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Global Marketing
Management
A European Perspective
Market Selection &
Market Entry Alternatives Exporting
Warren J. Keegan
Bodo B. Schlegelmilch
Overview
Selecting Foreign Markets
Market Selection Criteria
A Scoring Model for International Market Selection
Visiting the Potential Market
Market Entry Alternatives
Exporting - A Developmental Process
 The „Born Globals“
Methods of Export Financing
Summary
Keegan/Schlegelmilch
Global Marketing Management: A European Perspective
Chapter 8 / 2
Learning Objectives
To identify criteria suitable for the selection of foreign
target markets.
To appreciate which market entry alternatives are
available to companies.
To recognise export activities as a process developing
over time.
To understand different ways of export financing and
methods of payment.
Keegan/Schlegelmilch
Global Marketing Management: A European Perspective
Chapter 8 / 3
Selecting Foreign Markets
 ... should be based on a number of criteria, for example
market-related characteristics, such as product fit, market
size and potential,
cost-related aspects, such as transportation costs,
the regulatory framework
tariffs, duties and non-tariff trade barriers
 the importance of these selection criteria depends upon
the industry and the markets taken into account
Keegan/Schlegelmilch
Global Marketing Management: A European Perspective
Chapter 8 / 4
Critical Questions for a
Product-Market Profile: The „9 W´s“
1.Who buys our product?
2.Who does not buy our product?
3.What need or function does our product serve?
4.What problem does our product solve?
5.What are customers currently buying to satisfy the need and/or
solve the problem for which our product is targeted?
6.What price are they paying for the products they are currently
buying?
7.When is our product purchased?
8.Where is our product purchased?
9.Why is our product purchased?
Keegan/Schlegelmilch
Global Marketing Management: A European Perspective
Chapter 8 / 5
A Multi-Stage Selection Process
Approx. 150
countries
Markets which drop out
due to restrictions („must“
criteria)
Source: adapted from D.J.G. Schneider, and
R.U. Müller, Datenbankgestützte
Marktselektion: Eine methodische Basis für
Internationalisierungs-strategien, Stuttgart,
1989
Markets which are filtered out
based on a first set of
selection criteria
Markets which are filtered out
based on a second set of
selection criteria
Potential foreign
target markets
Keegan/Schlegelmilch
Global Marketing Management: A European Perspective
Chapter 8 / 6
A Scoring Model for
International Market Selection
SELECTION
CRITERIA
1
MARKET
POTENTIAL
WEIGHTS
COUNTRIES
2
TARIFFS
W = 15
E
3
NON-TARIFF
BARRIERS
4
PRODUCT
FIT
W = 17
W = 25
W=5
WxE
E
WxE
E
WxE
5
6
COMPETITIVE SHIPPING
SUMINTENSITY
COSTS
W = 22
E
WxE
E
WxE
W = 16
B
RANK
MATED
SCORE
WxE
MAX
400 P.
DENMARK
2
30
2
10
1,5
25
3,5
87
0,5
11
3,5
56
219
4
SWEDEN
3,5
52
4
20
3,5
59
25
62
2
44
3
48
285
2
NORWAY
2
30
3
15
2
34
3,5
87
1
22
2,5
40
228
3
FINLAND
4
60
4
20
3,5
59
3
75
4
88
1,5
29
326
1
PORTUGAL
0
0
3
15
1
17
0,5
12
2
44
2
32
120
5
GERMANY
AUSTRIA
SPAIN
•
•
•
W = Weights of selection criteria
E = Estimates (0 = very bad conditions; 1 = bad conditions; 2 = acceptable conditions; 3 = favoUrable conditions: 4 = very favourable conditions)
WxE = weighted estimate
Keegan/Schlegelmilch
Global Marketing Management: A European Perspective
Chapter 8 / 7
Visiting the Potential Market
... is essential after assessment and selection of
potential market(s)
goals:
to confirm (or contradict) assumptions regarding
market potential
to gather additional (primary) data; eg meeting
potential distributors face to face
to develop a marketing plan in co-operation with the
local agent or distributor
Keegan/Schlegelmilch
Global Marketing Management: A European Perspective
Chapter 8 / 8
Market Entry Alternatives
high
Acquisition/
Wholly-Owned Subsidiary
Control and
Foreign Market Presence
Joint
Ventures
Franchising
Licensing
Direct
Exporting
Indirect
Exporting
Production in the
Home Market
low
low
Production Abroad
Resource Deployment
high
Keegan/Schlegelmilch
Global Marketing Management: A European Perspective
Source: Adapted from
Günther MüllerStewens and Christoph
Lechner,
”Unternehmensindividu
elle und
gastlandbezogene
Einflußfaktoren der
Markteintrittsformen,”
in: Klaus Macharzina
and Michael-Jörg
Oesterle (eds.),
Handbuch
Internationales
Management, Gabler,
Wiesbaden, 1997, p.
