Internationalization: Which Markets to Enter PDF

**CHAPTER 5: INTERNATIONALIZATION: WHICH MARKETS TO ENTER?** Not many businesses have the capital necessary to enter every possible market. Even the biggest firms in the world need to be strategic when deciding which markets to target. They also need to determine the best time to enter these market...

**CHAPTER 5: INTERNATIONALIZATION: WHICH MARKETS TO ENTER?** Not many businesses have the capital necessary to enter every possible market. Even the biggest firms in the world need to be strategic when deciding which markets to target. They also need to determine the best time to enter these markets and compare the benefits of having a direct or indirect presence in various parts of the globe. Because of their limited direct presence, small and medium-sized businesses must rely on their global resource networks built via partnerships with suppliers, consumers, and even rivals if they want to gain an edge in the global marketplace. Still, what may work well for one business may not be at all feasible for another. **CONDUCTING INTERNATIONAL MARKET RESEARCH** Choosing how to enter international markets is a critical decision for any organization. It involves selecting the right target market, deciding on the best way to enter, creating a solid marketing plan, and establishing effective control systems. The entry mode chosen---whether through direct investment, partnerships, licensing, or other means---significantly impacts a company\'s global performance. Entry Mode = ''*a structural agreement that allows a firm to implement its product market strategy in a host country either by carrying out only the marketing operations (i.e., via export modes), or both production and marketing operations there by itself or in partnership with others (contractual modes, joint ventures, wholly owned operations)*''. (Sharma and Erramilli , 2004) 1. **Research Market Size** - - - - 2. **Find Market Info** - - - - 3. **Read Up on Your Export Market** - - - 4. **Check Out the Competition** - - - - 5. **Know the Risks** - - - 6. **Where to Find Info** - Trade groups know their people and have good info. - Search engines and big online stores show what\'s going on in markets. - Competitor sites and reviews tell you what they\'re doing right and wrong. - Look at online databases for rules and risks. Summarising the most important aspects, when you\'re thinking about expanding into new markets, keep these points in mind: - **How far is it?**: Think about how easy it is to get your products there and what it will cost. - **How big is the market?**: Check out how many people might buy your product and how much they usually spend. - **What's the economic vibe?**: Look at what's going on in the market and how the industry is doing overall. - **What's the business culture like?**: Make sure you understand the local business customs and language. - **What's your past experience?**: Consider places where you\'ve already had some interest or where your competitors are doing well. **PESTEL ANALYSIS** The weather forecast for your company's environment. A PESTEL analysis is like a big-picture look at all the external factors that can impact a business. Think of it as a way to spot potential threats and opportunities out in the world. Once you\'ve got the lay of the land, you can use this info to beef up your SWOT analysis, which helps you figure out your strengths, weaknesses, opportunities, and threats. - So, what exactly does PESTEL stand for? It\'s an acronym that covers six key areas: - **P** for Political - **E** for Economic - **S** for Social - **T** for Technological - **E** for Environmental - **L** for Legal **How These Factors Interact** All these factors are interconnected and can influence each other in surprising ways. For example, political decisions (like trade policies) can have a big impact on economic conditions (such as inflation and exchange rates), which in turn affect social factors (like consumer spending and employment rates). Similarly, technological advances can create new opportunities (like innovative products) but also bring challenges (like needing to comply with new regulations). **PESTEL -- POLITICAL FACTORS** - - - - - - **PESTEL -- ECONOMIC FACTORS** - - - - - - - **PESTEL -- SOCIAL FACTORS** - - - - - - **PESTEL -- TECHNOLOGICAL FACTORS** - - - - - **PESTEL -- ENVIRONMENTAL FACTORS** - - - - **PESTEL -- LEGAL FACTORS** - - - - - - **PESTEL VS. SWOT** The **SWOT analysis** looks inward at your business to identify its **Strengths, Weaknesses, Opportunities, and Threats**. It\'s like a self-assessment that helps you figure out what's working well, where you can improve, and what challenges you might face. The **PESTEL analysis** focuses on the external environment---things happening outside your business that can impact it. It covers six areas: **Political, Economic, Social, Technological, Environmental, and Legal** factors. These are the big-picture forces that shape the market and can affect your business in various ways. **How They Work Together** Start with a **PESTEL analysis** to understand the external context. This helps you see the landscape your business operates in, like government regulations (Political), economic conditions (Economic), social trends (Social), technological changes (Technological), environmental concerns (Environmental), and legal requirements (Legal). Next, use this information in your **SWOT analysis**. By knowing the external factors, you can better assess your business's **Opportunities** and **Threats**. For example, a new technology (Technological factor from PESTEL) might be an opportunity for your business to innovate (Opportunity in SWOT). Conversely, new regulations (Legal factor from PESTEL) could pose a threat that you need to address (Threat in SWOT). **MARKET SELECTION** - **Pre-Research: Market Choice** - **Market Deep Dive** *"The successful selection of foreign markets is an important step in company activity, because:* *This decision impacts further actions in the selected foreign markets;* *The geographical distance of the foreign market and its location impacts the decisions of a company and its possibilities to coordinate international operations;* *In the initial steps it can appear to be the key factor of success or failure in the international market*." - Miečinskienė et al., 2014 **MARKET SELECTION** 1. **Stage 1: Initial Market Selection =** This first stage involves two key processes: elimination and selection. - - **Economic Factors**: Does the market have the financial stability and consumer purchasing power that you need? - **Political Factors**: Is the political climate stable enough for your business? - **Geographical Factors**: How accessible is this market in terms of logistics and transportation? - **Cultural Factors**: Are there cultural barriers that could impact your product's acceptance? - **Technological Factors**: Does the market have the necessary technological infrastructure? - **International Policy**: Are there any trade policies or tariffs that could hinder your business? - **Selection Procedure**: After eliminating unsuitable markets, you apply more specific criteria: - **Company-Specific Criteria**: Does this market align with your company's strengths and strategic goals? - **Product-Specific Criteria**: Is there a demand for your particular product in this market? 2. **Stage 2: Macro-Segmentation** - 3. - - **Market Potential**: Use historical and current data to assess the potential growth and size of the market. You might apply various methods (e.g., statistical analysis, trend analysis) to understand this. - **Market Demand**: Evaluate the current and projected demand for your product in the market. This involves understanding consumer behavior, preferences, and buying patterns. - **Requirements for Company**: Identify what your company needs to successfully enter and compete in this market. This might include resources, capabilities, and any adjustments to your business model. 4. - **KEY TAKEAWAYS** - - - - - -