, 2009 Introducing Forresters B2B Technology market Forecasting april 8, 2008

19 Never Too Old, Too Young, Too Large, Or Too Small For A Solid MOA Process 20 Supplemental Material

2010, Forrester Research, Inc. All rights reserved. Unauthorized reproduction is strictly prohibited. Information is based on best available resources. Opinions reflect judgment at the time and are subject to change. Forrester, Technographics, Forrester Wave, RoleView, TechRadar, and Total Economic Impact are trademarks of Forrester Research, Inc. All other trademarks are the property of their respective companies. To purchase reprints of this document, please email clientsupport@forrester.com. For additional information, go to www.forrester.com.

Where In The World?

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SETTING ThE TEch INDuSTRY STAGE FOR MARKET OPPORTuNITY ASSESSMENT Business and government spending on IT technology products and services comprised a $1.58 trillion dollar market worldwide in 2009. Forrester depicts the breakdown of the IT market by geography in the tech industry wheel (see Figure 1).1 As illustrated, opportunities for vendors in the IT industry vary across these geographies, requiring strategic assessment of which geographies to pursue for given products or services offerings. While the US is a standout at $564 billion, China is also remarkable as it rivals Japan for dominance in Asia. With its continued growth, China will overtake Japan in the coming years. Emerging markets overall, including all of Eastern Europe, the Middle East, and Africa; Latin America; and much of Asia, represent a sizable and growing portion of the wheel. This research report focuses on market opportunity assessment and how vendors undertake the research required to identify where and how their offerings will have the most impact. Not all geographies are made equal, nor are they appropriate for all vendors and their offerings. This report is part of Forresters tech industry strategy research, which is chartered to predict and quantify growth and disruption in the global IT industry. GROWTh IN EMERGING MARKETS MAKES ThEM MORE ATTRAcTIvE While developed economies endure recovery at an uneven pace or, worse, continued fiscal crises as is the case in much of Europe, many emerging markets have shrugged off the malaise of the past year or avoided it altogether. But knowing where, or even if, to go into a new market, particularly an emerging market, is not a simple process for tech industry strategists. Economists expect economic growth in China to reach nearly 10% in 2010, while Brazils economy will post over 6% growth.2 This expected growth contrasts with uneven and anemic growth in Europe and the US. It has sparked an almost-Pavlovian reaction among tech industry strategists and, perhaps, rightly so in some cases. Many US tech companies report that non-US revenues have surpassed their domestic sales, and growth is highest in emerging market countries like Brazil, India, and China (see Figure 2). For example, IBM recently reported revenues for 2009 showing growth in India of 25.8%, 18.3% in Brazil, and 14.7% in China; Russia was IBMs lagging BRIC country at 11% revenue growth, while IBMs worldwide revenues actually declined by 8% in 2009.3 Country-level demographic indicators and attitudinal trends among IT decision-makers indicate that emerging markets will continue to provide opportunity to technology vendors and be the subject of long-term planning for industry strategists as vendors evaluate and reevaluate evolving geographic markets and the opportunities they provide.

Demographic trends make emerging markets more attractive. The worlds population is

shifting toward emerging markets. The projected worldwide population growth of 32% between

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2010 and 2050 masks growth of only 3% in the most developed regions, in contrast to 29% and almost 100% in less developed and the least developed regions, respectively (see Figure 3). In fact, several mature markets face prospects of a shrinking population in the next decades.4 Germanys population will fall from 82 million in 2000 to 70 million in 2050, a 14% reduction. By contrast, Saudi Arabias population will grow from 20 million in 2000 to 43 million in 2050, an increase of 110%.5 Rapid urbanization in emerging markets also changes the dynamics of the markets: Urban population in emerging markets grew almost seven times that in mature markets from 2005 to 2010.6 The UN projects that the global urban population will increase by 180% between 2010 and 2050, with 118% in more developed countries contrasted with 367% in the least developed countries. The percentage of population in urban areas is expected to grow more rapidly in the least developed countries, from 29% to 55%, than in more developed countries, from 75% to 86%. What do these trends portend for technology vendors? Population growth and urbanization bring increasing demand for services of all kinds accessed via multiple channels, which in turn drives demand for IT infrastructure and applications to support those services.

Greater optimism among IT decision-makers appeals to tech vendors. Even at the height

of the economic downturn in early 2009, optimism in many emerging markets was higher than in mature markets. The same held true in 2010 as the global economy began to emerge from the downturn. In the Forrsights Budgets And Priorities Tracker Survey, Q2 2010, 52% of IT decision-makers in Latin America and 36% in Emerging Asia and Russia reported that the outlook for their industry was good or very good in 2010; by contrast, only 24% reported similar optimism in Europe and 31% in North America.7 In many cases, that optimism translated into expectation of greater IT spending; 66% of respondents in India, 56% in China, and 55% in Brazil reported that their total IT spending would increase in 2010 (see Figure 4).

