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Chapter Fourteen
Assessing and
Analyzing Markets
McGraw-Hill/Irwin
Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.
Learning Objectives
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Discuss environmental analysis and market
screening
Explain market indicators and market factors
Describe statistical techniques for estimating
market demand and grouping similar markets
Discuss the value of trade missions and trade fairs
Discuss problems researchers have in foreign
markets
Explain difference between country screening and
segment screening
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Assess and Analyze Markets
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Market Screening
 Firm (IC) identifies desirable markets: uses the
environmental forces to identify desirable
markets
 Similar to environmental scanning
Environmental Scanning
 Firm (IC) scans the world for changes in the
environmental forces that might affect it
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Market Screening
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Two Types of Market Screening
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Country Screening
 Uses countries as focus of analysis for market
selection
Segment Screening
 Uses market segments as the focus of analysis
for market selection
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First Step: Initial Screening
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A firm must assess if there is a basic need potential
for its goods or services in question
 If the need is lacking, then no reasonable
expenditure of effort and money will enable the
firm to market its goods and services
 Assessment of basic need potential
 Easier for producers of specialized industrial
materials or equipment
 More difficult for specialized consumer
products
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Initial Screening
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Imports don’t fully measure market potential
Flow can be influenced by government policy
regardless of import potential
Import data are a first indicator
Price level for imported product sales helps the
market entry mode decision
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Second Screening
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Initial screening narrows down country and market
possibilities
Second screening reduces the potential markets
through a preliminary financial and economic
analysis
 Inflation rate and forecasts
 Exchange rates
 Interest rates
 Credit availability and paying habits of customers
 Rates of return on similar investments
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Second Screening: Use of
Financial and Economic Forces
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How to use the indicators collected?
 Market indicators
 Market factors
 Trend analysis
 Cluster analysis
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Market Indicators
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Market indicators refer to economic data used to
measure relative market strengths of countries or
geographic areas
 Market size = size of target population x
consumption estimates
 Market growth rate = average growth rate of target
segment for products x real growth rate in GDP
 E-commerce readiness
 Mobile phones per 1,000 inhabitants
 PCs per 1,000 inhabitants
 Internet hosts per million
Use indicators developed such as above to create
attractiveness index
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Resources With Which To
Establish Need Potential
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International Trade Administration site on the Internet
(www.ita.doc.gov)
U.S. Exports of Merchandise on the National Trade
Data Bank
U.S. International Trade in Goods and Services
(FT900) by the Department of Commerce
Annual Worldwide Industry Reviews and
International Market Research Reports prepared by
various U.S. embassies
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Market Factors
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Market factors refer to data that correlate highly with
market demand for a product
Estimation by analogy involves using a market factor in
one country to estimate a potential country’s market
demand
Trend analysis is a statistical technique that involves
analysis of successive observations of a factor’s
variables at regular time intervals to establish patterns
 Use patterns for establishing future values
Cluster analysis is a statistical technique that identifies
groups so that the objects within each group are similar
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Third Screening:
Political and Legal Forces
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Entry Barriers
 Import restrictions, local participation requirements,
local content restrictions, government-owned
competition
Profit Remittance Barriers
 Undue restrictions on the repatriation of earnings,
limits to FDI, inability to provide foreign exchange
Policy Stability
 Political climate, government stability, public unrest
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Fourth Screening:
Sociocultural Forces
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Sociocultural factor screening
 Sociocultural factors are fairly subjective
 Data are difficult to assemble, particularly from a
distance
 Sources
 US Department of Commerce
 Business International
 Financial Times
 The Economist
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Fifth Screening:
Competitors’ Profile
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Number, size, financial strength
Market shares
Marketing strategies
Apparent effectiveness of promotional programs
Quality levels of product lines
Source of products--imported, local
Pricing policies
Levels of after-sales service
Distribution channels
Market coverage
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Final Selection of New Markets
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The final selection of new markets involves
 making personal visit to markets
 unhurried field trips
 government-sponsored trade missions
 trade fairs
 face-to-face interviews: get unwritten information
 hiring local research groups
 appointing an experienced project manager who
 has lived in the country or in culturally similar one
 is from the same geographic area
 is from the same industry
 is familiar with your company
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Local Research Problems
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Cultural
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Language
Literacy
Social desirability bias
Technical
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No up-to-date maps
Streets have different names
Houses not numbered
Only wealthy have telephones
Mail delivery issues
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Research in Developing Nations
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Less research performed
Often a seller’s market, minimal competition
 fewer competitors
 management struggling with problems other than
marketing
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Return to Segment Screening
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Segments must be
 definable: to identify and measure
 large: to be worth the effort needed
 accessible: for promotion and distribution
 actionable: have control of marketing programs
 capturable: reasonable potential for success
LO6
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