Podcast
Questions and Answers
What must management do if key resources are lacking for a foreign market venture?
What must management do if key resources are lacking for a foreign market venture?
- Proceed with the venture regardless
- Focus only on local markets
- Ignore the resource gaps
- Acquire or develop the necessary resources (correct)
Why is organizational culture important for expanding into foreign markets?
Why is organizational culture important for expanding into foreign markets?
- It guides the selection of competitors
- It affects the motivation and commitment of key employees (correct)
- It determines the geographic location of the firm
- It influences product pricing strategies
Which aspect is NOT crucial for assessing product suitability in foreign markets?
Which aspect is NOT crucial for assessing product suitability in foreign markets?
- Assessing local cultural beliefs
- Analyzing why people buy the product
- Identifying who uses the product
- Understanding competitor pricing strategies (correct)
What is a recommended method for evaluating local demand for a product in a target market?
What is a recommended method for evaluating local demand for a product in a target market?
What is an important factor to consider when adapting offerings for foreign markets?
What is an important factor to consider when adapting offerings for foreign markets?
What should be assessed to identify potential market hindrances?
What should be assessed to identify potential market hindrances?
What is the primary purpose of country screening in opportunity assessment?
What is the primary purpose of country screening in opportunity assessment?
What might inhibit sales in a foreign market?
What might inhibit sales in a foreign market?
What is a critical indicator of market attractiveness in terms of the middle class?
What is a critical indicator of market attractiveness in terms of the middle class?
Which of the following best describes the relationship between income distribution and market attractiveness?
Which of the following best describes the relationship between income distribution and market attractiveness?
What is a potential drawback of per capita income measurements in emerging markets?
What is a potential drawback of per capita income measurements in emerging markets?
What is a key consideration when conducting country screening for foreign direct investment?
What is a key consideration when conducting country screening for foreign direct investment?
What method do researchers use to evaluate the overall market attractiveness of countries?
What method do researchers use to evaluate the overall market attractiveness of countries?
What is a significant consequence of failing to select the right countries for expansion?
What is a significant consequence of failing to select the right countries for expansion?
Which criterion is NOT used when assessing potential countries for market entry?
Which criterion is NOT used when assessing potential countries for market entry?
What characteristic is particularly emphasized when targeting consumer electronics markets?
What characteristic is particularly emphasized when targeting consumer electronics markets?
What is the initial approach firms often take when selecting countries for expansion?
What is the initial approach firms often take when selecting countries for expansion?
What process is described as a method to gradually identify promising markets?
What process is described as a method to gradually identify promising markets?
What is an important factor that contributes to a country's receptivity to imports?
What is an important factor that contributes to a country's receptivity to imports?
Why might firms initially avoid more complex markets like China or Japan?
Why might firms initially avoid more complex markets like China or Japan?
Which type of market is likely to be targeted by health insurance companies?
Which type of market is likely to be targeted by health insurance companies?
What is the first step a firm should take when deciding on foreign business partners?
What is the first step a firm should take when deciding on foreign business partners?
Which of the following types of foreign business partners typically produces products under licensing agreements?
Which of the following types of foreign business partners typically produces products under licensing agreements?
What factor is NOT considered when assessing a company's sales potential in a target market?
What factor is NOT considered when assessing a company's sales potential in a target market?
Which partner type focuses on global sourcing and contract manufacturing?
Which partner type focuses on global sourcing and contract manufacturing?
What is meant by industry market potential?
What is meant by industry market potential?
Which factor is NOT typically considered when estimating industry market potential?
Which factor is NOT typically considered when estimating industry market potential?
When crafting a market entry strategy, which of the following criteria is most critical for selecting partners?
When crafting a market entry strategy, which of the following criteria is most critical for selecting partners?
What is a crucial determinant of company sales potential?
What is a crucial determinant of company sales potential?
Which factor is a major determinant of a company's proficiency and success speed in foreign markets?
Which factor is a major determinant of a company's proficiency and success speed in foreign markets?
Which of these methods is used for estimating industry market potential?
Which of these methods is used for estimating industry market potential?
What is the approximate time frame a firm should consider for developing a sales forecast in target markets?
What is the approximate time frame a firm should consider for developing a sales forecast in target markets?
What aspect is considered important when estimating sales in a new market?
What aspect is considered important when estimating sales in a new market?
What major factor could impact a company's competitive intensity in a foreign market?