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Figure 1 Forresters Information and communications Technology (IcT) Industry Wheel By region
Geographic distribution of global IT purchase market (US$ billions, 2010) South Korea Rest $68 $27 Australia $29 India $36 China $125 United States $564 Japan $127

Asia $411 $1,580* E. Europe and MEA $80 Western and Central Europe $388

North America $620

South Africa $13

Rest $28

Saudi Arabia Russia $8 Turkey $18 $10 Rest $55 The Netherlands $24 Spain $25 Italy $34 Scandinavia $41

Latin America $83 Canada $56 Brazil $38 Mexico Rest $24 Germany $21 $74

France $62

UK $73

*Total excludes telecom services. Eastern Europe, the Middle East, and Africa
Source: Forrester Research, Inc.

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Figure 2 large uS Tech Vendors make The majority of Their revenues outside of The uS
International share of revenue IBM HP Oracle Symantec Cisco NetApp Google N/A Source: Vendor annual reports for FY 1999 and 2009
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57% 55% 49% 40% 39% 38%

82% 64%

1999 2009

56%

51% 50% 49% 53%

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Figure 3 Population Growth In less Developed regions Eclipses That In more Developed regions
3-1 United Nations world population prospects: the 2008 revision 2010 10,000,000 9,000,000 8,000,000 7,000,000 6,000,000 5,000,000 4,000,000 3,000,000 2,000,000 1,000,000 0 2010 2050 Growth 32% Growth 29% 2050

Growth 3% More developed* 1,237,228 1,275,243 Less developed 4,816,763 6,202,328

Growth 96% Least developed 854,696 1,672,414

World 6,908,688 9,149,984

3-2 United Nations world urbanization prospects: the 2009 revision Urban population as a percentage 2010 2010 8,000,000 7,000,000 6,000,000 5,000,000 4,000,000 3,000,000 2,000,000 1,000,000 0 Growth 80% Growth 85% Growth 18% More developed* 929,851 1,099,730 Less developed 2,307,033 4,271,781 2050 50% 69% 75% 86% 48% More developed* 69% 29% 55% 2050

World Growth 267%

Less developed

Least developed

World 2010 2050 3,486,326 6,285,881

Least developed 249,442 914,370

Source: United Nations (http://esa.un.org/unpp/) *More developed regions comprise Europe, North America, Australia/New Zealand, and Japan. Less developed regions comprise all regions of Africa, Asia (excluding Japan), Latin America and the Caribbean, and some Pacic Islands. The least developed countries according to standard United Nations designation
54505 Source: Forrester Research, Inc.

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Figure 4 optimism about Industry and Budget Projects Prevails in Emerging markets
4-1 What is your industry outlook for 2010? That is, how will your industry compare with other industries? (Percentage who responded a somewhat good year or a very good year) Latin America (N = 299) Emerging Asia/Russia (N = 448) North America (N = 1,195) Asia Pacic (N = 299) Europe (N = 562) 36% 31% 30% 24% 52% 4-2 How do you expect your spending on the following categories to change in 2010? Total IT spending (operating plus capital budget) (Percentage who responded increase 5%-10% and increase more than 10%) India (N = 149) China (N = 150) Brazil (N = 144) Russia (N = 149) US (N = 1,039) UK (N = 187) 66% 56% 55% 45% 38% 33%

Responses for a very challenging year, a somewhat Responses for decrease more than 10%, decrease challenging year, and it's too soon to say have been 5%-10%, about the same, and don't know have removed. been removed. Base: 2,803 global enterprise IT decision-makers Source: Forrsights Budgets And Priorities Tracker Survey, Q2 2010
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Global Trends Make Entering New Markets Easier Economic liberalization in many emerging markets and improvements in transportation and communications among countries facilitate global trade, fueling globalization of the technology and other industries.

Liberalization of economies facilitates globalization. The press abounds with stories of

increasing trade between countries, and not necessarily with the US. In fact, China just surpassed the US as Brazils largest trading partner.8 That increased trade results in part from liberalization of economies as reflected in the elimination of trade barriers, relaxation in currency restrictions, and overall improvements in business climates. Many of these indicators are measured and aggregated into an Index of Economic Freedom, developed by The Heritage Foundation and The Wall Street Journal.9 Comparing the Index of Economic Freedom of 2005 with that of 2010, almost 100 of the 159 countries with complete data or 62% have improved their score. The World Banks Doing Business index focuses specifically on regulations relevant to the life cycle of a small to medium-size domestic business.10 The Doing Business 2010 index reflects improvements in the business administration processes in 57 of the 181 countries studied, or more than 30% of countries. Doing Business 2010 recorded 287 specific reforms in 131 economies.

