Transcript EXPORT MARKET SELECTION

CHAPTER 3
REACTIVE
- Exporter acts passively in
choosing markets by filling
unsolicited order on the part
of foreign buyers
- Selection process is informal,
unsystematic and purchase
oriented
PROACTIVE
- Exporter acts actively in
initiating the selection of
foreign markets
- Selection process is
systematic and formalized
REACTIVE
- Approaches used are
inquiries from foreign
firms either through:
*active buying on their part
*contacts established by
indirect media used by the
exporter
PROACTIVE
- Approaches used are formal
and informal approach :
FORMAL
*Involve systematic market
research and visiting abroad
INFORMAL
*Selects a foreign market on
the basis of discussion with
business partner
Cont…
- No clear-cut divisions between reactive and
proactive approach
- Exporter apply the proactive strategy to
what are considered primary markets
- Exporter apply the reactive strategy to what
are considered secondary markets
MARKET SELECTION
PROCEDURES
1. Expansive Method
- Select market based on similarities
- Minimum adaptation
- Approaches:
a. Geographic proximity
b. Trade policy proximity
a. Geographic Proximity
- Nearest neighbor approach
- Similarity in economic, political, sociological and
cultural standing
- Less adaptation needed
- Targeted market can be treated as base market area
- Exp: South Pacific area (Australia, N. Zealand)
Asian (Malaysia, Singapore, Thailand)
b. Trade Policy Proximity
- Established a common market and economic
union structure
- The exporter has essentially a home market
situation in all member countries
- Tax conditions
2. Contractible Method
- Starting with large number of markets
- Involves three stages
i.
Preliminary screening
ii. Countries ranking
iii. Determining specific factors
- Geographic segmentation
 Prohibitive product characteristics
 Prohibitive market characteristics
- Customer segmentation
MARKET SELECTION
STRATEGIES
a. Market Concentration Strategy
b. Market Spreading Strategy
a. Market Concentration Strategy
- Slow and gradual rate of growth in number of
market served by a company
- Channeling available resources in to a small
number of market
- Devoting relatively high levels of marketing effort
and resources
- To win significant market share
Market Concentration Strategy
Market A
Marketing resources
Market B
b. Market Spreading Strategy
- Fast rate of growth in the number of market
served at the early stage of expansion.
- Allocating marketing resources over a large
number of markets
- To reduce risks of concentrating resources
- Exploit the economics of flexibility
Market Spreading Strategy
Market A
Market B
Marketing resources
Market C
Market D
Market E
Concentration = FEW
Spreading = MANY
RESOURCE ALLOCATION
- Each market are equal?
- Degree of market differences affect allocation
resources of marketing efforts
Number of market = amount of resources
Concentration vs. Spreading
Concentration
Spreading
Advantages:
Advantages:
- power of specialization,
scale, and market
penetration;
- greater market
knowledge;
- higher degree of control;
- learning of the export
process and the
experience curve
- flexibility;
- less dependence on
particular markets;
- lower perception of risk.
Company Factors
Factors favoring market
spreading
- High management riskconsciousness;
- Objective of growth through
market development;
- Little market knowledge
Factors favoring market
concentration
- Low management riskconsciousness;
- Objective of growth through
market penetration;
- Ability to pick ‘best’ markets.
Product Factors
Factors favoring market
spreading
- Limited specialist uses;
- Low volume;
- Non-repeat;
- Early or late in product life
cycle;
- Standard product salable in
many markets
Factors favoring market
concentration
- General uses;
- High volume;
- Repeat-purchase product;
- Middle of product life cycle;
- Product requires adaptation
in different markets
Marketing Factors
Factors favoring market
spreading
- Low communication costs for
additional markets;
- Low order handling costs for
additional markets
- Low physical distribution
costs for additional markets
- Standardized communication
in many markets
Factors favoring market
concentration
- High communication costs
for additional markets;
- High order handling costs for
additional markets
- High physical distribution
costs for additional markets
- Communication requires
adaptation to different
market
Market Factors
Factors favoring market
spreading
- Small markets-specialized
segments
- Unstable markets
- Many similar markets
- New or declining markets
- Low growth rate in each market
- Large markets are very
competitive
- Established competitors have
large share of key markets
- Low source loyalty
Factors favoring market
concentration
- Large markets-high volume
segments
- Stable markets
- Limited number of comparable
markets
- Mature markets
- High growth rate in each market
- Large markets are not excessively
competitive
- Key markets are divided among
many competitors
- High source loyalty