Evaluating and prioritising potential export markets · Market Attractiveness Index provides an...
Transcript of Evaluating and prioritising potential export markets · Market Attractiveness Index provides an...
Evaluating and prioritising
potential export markets
13th October 2009
Padraig Brennan
Outline
• Background
– Why evaluating potential export markets is important
• Market evaluation
– How to assess the suitability of potential markets for your company
• Case study
– Example of how an evaluation of potential export markets works
• Summary
Background – Why evaluating potential export markets is important
Growth opportunities
from exports
Exporting to other countries ...
But ...
- As a company, you have to prioritise
potential export markets to:
- Provide a common under-
standing of which marketplace
battles you have chosen and why
- Allocate your resources
accordingly
- Is an important lever for growth
- Provides value added opportunities
2003 2008
€7bn
€8.17bn
Irish
exports of
food and
beverages
Source: Roland Berger Strategy Consultants
Using the
"Attractiveness Index"
as a basis
Bord Bia introduced the "European Market Attractiveness
Index" a few years ago
• Index evaluates general export
attractiveness of major European
food and drink markets
• Index ranks export markets based
on two dimensions
– Country attractiveness
– Irish capability to serve
Market Attractiveness Index provides an initial assessment of markets, but
assessing the fit for your company requires a more detailed evaluation
Irish food & drink Industry
Capability to Serve
Co
un
try a
ttra
cti
ve
ne
ss
Low (0)
Low (1)
High (10)
Good (10)Average (5)
Avg. (5)
Market evaluation – How to assess the suitability of potential markets
for your company
TODAY'S FOCUS
The market evaluation
process involves
3 steps
STEPS
KEY
QUESTIONS
OUTPUT
Laying the foundation
• Defining strategic
parameters
• Creating a long-list
Evaluating potential
markets
• Developing a scoring
model
• Scoring and
prioritising markets
Detailing research and
initiating actions
• Analysing markets in
detail
• Planning and pre-
paring market entry
• What do you want to
achieve (size, growth,
profitability targets)?
• How much can you invest?
• What are your core
strengths?
• How much risk do you
want to take?
• Which geographic regions
do you want to consider?
• What dimensions and
criteria do you want to
consider in the market
evaluation?
• What KPIs do you use to
measure the criteria
selected?
• How do you weight the
dimensions and criteria?
• What are the most
attractive markets?
• What are the requirements
for entering a specific
market (e.g. packaging,
design, legal)?
• What specific SKUs should
be exported?
• What sales potential do you
estimate for your products
(year 1, year 2, etc.)?
• How will you operationally
manage exports (e.g. own
sales team vs. importer)?
• General "export strategy"
• Long-list of potential export
markets
• Prioritised short-list of
suitable export markets
• Detailed market profiles
• Defined export market(s)
• Clear launch roadmap
Source: Roland Berger Strategy Consultants
Top priority
markets
The general evaluation
framework is based on
two dimensions
• Market attractiveness:
How attractive is the market in
terms of size, accessibility and
country risk?
High
Low
Medium
Low HighMedium
MA
RK
ET
AT
TR
AC
TIV
EN
ES
S
ABILITY TO WIN
Source: Roland Berger Strategy Consultants
• Ability to win:
How well are we positioned to enter
the market in terms of:
• Financial/operational/marketing
capabilities
• Market knowledge to win on the
market?
The matrix is based on
two scoring models
Top priority
markets
High
Low
Medium
Low HighMedium
MA
RK
ET
AT
TR
AC
TIV
EN
ES
S
ABILITY TO WIN
Method for assessing each
market's performance
• Relevant evaluation dimensions and
criteria per axis are defined
• Each dimension is given a weighting
(between 0 and 100%; sum of
weightings for each axis equals 100%)
• Each criterion is scored from 0 (low) to
2 (high)
• The total score for each axis/market is
calculated based on scores and
weightings
Source: Roland Berger Strategy Consultants
"Market attractiveness" should
cover 5 dimensions
Dimensions of "Market attractiveness"
Country riskMarket Consumer CompetitionRetail
landscape
• Evaluates primary source of
business
• The higher your growth
targets/ambitions, the higher the
relative weighting should be
• Evaluates the competitive
marketplace you are likely to face
• Evaluates the risk of
exporting to a country
• The greater your risk
aversion, the higher
the relative weighting
Source: Roland Berger Strategy Consultants
Each dimension
includes several
criteria
The following criteria should be considered
Country riskMarket Consumer CompetitionRetail
landscapeDimension
Typical
weighting25% 25% 20% 20% 10%
Source: Roland Berger Strategy Consultants
Each criterion can be
measured by specific
KPIs
Market criteria
Criterion KPI
Current size Sales in 2008 [EUR m]
Future size Sales in 2012 [EUR m]
Average price per kg/litre Avg. price in 2008 [EUR/Kg]
Current private label share Private label share in relevant category, 2008 [value,%]
Future private label share Private label share in relevant category, 2012 [value,%]
Source: Roland Berger Strategy Consultants
Each criterion can be
measured by specific
KPIs
Consumer criteria
Criterion KPI
PCC category Per capita volume 2008 [kg]
Future PCC category
developmentDevelopment of per capita volume, 2009-2012 [% p.a.]