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Proliferation of technology makes communication easier. Globalization in general is

facilitated by the proliferation of technology and the improvements in communication that result. In the tech industry, the increased penetration of Internet and broadband is essential not only for business but also for the adoption of technology itself. However, penetration alone is not sufficient. The e-readiness ranking, developed by the Economist Intelligence Unit in cooperation with the IBM Institute for Business Value, measures not only availability of technology but also usage as reflected in social and cultural attitudes toward technology, business, and consumer adoption and legal and governmental environments as they affect technology use. The 2009 e-readiness ranking evidences increases in both the penetration and the use of ICT in more than one-third of countries in the study.

BuT WhEN AND WhERE (AND IF) ISNT ALWAYS OBvIOuS Identifying the right target markets isnt always straightforward. Where one supplier may see fresh opportunity, another sees a failed expansion. In one recent case, mobile telecommunications provider Bharti Airtel from India chose to enter the African market. Simultaneous with its entry came the exit of Zain, a Kuwaiti service provider, from many of its African markets. Zain sold most of its African footprint to Bharti.11 Zain will continue its African activities in only Morocco and Sudan and will focus on its highly cash generative operations in the Middle East, in the words of the CEO of Zain Group, Nabeel Bin Salamah.12 This example illustrates the opportunity cost involved in new market entry. As business models and market entry objectives and attitudes toward risk and competition differ, it is also important to keep in mind that:

No approach is one-size-fits-all; objectives and drivers differ. The big and growing markets

of China, India, and Brazil are often viewed as prime targets for market entry. However, for some vendors, bigger is not always better. A large handset manufacturer held off on entering the Brazilian market for several years until it could ramp its local manufacturing facilities to meet the anticipated demand. As one of its strategists told us, Market entry is influenced by production capacity sometimes we will not enter a market because it is too hot, and we know we cant meet demand.

Opportunism might seem easy, but it isnt right for everyone. Vendors can find themselves in

a new geography having followed a customer or based on a single deal resulting from a personal relationship. One small software vendor found itself in both Turkey and South Africa due to single deals based on previous relationships of the CEO. Good news or bad news? That depends on local requirements and the companys capacity to extend itself. For small vendors with limited resources, decisions to enter new markets are best based on more than opportunism. As one small software vendor told us, a beachhead is necessary but not sufficient. On the other

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hand, for many IT services firms, moves into new markets are often deal-led. As one large enterprise IT services provider put it, one customer can be significant. A relationship can pave the way and facilitate market entry.

Competition can be a mixed bag and comes in all forms. While one might initially think

that competition is not a good thing, a more fragmented market can make entry easier. Some vendors undertake a strategy of landing and expanding through acquisition of local players. Some vendors also benefit from a critical vendor mass of other foreign players, which can validate a market choice or provide strength in numbers when lobbying for better trade policies in the case of hardware. However, if the local players consist of few entrenched international vendors or strong local incumbents, competition might be too fierce for some entrants. The Russian software market, for example, is dominated by local players such as Kaspersky Lab in the security space or 1C in enterprise applications. Competition must be evaluated on a caseby-case basis. Another form of competition not to be ignored is substitute products or services. For example, in some markets, refurbished PCs compete with newer PCs at a much lower price point.13

Its not always the usual suspects. Whether to expand or not is then followed by determining

where to expand. Brazil, Russia, India, and China BRIC are most touted as hot emerging markets. However, when the term was first coined back in 2005, the emphasis was on prospective market size based on population and GDP growth. But GDP is not the only indicator to consider. Services firms need skilled labor. Hardware vendors must either import their products or manufacture in country. All technology vendors benefit from market infrastructure, from technology infrastructure and e-readiness, and of course a positive business climate. On many of these indicators, the BRIC countries dont rate as well as other emerging markets (see Figure 5). For example, in the Index of Economic Freedom, the United Arab Emirates (UAE) ranks fifth globally in terms of ease of cross-border trade, ranking just above Sweden and Denmark and only behind Hong Kong, Singapore, Finland, and Norway. While not a large market, its high marks on trade as well as on the Doing Business index in general suggest that the UAE is well suited as a regional hub.14

Emerging markets arent for everyone. For some vendors particularly those from emerging

markets entry into another emerging market is not necessarily the right expansion strategy. One software vendor from Russia chose to enter the US as opposed to other markets where competitors from Eastern Europe were investing, such as Africa, the Stans, or Latin America.15 In that vendors words, For us it was better to have 1% of the American market than 50% of the Argentinean market, for example. We needed to have revenues in hard currency if the ruble devalues . . .