237; Gunter Stahr,
Auslandsmarketing, Vol.
1, Kohlhammer,
Stuttgart, 1979, p. 162
Chapter 8 / 9
Direct Exporting
Direct market representation
via wholesalers or retailers or directly to the consumers
Independent representation
independent distributor
Piggyback marketing
distribution through another distributor´s channel
Keegan/Schlegelmilch
Global Marketing Management: A European Perspective
Chapter 8 / 10
Exporting: A Developmental Process
The firm
1. ... is unwilling to export.
2. ... fills unsolicited export orders (export seller).
3. ... explores the feasibility of exporting (this stage may bypass
stage 2).
4. ... exports to one or more markets on a trial basis.
5. ... is an experienced exporter to one or more markets.
6. ... pursues country or region focused marketing.
7. ... evaluates the global market potential. All markets, domestic
and international, are regarded as equally worthy of
consideration.
Keegan/Schlegelmilch
Global Marketing Management: A European Perspective
Chapter 8 / 11
The „Born Globals“
= global start-ups = international new ventures
... do not follow the traditional developmental
process
... are small firms which, at a very early stage of
their business, already target international markets
... are innovative and take advantage of new
technologies to excel in service to their customers
... in most cases achieve more than a quarter of their
sales in foreign markets after 2 years in business
Keegan/Schlegelmilch
Global Marketing Management: A European Perspective
Chapter 8 / 12
Export-Related Problems
Logistics
Legal procedure
Servicing exports
Sales promotion
Foreign market intelligence
Keegan/Schlegelmilch
Global Marketing Management: A European Perspective
Chapter 8 / 13
The World’s Leading
Exporting and Importing Nations
Exporters
1
2
3
4
5
6
7
8
U.S.
Germany
Japan
France
U.K.
Italy
Canada
The Netherlands
Value (in
bn US $)
Share of total
world-wide
exports
(in %)
Importers
Value
(in bn US $)
Share of total
world-wide
exports
(in %)
584.4
434.1
357.2
244.2
237.6
202.7
181.9
164.1
12.6
9.4
7.7
5.3
5.1
4.4
3.9
3.5
U.S.
Germany
Japan
U.K.
France
HongKong, China
Italy
Canada
762.8
374.5
287.1
307.2
260.6
177.1
177.1
170.5
16.1
7.9
6.0
5.5
4.8
3.7
3.7
3.6
Source: „World Trade Growth Accelerated in 1997, Despite Turmoil in Some Asian Financial Markets“, World
Trade Organisation 1998
Keegan/Schlegelmilch
Global Marketing Management: A European Perspective
Chapter 8 / 14
Market Entry Decision:
3 Key Questions
1. How many resources and what investment are
necessary to enter the market?
2. How much control of activities in the foreign
market is desired?
3. How much market knowledge can the
manufacturer gain by a specific market entry
alternative?
Keegan/Schlegelmilch
Global Marketing Management: A European Perspective
Chapter 8 / 15
Methods of Export Financing
Export Financing/
Methods of Payment
Non-Documentary
Payments
Payment against
Documents
Electronic Funds Transfer
Cheques
Payments in Cash
.....
Documentary Collection
Letter of Credit
...
Short-Term Financing
Bank Guarantees
Bid Bonds
Performance Bonds
Down Payment Guarantees
....
Countertrade
Barter
Counterpurchase
Offset
Compensation Trading
Cooperation Agreements
Hybrid Countertrade Arrangements
Switch Trading
Middle to Long-Term Financing
Keegan/Schlegelmilch
Global Marketing Management: A European Perspective
Chapter 8 / 16
Methods of Export Financing
Examples:
 Letter of credit: Substitutes a bank’s creditworthiness
for that of the buyer. Issued by the bank on behalf of
the buyer to a seller, it assures payment if the seller
complies with the terms set forth in the letter of credit.
 Countertrade: Full or partial payment is taken in some
form other than money. It flourishes when hard
currency is scarce.
Keegan/Schlegelmilch
Global Marketing Management: A European Perspective
Chapter 8 / 17
Summary
The choice of potential foreign markets must be
based on a thorough evaluation of criteria which
influence the potential success abroad; eg market
potential, market access, or product fit.
Once the potential foreign target market(s) is
selected, a company has to decide how to enter
this market. The options range from exporting to a
wholly owned susidiary.The 3 key criteria:
resources, control and market knowledge.
Keegan/Schlegelmilch
Global Marketing Management: A European Perspective
Chapter 8 / 18