International market selection

International market selection

An international market is defined as a market outside the geographical

borders of a company's country of citizenship. A company, to the extent
that it is a legally distinct entity from its owners like a corporation, is
usually a citizen of the country where it is organized. IBM, for example,
was formed in the United States. Thus, any geographic area outside the
territorial boundaries of the United States where IBM conducts business is
IBM's international market. The conceptual opposite of an international
market is the company's domestic market, which is the geographic region
within the national boundaries of a company's home country.
Once you have carried out a preliminary analysis of your company, the
next step towards internationalization is to choose the market(s) you want
to focus on. Selecting the right markets and learning how to reach out to
them could determine the viability of your expansion strategy. These
markets will shape your international development, business planning and
growth potential.
 Strategies for selecting international markets

Before you try to identify your target market, think of a number of

suitable markets where your product could work – then think about how
you could serve each one. No strategy is universally correct – it depends
on the type of business you are in and its marketing environment. Base
your strategy on the resources available and the lifecycle phase your
product has reached. A wide variety of factors will determine your
choice of strategy.
• Market concentration
• Market diversification
Market concentration
Focus on a few select markets. This strategy will help you to consolidate
your company’s presence in these markets, with the aim of securing
constant sales growth.
Advantages:
• you will gain in-depth knowledge of each market and can design or
adapt your products to match
• costs are reduced across logistics, management and operations
management
• you can dedicate more resources to market promotion
• you gain increased risk control of your international activities
Factors favoring concentration:
• international demand is concentrated on a small number of markets with stable
performance
• the market has several potential customers
• your product has a long lifecycle
• there is strong competition
• your company is small with limited resources
• your product needs to be adapted to suit particular market tastes
• the market requires large promotional or communication-channel investment
• there are reduced logistics costs, management and sales monitoring
Market diversification
Introduce your product to as many markets as possible – perhaps with
small shares in the majority of your markets.
Advantages:
• possibility for rapid sales growth
• you could sell at different prices and take advantage of the fluctuations
in exchange rates
• risk diversification
Factors favoring diversification:
• the global demand for your product or service is spread out across many markets
with irregular behavior
• there is a reduced number of potential customers in the market
• your product has a long lifecycle
• your competitive environment is stable and divided among fewer companies
• your company is large with abundant resources
• your product or service is standardized in all markets
• only limited promotional investment is needed to generate sales
• logistics management and sales monitoring comes at a high cost
The main criteria for selecting international markets
The global market selection process can be done using the following criteria:
1. Environment and market analysis
Put together a short list of countries that present a good concentration or potential concentration
of your target market.
Analyze the variables for each country:
• GDP growth – including the country’s growth prospects for infrastructure and the demand for
tourism products
• country risk – including political or social unrest, insecurity and currency devaluations
• political factors – including the degree of political intervention in business decisions, political
and social stability, and possible alliances or trade agreements with your country of origin
• other factors – including geographic proximity, and the similarity to your source market in
terms of business and social culture
In this first stage of pre-selection, consider countries that interest you or have good
market potential. Next, rank the countries in order of:
• market appeal – including the demand for your product and the risks associated
with it
• possible operational difficulties – including market legislation, state-level
protectionism, the ease of doing business, procedures for starting a business,
taxes, administrative costs, and the intensity of local competition
2. Analysis of the competition
To analyze competition in your market:
• identify your main competitors and describe them
• analyze their economic evolution and sales over the last 3 years
• detect their distinguishing factors – including prices, channels, market maturity,
3. Distribution channels
The choice of distribution channel will determine how your company expands in the
market. Track the supply chain of your product, from its origins to its final customer.
Develop a clear idea of the intermediate operators and their prices. Analyze the existing
sales structure in the country and how this could be adapted to your product or service.
There are a number of possible distribution channels:
• international distribution from your own market
• a local distributor in the target market
• your own commercial agent
• the internet
• a subsidiary or delegated company
• the creation of a joint venture with a local partner
4. Demand analysis
Analyze the current and potential demand of your product in its source
market, as well as its profile and expected evolution. This information
should confirm that your pre-selection process was successful and that
your chosen markets are suitable for your product.
The company must know how best to design your subsequent marketing
strategy based on price, presentation, promotion, distribution and so on.
We recommend that this initial analysis is backed-up by further research
in the market itself or through intermediaries. This will help you assess
whether your initial analysis was correct.
 International or Foreign Market Selection Process

The International Market selection process involves:

• Setting International marketing objectives
• Identify Parameters for selection
• Preliminary Screening
• Shortlisting of markets
• Evaluation & selection
• Test Marketing
• Commercial Production
• International Marketing Objectives
The market selected to serve a particular international marketing objective need not
necessarily be the best suited to achieve some other international marketing objective.
• Parameters For Selection
For proper evaluation and selection of the markets .It is essential to clearly lay down
the parameters and criteria for evaluation. The different parameters for the selection of
a market are :
Firm’s Resources
 International Environment
Market Situation
Nature Of Competition
Government Policy etc.
• Preliminary Screening
Preliminary screening enables to eliminate market which obviously do
not meet consideration at the very outset . There would be a large no of
market left even after preliminary screening .They are further screened
with the help of more information then was used at the preliminary
screening stage.
• Shortlisting Of Markets
In this stage the markets that are potential for growth are shortlisted for
entry.
• Evaluation And Selection
The shortlisted market are further evaluated with reference to the cost benefit
analysis and feasibility study. They are then, ranked on the basis of their over
all attractiveness. Of the market, the best one is chosen for the launching of
product considering the companies and external environment.
• Test Marketing
Initially, the market is tested on a smaller scale by launching the product in a
part of the market, this provide a feedback to the producer about the market.
At the same time, it help the producer in assessing overall response of the
consumer from a specific market, after tested success, the production can be
undertaken on a mass scale.
• Commercial Marketing
Once the product is tested “ In the selected market, the company goes
ahead with the mass production. Minor modifications, if any, are
introduced in the product mixed during this stage.