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There is opportunity cost to any geographical expansion. While obvious to many, the

opportunity cost of expansion is worth revisiting. New markets, particularly emerging markets, require resources for partner recruiting, marketing and sales, and sometimes product development. The opportunity cost the cost of not pursuing a deal that could have been won if the resources spent on pursuing exotic new markets were instead invested at home or according to a focused geographical plan could be high. That seems obvious to smaller companies with limited resources. But for more established vendors developing new products, the temptation can arise more often as they have global sales forces. An enterprising account manager in Vietnam, for example, might push the business unit to pursue a local opportunity. The specific requirements of this new customer might not contribute to general product development and could distract engineering teams, let alone sales and marketing. Sometimes deal qualification itself requires development team involvement. In the words of a corporate strategist at one large tech vendor, Since gaining repeatability requires focus, we might say thats interesting but not yet. Market expansion is not always the right strategy for achieving specific goals. Its often an exotic and attractive proposition. But what is the cost and the opportunity cost?

Figure 5 Selected market Size rankings contrast With Business climate Indicators
Market size Population 2009 China India Brazil Russia Mexico Vietnam Turkey Thailand Korea Malaysia Saudi Arabia Chile Czech Republic Hong Kong Singapore UAE
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Doing Business index Singapore Hong Kong Thailand Saudi Arabia Korea Malaysia UAE Chile Mexico Turkey Czech Republic China Vietnam Russia Brazil India

Business climate E-readiness Index of Economic ranking Freedom Singapore Hong Kong Hong Kong Singapore Korea Chile Chile Korea Czech Republic Czech Republic UAE Mexico Malaysia UAE Mexico Malaysia Brazil Saudi Arabia Turkey Thailand Thailand Turkey Saudi Arabia Brazil China India India China Russia Russia Vietnam Vietnam
Source: Forrester Research, Inc.

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Market Opportunity Assessment Practices Run The Gamut Market opportunity assessment among tech vendors ranges from complex modeling to holding a finger into the wind. These extremes indicate a wide spectrum of activities undertaken in the pursuit of the holy grail of market expansion strategies. According to a recent Forrester survey of marketers, many are aware of their shortcomings in identifying and evaluating market opportunity; they judged the maturity of their market opportunity definition function well below other marketing functions (see Figure 6). In interviews with vendor strategists, we heard sentiments like:

No need, were too small. Some strategists indicate that their companies are too small to

undertake market assessment. While its true that market expansion is not an appropriate strategy for all companies, understanding how to assess the opportunities remains invaluable for defining strategy. How do you know if you are too small to expand if you dont know what the opportunities are relative to others?

Our data resides behind closed doors. Some vendor strategists do collect and disseminate

data but dont use specific market opportunity assessment (MOA) tools at all. Processes are not transparent. When asked about how they go about assessing new market opportunities, internal observers use words such as behind closed doors, ad hoc, and by default.

Our processes are immature. Others outline structured processes for gathering, synthesizing

and presenting data, engaging stakeholders, evaluating alternatives, and prioritizing market opportunities. However, even with a well-defined process of market opportunity assessment, the jury is often still out on its effectiveness, with some strategists reporting that its too early to say and were going through the second cycle now. Last year was the first year weve done this. The economic downturn only recently spurred many vendors to establish formal processes.

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Figure 6 market opportunity Definition Processes are Judged less mature Than other Functions
How mature is each of your marketing processes?* (Average responses on a scale of 1 [no process] to 4 [very mature]) Pricing Product requirements denition Positioning and messaging Channel management Market planning Competitive intelligence Demand forecasting Market opportunity denition Customer data management 3.3 3.2 3.1 3.0 3.0 2.9 2.9 2.8 2.8

Base: 235 North American marketers at global companies with 100 or more employees Source: Q4 2009 North American B2B Marketing Organizations Online Survey *Mature is dened as stable, broadly understood, and consistently practiced.
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KNOW ThY MARKETS, BuT KNOW ThYSELF FIRST With the plethora of market analysis and assessment models and tools, its no wonder some vendor strategists chose to turn away. However, jumping directly into models and methodologies is not the right approach. Before even looking at a formal model be it political, economic, social, and technological (PESTEL); Five Forces; or strengths, weaknesses, opportunities, threats (SWOT) the first step is simple and straightforward: Know what you need to accomplish, then find out where to get it. Understand the companys objectives. Is it time to look for growth outside of the traditional opportunities? Does that mean new geographical markets? Or could that just mean new market adjacencies in product development, vertical alignment, or market segment positioning? Its not necessarily a question of where. The investigation starts with a what and a how. That leaves the geographical question a big if, and not a done deal. Start by asking a series of questions to evaluate if you really need or want to expand geographically (see Figure 7).

