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In small companies IMS is often a reaction to a stimulus. IMS of a small company is based on:
Low uncertainty about foreign markets Low perceived difficulty of acquiring information about foreign markets Low cultural distance Low geographic distance
Segmentation allows managers to focus on common aspects of countries and avoid information overload. Segmentation Criteria
Geographic location: The location fo the market. (e.g. Scandinavian countries, Middle East) Political factors: Broad political characteristics (e.g. Iron Curtain) Demography: Population characteristics Economy: Economic development level Industrial Structure: Characteristics of business population Technology: The degree of technological advancement Cultural characteristics / Lifestyles / Attitudes .....
Benefits Size of the market Purchasing power of customers Future prospects of a country * Costs Bribes Relatively primitive or undeveloped economy Local laws and regulations setting standards * Risks Political/Economic/Legal Risks Rate attractiveness of different countries relative to each other.
Some companies are more compatible with the firm itself. 1. Cultural distance 2. Administrative and political distance 3. Geographical distance 4. Economic distance
PEST ANALYSIS
CAGE FRAMEWORK
Interactive Practice
Individualized reports prepared by market research and business consulting companies Studies prepared by research organizations that are much cheaper than individualized reports Government Agencies International Organizations (WTO, IMF, OECD) Trade Associations Information-service Companies (e.g. IGEME Library) Internet (e.g. www.intracen.org/marketanalysis/)
Competitive Risk
Find countries where there is no significant competition Avoid overcrowded markets Clusters are an exception
(www.businessmonitor.com),
Opportunities
Your company that has to choose between making a $100 million investment in Russia or the Czech Republic. Both investments promise the same longterm return, so your choice is driven by risk considerations. Assess the various risks of doing business in each of these nations. Which investment would you favor and why? http://globaledge.msu.edu/countries/czechrepublic/ http://globaledge.msu.edu/countries/russia/
Criteria
Weights
Score (1-4)
Labor cost/productivity
Short-term credit Long-term loans/venture capital Attitude towards foreign investors Nationalization Monetary inflation Balance of payments Enforceability of contracts Bureaucratic delays Communications (phone, fax, internet access) Local management and partner Professional services TOTAL 1.5 1.5 1.5 1.5 1.5 1 1 1 0.5
V IV
Try Harder
LOW
Withdraw
HIGH
MEDIUM
LOW
COMPANY STRENGTH
Your company wants considers internationalizing. The options that you consider include: Egypt, Russia, Poland, Ukraine, Iran Read the Euromonitor reports for these countries and conduct:
An environmental risk analysis Market drivers analysis Cost-Benefit analysis Etc.
1
2 3 4
High level scan of markets has identified some interesting similarities and differences: The forecasted market growth rate is highest in in ______ followed by _____ and _____. Consumers are considered to be most sophisticated in ______ followed by _____ and _____. ___ and ___ have the highest sensitivity to price, prioritizing functional benefits. Consumers are interested in modern, novel and advanced products in ___ and ___ Western lifestyles are affecting customer trends in ___ and ___. Economic factors affect purchasing decision negatively in ___ and positively in ___. Legal factors became a major force in ___. The effect of cultural factors and traditions on cosmetics and toiletries spending is highest in ___. Contraband products are threatening the cosmetics and toiletries industry in ___.
Consumer Sophistication
Competitive Landscape
Socio-Macroeconomic Level
Retail Development
Barriers to Entry
Price Sensitivity
Consumers are considered to be most sophisticated in Russia followed by Ukraine and Poland Iran and Egypt have the highest sensitivity to price, prioritising functional benefits over emotional Iran has high government control over retail development
Implications:
weak strong
Hair care Fragrances Skin care Skin care Hair care Man care
Companies need to invest in obtaining specific market and consumer insights to inform its business strategies Each priority market needs to be handled discreetly The gathering of insights by market should consist of desk based and primary research (qualitative and quantitative).