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The international market selection

process

Agenda

 International market selection process  Segmentation-targeting-positioning  Steps for the IMS  Entry modes

 Typically, countries that are most similar to the home market are developed first; with each subsequent stage, the heterogeneity of the foreign markets worked increases

 This is usually done with the aim of gaining pioneering benefits. This strategy can make sense when opening up previously closed markets, such as the Eastern European market after the political upheaval in 1989- it is relevant in connection with the simultaneous launch of new products in already developed markets as part of a global strategy

Timing of Foreign Market Entry

 Product-related influencing factors also determine the choice of the cross-country timing strategy. Companies that offer products with a short product life should sell them in as many foreign markets as possible in order to be able to amortize the R&D costs more quickly.  A sprinkler strategy also makes sense when the competitors are expected to enter the target markets themselves, introducing substitutes and setting technical standards

Timing of Foreign Market Entry

 Kalish et al. ( 1995 , p. 113 ff.), using a diffusion and game theory approach, demonstrate that a waterfall strategy is preferable under the following conditions:

1. the production life cycle is long,
2. the foreign market is comparatively small,
3. the growth rate of the foreign market is relatively low,
4. the foreign market is not very innovative,
5. competitors on the foreign market are weak,
6. competitors behave cooperatively,
7. the entering company has a monopoly position on the foreign market.

Phase 1: Preliminary Analysis and

Screening

 to exclude those countries from further consideration which do not meet certain requirements or are not compatible with corporate policy principles. These include, for example (Köhler & Hüttemann, 1989 , p. 1431 ):

1. factual obstacles , such as the absence of a need for the company’s range of services; 2. specific management values, e.g. likes or dislikes of certain countries for ethical or ideological reasons; 3. preliminary strategic decisions , such as the restriction to the Triad countries; 4. defined maximum or minimum requirements for certain assessment criteria, e.g. per capita income, market volume, etc.

Phase 1: Preliminary Analysis

and Screening

 First act: rate the  Characteristics of the market (e.g. growth of and sensitivity to imports, extent of customers concentration, sensitivity to quality and performance characteristics, availability of close substitutes)  Competitive conditions (e.g. concentration of domestic industry, other exporters; complexity of the distribution system)  Legislative and socio-political conditions (e.g. political stability, trade legislation)

Phase 1: Preliminary Analysis and Screening 13 Preliminary screening

• the country comparisons of the

1. World Bank,
2. the OECD,
3. the IMF
4. the HDI index of the United Nations Development Programme (UNDP) - Human Development Index https://hdr.undp.org/data- center/human-development-index#/indicies/HDI 5. Market Potential Index (MPI) https://globaledge.msu.edu/mpi The purpose of this study is to rank, with a U.S. focus, the market potential of the largest economies and to provide guidance to the U.S. companies that plan to expand their markets internationally. While the U.S. is not included in the rankings, the insights provided by the index are still applicable to companies located in other international markets.
5. Operational Risk Index https://www.fitchsolutions.com/sites/default/files/ 2021 - 08 /DC- 6326 - FS_OP-Risk-Methodology-Doc-Update.pdf

(^14) https://hdr.undp.org/data-center/human-development-index#/indicies/HDI

OPPORTUNITY MATRIX FOR HENKEL

IN ASIA PACIFIC

16 Hellmut Schutte, ‘‘Henkel’s Strategy for Asia Pacific,’’ Long Range Planning, 28 ( 1 ), 1995 , p. 98

Phase 1: Preliminary Analysis

and Screening

 A company’s strengths and weaknesses, products, philosophies, modes of operation, and objectives must be matched with a country’s qualities  Second act: rate the  Management characteristics (e.g. adequacy of management resources, degree of institutional support)  Marketing characteristics (e.g. pricing approaches, advertising and promotion campaign)  Technology characteristics (e.g. product design and development, investment in technology)  Production related competencies (e.g. cost competitiveness, scale of operation, logistics capabilities)

Phase 1: Preliminary Analysis and Screening “Fine grained” screening

Micro-Segmentation

 Basis for Segmentation ▪ Demographic ▪ Psychographic ▪ Behavioural Segmentation ▪ Geographic