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Figure 7 ask These Basic Questions Before Initiating market Expansion

Do you have room to grow in your current market? Or not? Is your oering limited in your current market? For example, is your solution core to a specic vertical with a limited addressable market in any one geography? Do you have a particular competitive advantage such as a niche product, an innovative business model, or particular expertise? Are you No. 1 or No. 2 in your current geographic market? Do you have capacity to expand into a new geographic market? Or not? Is your product delivered on demand or easily downloadable with limited requirements for local services and support? Can your services organization easily scale to accommodate more geographies? Does your oering require extensive localization? If so, is localization nancially feasible? Is there a reason to diversify country risk? Do you need to diversify currency risks? Note: Maybe an emerging market (or another emerging market) doesnt best suit your objectives.
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Start With Introspection The basic questions dont start with determining potential markets. Rather they start by asking:

Do you have room to grow in your current market, or not? Are you already No. 1 or No. 2

in your current geographic markets? In this case, geographic expansion is a source of growth. Or is your offering limited in your current market? For example, is your solution core to a specific vertical with a limited addressable market in any one geographic market?16 In that case, exporting the particular vertical expertise is a good idea. Or do you have a particular competitive advantage such as a niche product, an innovative business model, or particular expertise in some other way? Again, similar to the vertical solution, such a competitive advantage might lend itself to export but only if conditions in another market result in a similar competitive advantage. The answer to this question is not so clear cut.

Do you have capacity to expand into a new geographic market, or not? Is your product

delivered on-demand or easily downloadable with limited requirements for local services and support? Can your services organization easily scale to accommodate more geographic markets? Does the audience that you are targeting require intensive support and services? LogMeIn, a remote access and system management software company, was able to expand globally by nature of its product and the ease with which it was downloaded and purchased.

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Does your offering require extensive localization? Related to capacity to enter a new

geographic market are the requirements for that specific market. Take localization, for example. Does the offering need to be localized in any way either language localization or other changes necessary to adapt to the local market such as accommodating local tax codes in enterprise applications? If so, is localization financially feasible?

Is there reason to diversify country risk? Selling only in a market with an unstable currency is

one reason to diversify geographic markets. Kaspersky Lab, a Russian security software vendor, set its sights on the US market to diversify revenues out of the ruble and into the dollar. Other political or economic risks such as government corruption or an unstable political situation in a home market are reasons to expand.

IF YES, ThEN ASSESS If your answers to these questions indicate that geographic expansion is a go, then the next step is to undertake an MOA. While the task might seem overwhelming, breaking down the process into steps makes it less daunting and more manageable (see Figure 8). Basic steps include determining: 1) country rank; 2) addressable market forecast; and 3) market dynamics. You can delegate these steps to different parts of the organization and repeat them if markets are eliminated in the process.

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Figure 8 Steps In a market opportunity assessment (moa)

Country rankings (based on macrodata)

Total addressable market (based on macrodata)

Market dynamics Market segmentation (metro-level, vertical, size) Competitive landscape

Target markets
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1. country Ranking: craft A Shortlist Of Prioritized Potential Target Markets There are 195 countries in the world. Many are considered developing countries but fewer are tracked as emerging markets.17 And, not all of these are going to be appropriate targets for tech vendor market expansion. The first step is to establish a list of potential target markets. The shortlist is based on criteria that establish a given market as suitable. Creating, evaluating, and prioritizing that list require that strategists:

Gather the macrolevel data. Indicators of market opportunity include country-level gross

domestic product (GDP) and growth rates, high penetration of Internet access and broadband, technology investment, higher education levels, and indicators of a positive business climate. Low scores on these indicators represent the risk factors. These indicators taken together create the prioritization of potential markets. In Forresters online survey of vendor strategists, ICT investment per capita, Internet users per 100 inhabitants and the Doing Business index were at the top of the list of indicators used in evaluating markets. (see Figure 9).

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Weigh the indicators according to importance. Not all factors are equally important to

market-entry decisions. Weighting certain factors over others refines the prioritization to better match specific requirements for entry. For example, vendors of any cloud computing service offering (software-as-a-service [SaaS], platform-as-a-service [PaaS], or infrastructure -as-aservice [IaaS]) that requires connectivity would place a higher weighting on broadband access. Services organizations require higher local skills levels. Rankings on individual indices can be aggregated using these weightings to create a final shortlist of prioritized geographical markets (see Figure 10).