PCC sub-category
Future PCC sub-category
development
Population density Inhabitants/km2
Avg. available income Avg. per capita income ['000 EUR/year]
Source: Roland Berger Strategy Consultants
PCC = Per Capita Consumption
Per capita volume 2008 [kg]
Development of per capita volume, 2009-2012 [% p.a.]
Each criterion can be
measured by specific
KPIs
Competition criteria
Criterion KPI
Degree of industry
consolidationCumulative market share of top 5 players [value,%]
Market share/acceptance
of international brandsCumulative market share of international brands [value, %]
Advertising intensity in
category relative to overall
market
Category's share of voice vs. category's share of market in
total FMCG [index]
Source: Roland Berger Strategy Consultants
Each criterion can be
measured by specific
KPIs
Retail landscape criteria
Criterion KPI
Degree of current retail
consolidation Cumulative market share of top 5 players [value,%]
Degree of future retail
consolidationCumulative market share of top 5 players [value,%]
Accessibility via wholesale Qualitative assessment
Source: Roland Berger Strategy Consultants
Each criterion can be
measured by specific
KPIs
Country risk criteria
Criterion KPI
Future inflation Avg. forecast inflation rate, 2009-2012 [%]
Corruption Corruption Perceptions Index 2008 [score]
Legal limitations for imports Qualitative assessment
Currency risk Currency volatility [%, 360 days]
Currently: exposure to
financial crisisChange in GDP, 2009 vs. 2008 [%]
Source: Roland Berger Strategy Consultants
The dimensions of
"Ability to win" are more
difficult to assess
Dimensions of "Ability to win"
Financial/operational
capabilityMarketing capability Country knowledge
• Evaluates your company's
financial and operational
ability to enter the market
and make the necessary
investments
• Evaluates your company's
ability to successfully
create demand for your
product and achieve
distribution
• Evaluates your company's
ability to understand the
market's needs
The dimensions of "Ability
to win" cover several
criteria
Dimension
Typical
weighting35% 35% 30%
Financial/operational
capabilityMarketing capability Country knowledge
Source: Roland Berger Strategy Consultants
Each criterion needs
to be assessed
in detail
Criterion KPI
• Logistics costs Estimate of average logistics cost with suitable
means of transportation [EUR/'000 tons]
• Cost of required
sales structure
Estimate of average costs for sales structure (e.g.
sales force or importer fees) [EUR/'000 tons]
• Cost of promotional
activity
Estimate of average costs promotional activity
[EUR/'000 tons]
Dimension
Financial/
operational
capability
Source: Roland Berger Strategy Consultants
• IT costs Estimate of average costs for necessary IT
adjustments [EUR/'000 tons]
• Cost of changes in
production
Estimate of average costs for necessary
changes in production (ingredients, packaging,
lot sizes, etc.) [EUR/'000 tons]
Each criterion needs
to be assessed
in detail
Criterion KPIDimension
• Product fit Either results of product test or qualitative
assessment by experts regarding taste, quality,
serving size, fit to consumption occasions, etc.
