Micro and macro analysis in internation market selection

The identification of “right” International market (s) is one of the most important decisions that organisations face today when engrossing in international trade. Despite of its importance, the tactics pondered by many organisations in ascertaining profitable and servable markets in the international context are often based on the ad hoc decisions and perception, rather than a formalised endeavour to match the organisation’s competences to that of the pertinent foreign target markets.

The following research is aimed at evaluating systematic approaches to international market selection (IMS) and segmentation while bearing in mind the suitability of different models and processes for various organisations and markets in today’s competitive global world. A synopsis of current methodologies for the purpose of target market selection and segmentation based on the literature contemplating international marketing is then given. The conclusion will provide a short executive abridgment to identify the key elements to be considered by the management in electing international markets.

INTERNATIONAL MARKET SELECTION (IMS)

Business in the age of globalization has necessitated a move towards the internationalization of organisations (Wood & Robertson, 2000). Although globalization is incontrovertibly ensuing in different forms throughout the world, organisations participating in international trade often find themselves improvised with the environment they are entering into and thus neglecting the potential risks involved in it. It appears that the target countries chosen for international business are selected on the basis of “soft” factors such as vicinity or personal preferences, and not on the basis of “hard” factors such as market size, segment profitability, growth rate, etc. which is also supported by Cateora & Ghauri (2000).

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Thus far, two groupings have been identified for the purpose of international market selection (Papadopoulos & Denis, 1988). These are general and context-specific, i.e. pertinent to specific industries, categories of companies or business conditions. Most models differ only trivially in their approach, usually being composed of three or four sequential stages. For a three stage model, Kumar, Stam & Joachimsthaler (1994) terms these stages as (1) screening, (2) identification and (3) selection while in a model of four stages, Keegan & Schlegelmilch (2001) suggest a differentiation between constraints, a first and a second set of selection measures and the final selection of potential foreign target markets.

Despite variations in terminology, the models proposed by various writers, are virtually identical in content. They entail of a filter or funnel approach to target market selection, each stage coating a different set of benchmarks, until a set of suitable foreign target markets has been acknowledged.

Preliminary screening

Preliminary screening involves the identification and eradication of countries with unsuitable trading environments by applying macro-level indicators that offer clues to differences between organisational objectives and the traits of a given foreign market (Kumar, Stam & Joachimsthaler, 1994; Koch, 2001). Macro-level indicators may embrace the state of the market considering the factors such as market size, growth rate, price sensitivity, competitive rivalry, political or socio-cultural factors, etc. (Kumar, Stam & Joachimsthaler, 1994; Koch, 2001).

The objective for applying preliminary screening is to reduce the number of countries to sense a greater attention by a way of more detailed evaluations (Keegan and Green, 2011). There can be reasons for the unsuitability of a country, for instance, currency considerations (as in case where currencies can’t be traded in the open-market), political instability, hostile weather conditions (for clothing or fresh food) (Kumar, Stam & Joachimsthaler, 1994) or stern restrictions within the overseas market (Keegan & Schlegelmilch, 2001).

Fine-grained Screening

While preliminary screening focuses in the macro-level factors for identifying foreign target markets, fine-grained screening is a broader approach used for the identification of the ‘best opportunity’ target countries in which information specific to the core competencies of the firm is gathered, analysed and evaluated for each of the potential foreign target markets that are acknowledged in stage one (Hollensen, 2011). It uses a market portfolio model that uses the market attractiveness/competitive strength matrix with two composite dimensions applied to global marketing issues. Hollensen (2011) stresses that the two dimensions i.e. the market attractiveness and the competitive strength are built upon a large number of possible macro-variables e.g. market size (total and segments), braining power of customers, market seasons and fluctuations, competitive conditions, image, technology, product quality, etc.

Final Selection

Koch (2001) suggests three major ______ in the final selection of international markets. These are:

Company’s objective;

Strategies; and

Resources.

Doole and Lowe (2008) argue that an organisation should keep a balance between its domestic and foreign market commitments. In addition to this, they stress that the mutual effects of one onto the other can’t be under-estimated. Thus, if a company has a strong domestic footing, it will increase the stability to customers in international market. On the other hand, if the company wishes to export, it increases the acceptability of the company in its domestic market.

While the stages mentioned above appear relatively simple, they assimilate scrupulous and time-&-money consuming research work. The scope of the research is fickle and requires list important factors to be considered (Wood and Robertson, 2000). Research shows, the more specified the preliminary and fine-grained screening studies are, the more accurate the final international market selection is going to be. However, constraints such as finance and time need to be acknowledged and weighed against the proposed degree of international trading activity.

Conclusion

International Market selection becomes difficult due to the changes occurring in the international business environment. The underpinnings on which the market selection process is based should be a strategic orientation that treats market entry as part of the firm’s overall strategy and must be linked to the objectives and resource base of the company (De Burca, Fletcher & Brown, 2004).

The literature above points toward two types of data needs: macro information, providing knowledge about traits and state of the markets; and micro information, providing details about the firm’s internal capabilities and limitations (Czinkota, 1991).