At this macrolevel, a central corporate strategy team can gather and analyze this market data and disseminate as needed to stakeholders throughout the organization. Some strategy teams see themselves as a service bureau for business units, and they delegate subsequent steps and market entry decisions to business units and regional sales organizations. Centralizing macrodata collection and distribution establishes uniform standards and a common baseline. But then planning and recommendations requires input from the bottom up. 2. Total Addressable Market: Forecast (Or commission Forecasts Of) Addressable Market Size As a second step, strategists use market forecast data or commission custom market forecasts for the shortlist of geographical targets. Forecasts require significant data about technology adoption and specific market trends, as well as local market knowledge and forecasting expertise.18 These data and those used for the macrolevel prioritization come from a variety of sources. In addition to data from large organizations such as the UN and World Bank, respondents in Forresters online MOA survey also indicate that they most use data from both global and regional or local analyst firms, regional or local partners, company Web analytics, and custom surveys. Due to the data and expertise required, market forecasting can be costly; the shortlist of target markets reduces those costs. In one large technology company, the business units take responsibility for this step, commissioning forecasts for the products they want to market and sell in the target markets. 3. Market Dynamics: understand And compare Specific Market Dynamics Market dynamics influence the attractiveness of specific markets. A SWOT analysis provides a framework for identifying the dynamics of the specific markets and evaluating those markets against each other. In Forresters online survey of vendor strategists, more than 70% reported using a basic SWOT analysis to evaluate opportunities making SWOT the most common tool. To start evaluating market dynamics, vendor strategists will want to embrace a more bottom-up approach as they:

Evaluate specific vertical and market segment opportunities (market segmentation). Which
vertical industries are most dynamic? Do those map to the strengths of your products and offerings? Is there more opportunity with small and medium-size business (SMB) customers

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or with large enterprise customers? Within a specific geographical market, dynamics can vary across vertical industries or market segments. Vertical and segment sales and marketing teams take responsibility for understanding the market segmentation within a geographical market, again working with resources in regions or specific country markets.

Assess the potential competition in the market (competitive landscape). Who are the

competitors in those markets? Is the competition fragmented or concentrated? Is it primarily local players or branches of global competitors? As competition differs across products, vendors with multiple product lines must assess the competitive landscape for a specific product. Product management or marketing teams in collaboration with local field marketing teams often conduct competitive landscape reviews.

4. Target Markets: Pick Markets, But Review Regularly Consider market opportunity assessment a cycle, rather than a one-time process. In the initial stages, when you eliminate a market for one reason or another, you can replace it with the next one on the list. But at some point, you must make a decision. Which new markets are the best targets? How many depends on the resources available. When you determine the final list of markets, compare actual sales to forecasts to assess progress and review suitability of the market. While about one-third of strategists in Forresters online survey reported undertaking market opportunity assessments annually, one-quarter of respondents indicate a more frequent process. Many of the strategists we interviewed echoed the sentiment that global market dynamics required continuous review.

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Figure 9 Vendor Strategists Identify Indicators Important To Evaluating market opportunity

Which key parameters have you identied as important to your markets and do you use to evaluate market opportunity?* Internet users (per 100 habitants) ICT investment per capita Number of PCs (per 1,000 habitants) Ease of Doing Business index GDP per capita Education levels Gross domestic product (GDP) Real GDP growth rate (%) The Index of Economic Freedom Cellular mobile subscribers (per 100 habitants) Urban population Political freedom status Trade as a percentage of GDP (%) Private consumption as a percentage of GDP (%) Main telephone lines (per 100 habitants) Per capita imports from the US Average annual growth rate of primary energy use (%) Population per retail outlet 36.1% 36.1% 33.3% 30.6% 27.8% 22.2% 16.7% 16.7% 16.7% 13.9% 8.3% 5.6% 2.8% 2.8% 47.2% 47.2% 47.2% 61.1%

Base: 36 multinational IT enterprise corporate strategists (multiple responses accepted) Source: April 2010 Global Market Opportunity Assessment Online Survey *Note: Responses for Other, please specify have been removed from this analysis.
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Figure 10 assess The Suitability of Potential Target markets; Weight Factors, create The Shortlist

Assessment criteria Market size Market infrastructure

Weight 30% 20%

Potential measures used: Population (million) Population forecast (2050) Main telephone lines (per 100 habitants) Cellular mobile subscribers (per 100 habitants) Broadband penetration Doing Business index The Index of Economic Freedom

