International marketing

Market selection model

The market selection model is a sequential model of IM activities focused on the marked selection and on defining its attractiveness. This is a sequential model, in which no decision is taken before the marketing program is ready. As far as the market selection and evaluation is concerned, at the end of the selection process we obtain a list of countries ranked in terms of attractiveness. The most important thing is to analyse markets before entry → a company can having to withdraw from market or seeing its margins decrease if the selection and entry mode have not been made on the basis of the correct information.

Market selection: how to analyse markets

In-depth analysis

It is a suitable analysis if you only have to analyze a few markets (focus on deep analysis of the markets). Even if you use this first type, you have to remember that there are some issues not covered during the analysis:

• Entry barriers → different types of entry barriers depending on specific local aspects, structure and competitive climate, macro-environment. For example, if we are in markets that aren’t under regional agreements, we can’t face some legal obstacle, tariff or non-tariff, monetary (e.g., legal requirements, markets that are closed from the geopolitical point of view, etc.).
• Social and cultural analysis which should provide information in terms of lifestyles, local specific, cultural aspects → behavioral model.

Screening process

It is a suitable analysis if we have to analyze many different foreign countries (high number). The screening process means to screen the markets by using specific criteria. It aims to eliminate a certain number of markets. Marketers may use the first screening process with some criteria and then go on the second one utilizing other criteria. At the end, only a few markets correspond to the company necessity (only a few markets are considered attractive).

Market selection variables

There are many variables affecting the country choice, and also the entry mode selection as well. The Double Screen Process is based on external variables and internal ones:

• External variables:
  1. Foreign market entry conditions (profitable market, characteristic of the market, if they are attractive for my company, etc.).
  2. Macro environment variables in the foreign market.
  3. Structure and competitive context in the foreign market → if companies work in districts, in many situations they are not able to define an internationalization process because you have to change your partners. If my partners are internationalizing in some country, but not in others, this could affect my choice of the market.
• Internal variables:
  1. Company objectives
  2. Values, culture, and organization at the climate of the firm → need to understand the company culture (ethnocentricity) and look for the markets that are similar to mine (similarity). I need to find some customers that might buy my products.
  3. Available resources, strengths, and weaknesses → firm’s competitive advantages.
  4. Characteristics and specifics of product portfolio.

The definition of attractiveness

Every firm defines attractiveness in different ways: companies have for sure their definition of attractiveness for their specific purposes. Foreign markets can be attractive if:

• Profitability: check data about sales and relative sales in that industry.
• The possibility of entering a market without any obstacle → no entry barriers: the company checks if in that foreign country there are entry barriers or not.
• Low competition in that market → in some situations, big dimensions do not mean an attractive market.
• Actual or potential demand is high.
• No political, commercial, financial risks, etc.: they are impossible to avoid; companies cannot choose countries with no risks at all.
  • Political risk: the political decision may directly affect the probability of the company.
  • Financial risk: there are many kinds of risks to keep in mind if a company exports.
  • Commercial risk: related to the fact that the company can trust the partners, who should be reliable.
• Market potential: is the best criterion to apply. It is the estimated maximum total sales revenue of all suppliers of production in a market during a certain period. We prefer defining foreign markets’ attractiveness as market potential.

The Double Screening Process

(At least two screenings)

• Initial Screening → you will be going in search of information that is useful to eliminate the superficial series of markets so you are able to analyze a few numbers of markets which are interesting for the firm.
• Second screening → classification of countries based on attractiveness criteria
  1. First screening variable: market size (import export, value of industry, distribution of the population), market potential (price, segment trend, growth of the population), accessibility risk (country risk financial, commercial; import duties), willingness to pay.
  2. Second screening variable: interest in the offer, population interest in having shops and distributors, features between country and my offer.

Marketing expansion strategy

Exporting

1. Export Intermediaries (indirect): bring firms or their products to the global market → one more actor. Cover the international firm’s marketing knowledge and performance gap and provide contacts with buyers abroad. An example is the Trading Companies or the Export Management Companies.
2. Direct Exporting: need a great level of control. It can be direct market representation (via wholesalers or directly to the consumer) or independent representation (independent distributor).

Entry modes should be decided looking at the attractiveness of the market and the pressure for local production or for local cultural needs.