Chapter 5Analyses of National Markets

John S. Hill

Figure 5-1: National Markets Analysis topic outline

The Shaping of National Cultures

Historic FactorsGeographic Factors

Analysis of National Markets

Macro Analysis

Political FactorsEconomic FactorsInternational Position

Business & Market Analysis

Operating Conditions

Industry Analysis

Product-Market

Fit

Chapter Outline

Essential BackgroundCurrent Position AnalysisCommercial AnalysisCultural Analysis

Essential Background

Historic Influences on National Culture Development

Geographic Influences on National Culture Development

Essential Background Historic Influences on National

Culture Development Political trends, power bases and

sensitivities: powerful families; key leaders Industrialization, Economic Change and

Development: agriculture-industrial-service sector breakdowns as key indicators

Cultural development, Ethnic, cultural and linguistic differences: size of groups and extent of rivalries

External influences on country behaviors

Essential Background

External Influences on Country Behaviors

National participation and membership of global treaties and conventions: UN, IMF, WTO, World Bank, IMO, ICAO and so on

Participation in Regional Political Organizations: Organization of American States (OAS), Organization of African Unity (OAU).

Historic Events and National Rivalries: China and Taiwan; North versus Southern Ireland

Essential Background Geographic Influences Geographic Influences on National Development Country location on world map: affects political,

trade, commercial relationships Climate: affects population concentrations, food

supplies, work conditions, national mindsets (e.g. fatalism in developing nations)

Population concentrations: affects market demand and marketing approaches (e.g. ethnic groups)

Resources: agricultural food supplies, energy sources, mineral supplies

Topography: affects population, distribution

Essential Background Geographic Influences Geographic Influences on

Infrastructure Development: necessary in foreign, especially developing markets

Utility and Energy Assessments: water, sewer, energy availabilities

Communication infrastructures: telephones, radio, TV, print media availabilities

Transportation infrastructures: extent of development of highways, waterways, rail, port, harbor and airport facilities

Current Position Analysis Current Political

Situation Current Economic

Position Current

International Position

How Managers use Balance of Payments Data

Current Position Analysis Current Political Situation Political system: democracy v.s.

authoritarian systems: extent of democracy (1 party democracies)

Parliamentary Assemblies: who has power; frequency of elections

Key political parties: and philosophies (right, left wing, special interests)

Political risk, elections, and the likelihood of political change

Current Position Analysis Political Risk, Elections and the Likelihood

of Political Change Internal frictions: ethnic or religious groups

and their influence on national politics External influences: impact of globalization,

westernization, privatization Economic problems: inflation,

unemployment, growth, trade (e.g. protectionism)

Political problems: government expenditure priorities; taxation levels, social welfare, corruption, business legislation

Current Position Analysis Current Economic Position Comparative economic analyses: country

versus regional performance puts national economic performance into perspective

Country-specific economic analyses o General economic indicators: GDP size, GDP per

capita; government income/expenditures; growth, inflation

o Private-sector performance: public/private expenditures; agriculture-industry-services; key industries and sectors

o International economic and trade policies: tariff levels, WTO, trade bloc membership

Current Position Analysis Current International Position Analyzing Country Balance of Payments o Current Account: merchandise trade balance,

goods and services balance, income account, unrequited (one-time) transfers

o Capital Account: capital account, direct investments, portfolio investments, monetary transactions

o Financial Account=direct investments + portfolio investments + financial derivatives + other investments

o Net Errors and Omissionso Reserves and related items show how B/P

surpluses are used or how deficits are financed

Current Position AnalysisHow Managers use Balance of Payments

Data Merchandise trade balance: Imports and

exports: protectionist tendencies, currency adjustments

Services: laws requiring local carriers Investments: restrictions for ‘capital flight’ Balance of payments effects on currency

values: B/P surpluses (currency strengthening); B/P deficits (currency weakening)

Inflation rate effects on balance of payments and currency values: high inflation = likely currency devaluations

Commercial Analysis

Industry analysis

Demand Analysis

Supply Chain Analysis

Business Environment Analyses

Commercial Analysis Industry analysis Market size, growth Market structure: # firms; global, regional,

national competitors; profitability; change; key success factors; industry characteristics

Demand Analysis: Customer and Marketing Considerations

Customer concentrations: where located Customer segmentation issues: profiles,

location Marketing research services: availability

Commercial Analysis Supply Chain Analyses Supplier considerations; location, quality Manufacturing Investment and Site-

Location Decisions Investment permissions: fit with government

plans Investment incentives: for undeveloped

regions Infrastructure connections: roads, energy Labor quality and availability: education

system Labor laws: wages, work hours, safety,

benefits Information technology/E-commerce issues Cost chain considerations: wage rates,

depreciation rates, taxes

Commercial AnalysisBusiness Environment Analyses Financial Aspects: Capital Markets,

Taxation Policies, and Currency Issues National capital markets: long, medium,

short term capital sources (stock markets, banks)

Corporate taxation and taxes: rates, exemptions

Currency considerations: convertibility; stability; preferences for depreciating currencies for exports and investments

Legal Infrastructures

Commercial AnalysisBusiness Environment Analyses Legal Infrastructures

Industry ownership limitations: ‘off limits’ sectors; ownership restrictions

Monopoly and anti-trust laws: affects acquisitions Intellectual property laws: procedures, effectiveness,

enforcement Consumer protection laws: warranties, advertising,

deceptive practices Environmental laws: recycling, pollution, chemical

use Local company organization: affects

shareholder/owner responsibilities, liabilities, obligations

Cultural Analysis General national backgrounds: climate,

history, government, education, population, religion, language

Interpersonal relations: family unit, dating, appearance, visiting, greetings, eating habits, tipping, gender relations, body language, gestures

Lifestyles: eating habits, recreational sports, diet, refreshments (alcohol)

General attitudes: family, friends, punctuality, modesty, religiosity, surprises, materialism, social classes, ethnic identities, male-female relations

Key Points

Thorough examinations of national markets entail…Reviewing background info on

country history and geographyAssessing the current political,

economic, and international situations

Evaluating its commercial environment and national culture

Key Points

Historic background traces national political development and economic change.

Geographic factors affect national economic and infrastructure development.

Managers examine the current political, economic, and international situations.

Key PointsNational economic positions

should be assessed in their regional context first, followed by examinations of economic indicators, private sectors, and memberships of international organizations.

Analyses of country balances of payments show how nations are performing in international trade.

Key Points

Commercial analyses comprise examinations of national industry conditions.

Business environment analyses review general factors affecting operations in foreign markets.

Cultural analyses look at national backgrounds and behaviors.