What major factor could impact a company's competitive intensity in a foreign market?
What role do supplier networks play in estimating sales potential?
What role do supplier networks play in estimating sales potential?
How often are industry market potential and company sales potential forecasted?
How often are industry market potential and company sales potential forecasted?
Which indicator is NOT typically related to estimating industry market potential?
Which indicator is NOT typically related to estimating industry market potential?
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Study Notes
Opportunity Assessment:
- Similar to a SWOT analysis but focuses on international expansion
Key Resource Assessment:
- Management must acquire or develop key resources before venturing into foreign markets.
- Organizational culture is critical for motivating and committing employees to international expansion.
- The external business environment should be examined for opportunities and threats in the target market.
Assessing Product/Service Suitability:
- Identify the buyers, users, and reasons for purchase for the product/service.
- Evaluate the fit between the company offerings and foreign customer needs.
- Identify factors that might hinder market potential in each target market.
- Determine necessary adaptations of the offering for each specific market.
- Consider foreign customer characteristics, legal regulations, channel intermediaries, and competitors.
- Consult with intermediaries in the target market, and attend industry trade fairs to gauge demand.
Country Screening:
- Essential, but time-consuming, process for identifying the most promising markets.
- Focus on criteria like market size, growth rate, intensity, consumption capacity, receptivity to imports, infrastructure, economic freedom, and country risk.
- Initially, prioritize countries that are geographically and culturally similar to the home country.
Screening Methodology:
- Gradual Elimination: Start with a long list and eliminate countries based on research.
- Macro Level: Analyze population, income, and economic growth for each country.
- Micro Level: Evaluate market size, competition, import statistics, and export levels.
- Indexing and Ranking: Assign scores based on criteria and weighting each indicator for relative importance.
Engines of Economic Growth: Middle Class:
- The size and growth rate of the middle class are critical indicators.
- The middle class is measured by the share of national income available to middle-income households.
- A large, growing middle class indicates a more attractive market.
- Unequal income distribution can limit the middle class size and reduce market attractiveness.
Country Screening for Foreign Direct Investment (FDI):
- FDI involves longer-term investments, so choosing the right market is crucial.
- Different variables are considered for FDI compared to exporting.
Estimating Industry Market Potential:
- Forecasts industry sales for all firms in a specific sector over a given period.
- Managers analyze variables specific to each country:
- Market size and growth
- Trade barriers
- Industry standards and regulations
- Distribution channels
- Customer requirements and preferences
Data Sources for Industry Market Potential:
- Obtain information about industry sales, production, export intensity, and import levels.
Estimating Company Sales Potential:
- Forecasts the firm's share of industry sales in each target market.
- Factors that influence company sales potential include:
- Competitive intensity
- Pricing and financing attractiveness
- Human and financial resources
- Partner capabilities
Methods for Estimating Industry Market Potential:
- Simple Trend Analysis: Examines aggregate production in the industry.
- Key Industry-Specific Indicators: Monitors industry drivers of market demand.
- Key Competitor Analysis: Estimates competitor sales levels.
- Key Customer Monitoring: Tracks customer activity globally for potential sales information.
- Supplier Network Insights: Taps into suppliers for information on sales and competitor activity.
- International Trade Fairs: Offers insight into market characteristics and sales potential.
Choosing Foreign Business Partners:
- Determine the type of partner needed and establish ideal partner qualifications.
- Identify value-adding activities to be performed by the partners.
- Assess partners based on criteria like expertise, commitment, distribution channels, financial strength, staff quality, and facilities.
Types of Foreign Business Partners:
- Exporters: Collaborate with foreign market intermediaries (e.g., distributors, agents).
- Licensing Partners: Produce products using the focal firm's intellectual property.
- Franchising Partners: Franchisees acquire rights and skills from the focal firm for local operations.
- International Collaborative Ventures: Include joint ventures and strategic alliance partners.
- Other Partners: Basic suppliers, global sourcing partners, and contract manufacturers.
Estimating Company Sales Potential:
- The firm estimates its most likely share of industry sales in each target market over a specified period.
- Develop a 3-5 year sales forecast based on partner capabilities, distribution access, competitive intensity, pricing and financing, market penetration timeline, and risk tolerance.
- Factors that influence company sales potential include:
- Competitive intensity
- Pricing and financing attractiveness
- Human and financial resources
- Partner capabilities
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