Business climate

15%

Countries Argentina Brazil Chile China Colombia Czech Rep. Egypt Hong Kong Hungary

Market size Rank Index

Market infrastructure Rank Index

Business climate Rank Index

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r E c o m m E n D aT I o n S

NEvER TOO OLD, TOO YOuNG, TOO LARGE, OR TOO SMALL FOR A SOLID MOA PROcESS
The largest vendors are in many markets, but they still continue to assess new market opportunities, including geographical markets. new products, new market segments, or new vertical industries also require assessment. Small vendors also need to assess market opportunities to understand when geographic expansion is right. not now does not necessarily mean not ever. To know when to expand, you need to assess and compare the opportunities. For larger vendors engaging in market opportunity assessment, a few lessons to keep in mind are:

Think of hQ or corporate as the resource center, not necessarily the driver. a solid
moa process requires engagement from the stakeholders at the top and throughout the organization. centralized resources for data collection and process management should be complemented by data collection and assessment activities in the field, within product

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management, and within other marketing or sales functions. Participation and process transparency lead to greater legitimacy of decisions.

Decentralize responsibilities for processes that most closely touch business units.
This is the flip side of headquarters as a resource. as one corporate strategist put it, the best strategic plans are done for themselves for the business unit by the business unit. corporate strategists provide a process framework, and some of the macrolevel data collection, then ultimately aggregate the plans developed by business units and sales organizations to create the overall geographic market strategy.

use MOA to assess regional or municipal markets within a country. Presence within a
country does not mean the process is over. In fact, it has likely just begun. In large markets like china or Brazil, regional markets vary considerably. Industrial concentrations are different across regions. In china, manufacturing was traditionally concentrated in coastal regions, natural resources and agriculture in the north and west of the country. Business drivers and IT priorities vary across regions and municipalities, as does the competitive landscape. These varying market dynamics within a country require similar rigor in assessing and acting on market opportunities. Smaller and large vendors alike must also keep in mind that:

Local partners can act as an extension of the MOA team. resources in the field include
not only your own marketing and sales teams but also any local partners that can provide feet on the street, as well as eyes and ears. The moa process is both top down and bottom up for small as well as large vendors.

SuPPLEMENTAL MATERIAL Methodology Forrester fielded its April 2010 Global Market Opportunity Assessment Online Survey to 36 multinational IT enterprise corporate strategy professionals from our ongoing Technology Industry Research Panel; however, only a portion of survey results are illustrated in this document. The panel consists of volunteers who join on the basis of interest and familiarity with specific technology industry topics. For quality assurance, panelists are required to provide contact information and answer basic questions about their firms revenue and budgets. Forrester fielded the survey from April to July 2010. Respondent incentives included a summary of the survey results. Exact sample sizes are provided in this report on a question-by-question basis. Panels are not guaranteed to be representative of the population. Unless otherwise noted, statistical data is intended to be used for descriptive and not inferential purposes.

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If youre interested in joining one of Forresters research panels, you may visit us at http://Forrester. com/Panel. companies Interviewed For This Document Atos Origin Baynote Cisco Systems Comarch ESET FatWire Fujitsu Services ENDNOTES
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HP Kaspersky Lab LinkedIn Logicalis Group Research In Motion Verizon

At the core of Forresters forecast methodology for information and communications technology (ICT) spending is our model for projecting business investment in information technology based on variables like GDP growth, corporate profit growth, variations from trend growth in productivity, state of the economy (recession or not), and state of technology adoption (digestion phase or growth phase). Source: The global outlook in summary, 2008-2012, Global Economic Prospects, The World Bank, June 10, 2010 (http://web.worldbank.org/external/default/main?theSitePK=659149&pagePK=2470434&contentMD K=20370107&menuPK=659160&piPK=2470429). In 2008, the company established a new organization its Growth Markets Unit (GMU) to increase its focus on the emerging markets around the world that have market growth rates greater than the global average countries within Southeast Asia, Eastern Europe, the Middle East, and Latin America. The companys major markets include the United States (US), Canada, the United Kingdom (UK), France, Germany, Italy, Japan, Denmark, Sweden, Switzerland, Austria, Belgium, Finland, Greece, Ireland, the Netherlands, Portugal, Cyprus, Norway, Israel, Spain, the Bahamas, and the Caribbean region. The GMU overall represented 19% of IBMs geographic revenue in 2009. Source: IBM 2009 Annual Report, IBM (http://www.ibm.com/annualreport/2009/letter.shtml). Many mature markets also face an increasingly aging population. Elderly populations are expected to grow worldwide from 6.9% older than 65 years old in 2000 to 19.3% by 2050; but the elderly will make up a larger share in the US and in Europe 21.1% and 29.2%, respectively. Source: Paul Demeny and Geoffrey McNicoll, Encyclopedia of Population, Macmillan Reference USA, 2003. Source: World Population Prospects: The 2008 Revision, Population Database, United Nations (http://esa. un.org/unpp/index.asp?panel=1).

