Market Selection
- is the process of evaluating markets and regions to identify where talent pools will
create opportunity and support business goals.
- it is a critical process in international marketing where companies identify and evaluate
the most promising foreign markets to enter.
Selecting the right markets allow businesses to optimize their resources, manage risks,
and tailor their strategies to local conditions.
Bad reasons for exporting:
1. Disposing of excess production
2. Marginal costing
3. Prestige
Good reasons for exporting:
1. Increased profits
2. Spread of risk
3. Extension of the product
4. Even out seasonal fluctuations
Market Selection Criteria
1. Potential - is considered a critical market selection criterion because it directly
influences the long-term success, growth, profitability of a business. The obvious
attraction of new markets is the potential they offer for increased business.
Pure Sales Value - the total revenue generated from the sale of goods or services without
any deductions for expenses, taxes, or cost related to the production or sale of those
goods.
Market Share - is the percentage of an industry or market’s total sales that is earned by a
particular company over a specific period.
Reasons why potential is crucial in market selection:
1. Growth opportunities - markets with high potential offer opportunities for expansion
and revenue growth.
2. Future proofing - businesses want to invest in markets that are not only profitable now
but also have the potential to sustain or increased demand in the future.
3. Competitive advantage - by identifying markets with high potential early, companies
can establish a foothold before competitor do.
4. Innovation and expansion - markets with high potential often embrace new
technologies and innovations. Entering such markets enables businesses to be more
agile and responsive to evolving customer needs, driving both product and service
enhancements.
2. Accessibility - is considered a key criterion in market selection because it directly
impacts a company’s ability to successfully enter and operate in a market. This is very
great importance in international trade where barriers to trade exists which may make
certain markets inaccessible to certain suppliers.
Rules and Regulations are based on legislation in the country of destination and are
often operated by the Customs & Excise authorities of those countries. They broken down
it into two broad categories:
Tariff Barriers
- make certain markets inaccessible to foreign suppliers by increasing the cost of their
goods, reducing their competitiveness,and creating additional and logistic burdens.
- this often protects domestic industries at the expense of international trade, limiting
market access for foreign suppliers and reshaping global trade patterns.
Custom Duties
- are taxes or tariffs imposed by a government on goals imported into a country.
These duties are part of a government’s trade policy and are used to regulate the flow
of goods, protect domestic industries, and generate revenue.
Taxes
- refer to the use of taxes particularly tariffs, to restrict or regulate international
trade. These taxes are imposed by governments on imported goods and are designed
to make foreign products more expensive.
Excise
- refers to the use of excise taxes typically levied on specific goods like alcohol,
tobacco, fuel, or luxury items.
- excise tax function as tariff barriers by raising the cost of import good, creating
market distortions, limiting access to the market, and targeting specific sectors.
Licensing
- refers to the practice where governments require businesses to obtain special
permits or licenses to import certain goods.
- Licensing requirements can slow down the process of bringing foreign goods into
a market, making it more difficult or expensive foreign businesses to compete.
Levies
- refers to additional taxes or fees imposed on imported goods which function
similarly to tariffs by increasing the cost of these goods and protecting domestic
industries.
- levies function as tariff barrier by increasing the price of imports, protecting
domestic industries, targeting specific goods, and addressing social or environmental
issues.
Qoutas
- refer to government-imposed limits on the quantity or value of specific goods
that can be imported into a country over a defined period of time.
- qoutas functioned as tariff barrier by limiting the volume of imports, maintaining
domestic price levels, encouraging local production, and allocating import opportunities.
Non-Tariff Barriers
- these barriers increase the cost of doing business, reduce competitiveness, and create
uncertainty for companies seeking to export goods. While they often serve legitimate
purpose like protecting public health on the environment, non-tariff barriers can also be
used as protectionist measures to shield domestic industries from foreign competition,
limiting market access for suppliers from demand
Health, Safety, and Technical Standards
- can act as significant barriers to market entry for foreign suppliers. While these
regulations are often necessary for protecting consumers the environment, or industries,
they can impose high compliance costs, lengthy certification processes, and complex
requirements.
Culture
- can make certain markets inaccessible to specific suppliers through a variety of
mechanisms including cultural preferences and tastes, religious or ethical beliefs,
language barriers, brand perception and nationalism. These cultural factors can create
both formal and informal barriers to market entry, shaping consumer preferences,
business practices, and legal frameworks.
National Buying Preferences
- can make certain markets inaccessible to certain suppliers by encouraging
consumers to prioritize local or domestic products over foreign goods. This can be driven
by economic, political, or emotional factors which create barriers for outside suppliers.
Collaboration
- collaboration among firms, governments, or industries can create barriers that
make certain markets inaccessible to specific suppliers. This can occur through various
mechanisms such as exclusive partnerships, alliances, industry standards, and market
control strategies.
3. Similarity - it is considered as market selection criterion in market selection because it
helps companies assess how easily they can transfer their products, services, or business
practices to a new market with minimal adaptation. By entering markets that are similar
to their home market, companies can reduce risks, simplify operations, and increase the
likelihood of success. Once that the above requirements are finally met, the exporter
would wish that any new markets are as similar to current markets as possible.
