Analyzing International Opportunities 13-1. Choosing Marketing and Production Sites and Geographic Strategy Companies must determine where to market and.

Analyzing International Analyzing International OpportunitiesOpportunities

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Choosing Marketing and Production Sites Choosing Marketing and Production Sites and Geographic Strategyand Geographic Strategy

• Companies must determine where to market and where to produce

Decisions on market and production locations may be highly interdependent

• Process of determining overall geographic strategy must be flexible

Country conditions change Plan must allow company to:

• respond to new opportunities• withdraw from less-profitable operations

Choosing New LocationsChoosing New Locations

Scan for alternativesScan for alternatives Choose and weight variablesChoose and weight variables

• OpportunitiesOpportunities• Market sizeMarket size• Ease and compatibilityEase and compatibility• Cost and resource availabilityCost and resource availability

Collect and analyze data for variablesCollect and analyze data for variables Use tools to compare variables and Use tools to compare variables and

narrow alternativesnarrow alternatives

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Step 1

Identifybasic appeal

Identifybasic appeal

Step 2

Assess nationalbusiness

environments

Assess nationalbusiness

environments

Step 3

Measure marketor site potential

Measure marketor site potential

Screening Markets and SitesScreening Markets and Sites

Step 4

Select themarket or site

Select themarket or site

Business ConstraintsBusiness Constraints

Companies lack the resources to take Companies lack the resources to take advantage of all international advantage of all international opportunitiesopportunities

Companies must determine the order Companies must determine the order of country entryof country entry

Companies must set the rates of Companies must set the rates of resource allocation among countriesresource allocation among countries

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Country SelectionCountry Selection

Companies are Companies are attracted to countries attracted to countries that:that:• Are located nearbyAre located nearby• Share the same Share the same

languagelanguage• Have market conditions Have market conditions

similar to those in the similar to those in the home countryhome country

Companies pare Companies pare proposals to countries proposals to countries that:that:• Offer size, technology, Offer size, technology,

and other factors and other factors familiar to company familiar to company personnelpersonnel

• Allow an acceptable Allow an acceptable percentage of percentage of ownershipownership

• Permit sufficient profits Permit sufficient profits to be easily remittedto be easily remitted

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Potential: Industrialized MarketsPotential: Industrialized Markets

DemographicsDemographics Competitors’ market sharesCompetitors’ market shares Import/Export volumesImport/Export volumes Distribution networkDistribution network Marketing approachesMarketing approaches Retail sales levelsRetail sales levels Income elasticityIncome elasticity

Potential: Emerging MarketsPotential: Emerging Markets

Market sizeMarket size Market growth rateMarket growth rate Market intensityMarket intensity Market consumption capacityMarket consumption capacity Commercial infrastructureCommercial infrastructure Economic freedomEconomic freedom Market receptivityMarket receptivity Country riskCountry risk

Issues With Emerging EconomiesIssues With Emerging Economies

Advantages may be short-livedAdvantages may be short-lived Competitors follow leaders into low-Competitors follow leaders into low-

wage areaswage areas Little first-in advantage for this type Little first-in advantage for this type

of production migrationof production migration Comparability problemsComparability problems

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Issues with Emerging Economies, Issues with Emerging Economies, con’tcon’t

Foreign costs rise quickly due to wage Foreign costs rise quickly due to wage pressures and exchange ratespressures and exchange rates

Extent of “red tape”Extent of “red tape” Risk and uncertaintyRisk and uncertainty Lack, obsolescence, or inaccurate Lack, obsolescence, or inaccurate

data/information to base decisions ondata/information to base decisions on

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Field trips• Engage in negotiations• Gain firsthand exposure• Contact customers/others

Competitor analysis• Access to inputs• Competitors’ numbers/shares • Competitors’ strategies• Channel access• Customer loyalty

Select the Market or SiteSelect the Market or Site

Market Research DifficultiesMarket Research Difficulties

CulturalCulturalproblemsproblems

AvailabilityAvailabilityof dataof data

ComparabilityComparabilityof dataof data

Sources of InformationSources of Information Individualized reportsIndividualized reports Specialized studiesSpecialized studies Service companiesService companies Government agenciesGovernment agencies International International

organizations and organizations and agenciesagencies

Trade associationsTrade associations Information service Information service

companiescompanies InternetInternet

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Methods of Primary ResearchMethods of Primary ResearchMethods of Primary ResearchMethods of Primary Research

Trade shows and missionsTrade shows and missionsTrade shows and missionsTrade shows and missions

Interviews and focus groupsInterviews and focus groupsInterviews and focus groupsInterviews and focus groups

SurveysSurveysSurveysSurveys

Environmental scanningEnvironmental scanningEnvironmental scanningEnvironmental scanning

Making Final Country DecisionsMaking Final Country Decisions

Make site visitsMake site visits Construct detailed estimates of costs and Construct detailed estimates of costs and

expensesexpenses Decide whether to invest alone or with a Decide whether to invest alone or with a

partnerpartner Examine financial statements in detail for Examine financial statements in detail for

acquisitionsacquisitions Watch analysis constraints such as:Watch analysis constraints such as:

• TimeTime• costs costs

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Allocating (operations) Among Allocating (operations) Among LocationsLocations

Analyze effects of reinvestment Analyze effects of reinvestment versus harvesting in existing versus harvesting in existing operating locationsoperating locations

Appraise interdependence of Appraise interdependence of locations on performancelocations on performance

Examine needs for diversification Examine needs for diversification versus concentration of foreign versus concentration of foreign operationsoperations

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Diversification vs ConcentrationDiversification vs Concentration

DiversificationDiversification• Company moves rapidly into many Company moves rapidly into many

foreign markets, and gradually foreign markets, and gradually increasing its commitment in each increasing its commitment in each marketmarket

ConcentrationConcentration• Company moves to one or a few foreign Company moves to one or a few foreign

markets until its develops a very strong markets until its develops a very strong involvement and competitive position involvement and competitive position then move to others.then move to others.

Diversify or Concentrate Diversify or Concentrate International FacilitiesInternational Facilities

Analyze growth rate and sales Analyze growth rate and sales stability in each marketstability in each market

Research expected lead time over Research expected lead time over competitorscompetitors

Determine what the spillover effects Determine what the spillover effects areare

Measure degree of need for product Measure degree of need for product and marketing localization for and marketing localization for different countriesdifferent countries

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