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From 2005 to 2010, migration to the cities accelerated with an average growth rate in more developed countries of 0.60 and in least developed countries of 4.1. Source: Demographics, social and economic indicators, United Nations Population Fund (UNFPA) (http://www.unfpa.org/swp/2009/en/pdf/EN_ SOWP09_DemSocialEcon.pdf). Source: Forrsights Budgets And Priorities Tracker Survey, Q2 2010. Source: Paulo Prada and John Lyons, Brazil Courts Chinese Business, The Wall Street Journal, April 14, 2010 (http://online.wsj.com/article/SB10001424052702304604204575182224127279254.html?KEYWORDS =trade+brazil+US+China). The 2010 Index of Economic Freedom covers 183 countries around the world, ranking 179 of them with an economic freedom score based on 10 measures of economic openness, regulatory efficiency, the rule of law, and competitiveness. The index measures economic freedom within 10 specific categories: labor freedom, business freedom, trade freedom, fiscal freedom, government spending, monetary freedom, investment freedom, financial freedom, property rights, and freedom from corruption. Scores in these categories are averaged to create an overall score. Source: The Heritage Foundation and The Wall Street Journal (http:// www.heritage.org/index/). The World Banks Doing Business index is a purpose-built indicator of the ease with which one can do business in a particular country. The rankings are built on standardized case scenarios in the formal sector measured for the most populous city in each country. The index does not measure all aspects of the business environment such as macroeconomic stability, corruption, level of labor skills, proximity to markets, or regulation specific to foreign investment or financial markets. Rather it specifically indicates how easy the administrative processes are for establishing, running, and even closing a business. Source: The World Bank (http://www.doingbusiness.org). Zains African holdings included Ghana, Burkina Faso, Chad, the Republic of the Congo, the Democratic Republic of the Congo, Gabon, Kenya, Malawi, Madagascar, Niger, Nigeria, Sierra Leone, Tanzania, Uganda, and Zambia. Source: Jennifer Belissent, Ph.D., Market Opportunity, or Not: Bharti wants in but Zain wants out, Jennifer Belissents Blog, April 2, 2010 (http://blogs.forrester.com/jennifer_belissent/10-04-02-market_opportunity_ or_not_bharti_wants_zain_wants_out). The refurbished market for used, branded PCs and laptops has become a big business, distributing some of the more than 80 million computers recycled and reused annually. Businesses such as Just PCs in South Africa offer a wide range of options with a complete system starting at about $50 for a Pentium-3-based desktop including service options and a six-month warranty. China also has a brisk market for used devices, with more than 10,000 offered on Alibaba.com, a large B2B trading Web site. Even the shanzhai (knockoff) manufacturers in China are having a hard time competing. Profit margins from the knockoffs are even less than those generated by secondhand notebook computers. See the October 9, 2009, Rewrite The Netbook Story For Business Technology Buyers report.

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The cross-border trade index of Doing Business notes the existence of paper-free electronic data interchange (EDI) systems, pre-arrival submission of customs declaration, selective controlling of containers, world class port infrastructure, and simplified procedures. Source: Dana Omran, Time and Motion Methodology Training, Doing Business presentation, The World Bank, November 3, 2009 (http:// www.doingbusiness.org/documents/presentations/DB-2010-training-time-motion-indicators.ppt). The term Stans refers primarily to the Central Asian republics of the former Soviet Union Kazakhstan, Uzbekistan, Kirgizstan etc. as well as Afghanistan and Pakistan. For further discussion on vertical positioning, see the April 16, 2010, Eleven Steps To The Right Verticals 3.0 Strategy report. According to UN designation, Europe, Northern America, Australia/New Zealand, and Japan are considered more developed. The rest are less developed, with about 49 of these considered least developed, including 33 in Africa, 10 in Asia, five in Oceania, plus one in Latin America and the Caribbean. Of these, the Morgan Stanley Capital International tracks 21 as emerging markets, The Economist tracks 24, and the Dow Jones Industrial Average tracks 35. There is obviously variation in definitions and assessments of these markets. For a discussion of Forresters market forecasting methodology, see the April 8, 2008, Introducing Forresters B2B Technology Market Forecasting report.

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