[score]
• Pricing fit Relative price position of key SKUs vs. key
competitors in market or vs. market's average
price [index]
• Channel fit Qualitative assessment of company's capability
to deal with dominant distribution channels in
market [score]
Marketing
capability
• Cultural fit Qualitative assessment of trade and cultural
affinities with Ireland [score]
• Country experience Qualitative assessment of degree of relevant
county experience (e.g. experience with key
people, actual company experience in other
product categories, etc.) [score]
Country
knowledge
Source: Roland Berger Strategy Consultants
Case study
– Example of how an evaluation of potential export markets works
Case study –
Background
• European manufacturer of frozen ready meals aims to expand its business
and grow in Central and Northern Europe
• The following countries are on the long-list
– Sweden Germany
– Norway France
– Finland Switzerland
– Denmark
• The "Market attractiveness"/"Ability to win" framework is applied
• The dimensions and criteria presented previously are applied for evaluation
Source: Roland Berger Strategy Consultants
Assessing "Market
attractiveness" – Data
basis (1/2)
Source: Roland Berger Strategy Consultants
Once criteria and KPIs are defined, information needs to be gathered
– extensive desk research & usage of research reports recommended
Assessing "Market
attractiveness" – Data
basis (2/2)
Source: Roland Berger Strategy Consultants
Assessing "Market
attractiveness" –
Example of detailed
analysis
Source: Roland Berger Strategy Consultants
Market size frozen ready meals 2012 [EUR m]1)
42 59 70107
257
865
564
< 150 EUR m
0 points
> 400 EUR m
2 points
150-400 EUR m
1 point
1) Euromonitor estimate
• Definition of scoring criteria
based on comparison of
actual data
• Usage of absolute future
market size instead of
growth rates to avoid
distortions through high
growth rates on very small
basis
At least two of the
following limitations
apply
• Additional limitations
on ingredients besides
EU limitations
• More information on
packaging
compulsory in addition
to EU requirements
• Duties
• Import quotas
One of the following
limitations applies
• Additional limitations on
ingredients besides EU
limitations
• More information on
packaging compulsory
in addition to EU
requirements
• Duties
• Import quotas
Best case
• EU member: no
restrictions/no duties
• EU standard require-
ments for packaging
information apply
Assessing "Market
attractiveness" –
Example of detailed
analysis
Source: Roland Berger Strategy Consultants
Qualitative assessment of legal limitations/ import restrictions
• Precisely
defined scoring
criteria serve
as the basis for
sound qualita-
tive assess-
ments
0 points 2 points 1 point
• Norway • France
• Germany
• Sweden
• Switzerland • Finland
• Denmark
Assessing "Market
attractiveness" –
Results
Source: Roland Berger Strategy Consultants
A dimension's weighting has very strong influence on final result
Avoid adjusting the weighting to achieve desired results
Assessment of "Ability
to win" – Results
Source: Roland Berger Strategy Consultants
Result - Ability to win
Ranking Total scoresFinancial/Opera
tional capability
Marketing
capability
Country
knowledge
France 1 78.0 24.0 29.0 25.0
Switzerland 2 65.0 23.0 24.0 18.0
Germany 3 59.0 23.0 21.0 15.0
Denmark 4 48.0 17.0 17.0 14.0
Norway 4 48.0 18.0 19.0 11.0
Sweden 6 43.0 15.0 18.0 10.0
Finland 6 43.0 15.0 19.0 9.0
Maximum score 100.0 35.0 35.0 30.0
Minimum score 0.0 0.0 0.0 0.0
Countries for short-list
Results of two scoring
models are summarised
in matrix
Source: Roland Berger Strategy Consultants
MA
RK
ET
AT
TR
AC
TIV
EN
ES
S
ABILITY TO WIN
High
Low
Medium
Low HighMedium
If you have a set of generally very attractive markets on your long-
list, you may raise threshold levels to produce your short-list
Finland
Sweden
Norway
Denmark Germany
Switzerland
France
Summary
Summary
BE SYSTEMATIC AND STRUCTURED
To assess the suitability of potential export markets for your company, we
recommend a three-step approach
- Lay the foundation: Export strategy + country long-list
- Evaluate potential markets: Scoring model + information research
- Conduct detailed research and initiate actions: Detailed market profiles + roadmap
Source: Roland Berger Strategy Consultants
1
BE THOROUGH AND OBJECTIVE
To assess market performance along "market attractiveness" and "ability to
win", you should develop two scoring models that cover all relevant criteria
for your company and measure performance based on clear KPIs
2
BE COMPANY-SPECIFIC
Dimensions, weightings, criteria and KPIs presented here may need to be
adjusted according to your company's specific requirements
3
Evaluating and prioritising
potential export markets
13th October 2009
Padraig Brennan