Selecting International 5 Business Opportunities...Selecting International Business Opportunities...

143

5Selecting International Business Opportunities

Profile: Karan Bilimoria

Cobra beer

Karan Bilimoria, founder and chief executive of Cobra Beer, has two mis-sions: to brew the finest Indian beer ever and to make it a global brand. One of the fastest growing beer companies in the UK, Cobra Beer is well on its way to achieving both goals.

Cobra Beer tries to set itself apart from the competition by emphasizing that its product is smooth and less gassy. Bilimoria explains, “I saw that the market was dominated by harsh, gassy ‘Eurofizz’ beers, all poor partners to food. I wanted to produce a premium, high-quality lager that would com-plement rather than fight against food.” The aim is to appeal to both ale and lager drinkers and to people eating Indian food. “We built the business in the UK on the Indian restaurant niche sector,” says Dynshaw Italia, the company’s finance director and chief operating officer.

Lord Bilimoria’s (he became Lord Bilimoria of Chelsea in June 2006) unrelenting entrepreneurial spirit and pursuit of excellence sets the com-pany apart. A Cambridge law graduate and qualified chartered accountant, he founded the company in 1989 at the age of 27 with GBP20,000 of stu-dent debt.

Change of Location

In 1990 Bilimoria began brewing Cobra Beer in Bangalore, India, and shipped the brand from there to the UK, the world’s most competitive beer market. Although demand surged, the brewer increasingly produced a beer of uneven quality and was late with consignments. Consequently, in 1997

144 InTErnATIOnAL EnTrEPrEnEUrShIP

he moved its production to the UK, where he established a license with Charles Wells, a well-known brewer.

The company later hired Palm Breweries in Belgium and its subsidiary, Browar Belgia in Poland, as breweries to guarantee several suppliers to meet the demands for Cobra in the European and worldwide market. Browar Belgia is one of Europe’s leading and most modern breweries as well as Poland’s fourth largest brewer. “When we decided to look at various options and countries, a major criterion was matching the taste of the beer,” says Mr. Italia. Browar Belgia was able to match the taste of the beer within two or three tries.

Success Story

In 2007 Cobra Beer was so successful that it enjoyed a retail value turn-over of GBP125m, up from GBP80m reported in 2006. In 10 years its com-pound annual growth rate has been more than 42%. Sold mainly in draft form, the beer is found in nearly 6,000 UK Indian restaurants and 6,000 bars, pubs, and clubs. “We’re starting to expand to the supermarkets, as well as to the off-trade and on-trade markets,” reports Mr. Italia. Cobra Beer is exported to almost 50 countries and maintains subsidiaries in India, South Africa, and the United States, but the UK remains its largest market.

The company positioned itself to enter the big leagues of the beverage industry. “To go to that next stage requires a giant leap,” says Mr. Italia. Since 2006 Cobra Beer has undergone major changes that included increas-ing its staff from 10 to 113. A well-known managing director and a market-ing director from major beverage and spirit companies were hired. next, Cobra plans to extend its brand in the UK to different occasion categories and expand its position overseas. “At the moment people associate the beer with Indian food,” says Mr. Italia. “But people are starting to drink it on dif-ferent occasions.”

Indian Market

Cobra is also stepping up its presence in India. Tariffs there are so high that importing beer makes it difficult to compete against the local brands. Consequently, Cobra Beer has partnered with Mount Shivalik Group, India’s largest independent brewing company, to brew Cobra under license for India’s rapidly growing domestic market. Most significant, Mount Shivalik Group was capable of matching the taste of the Cobra Beer brewed in the UK, which resulted in Cobra Beer being awarded a gold medal at the Monde Selection in Brussels.

Since 1999 the beer has won a string of awards, including one grand gold medal and eleven gold medals at the 2006 Monde Selection; two grand gold medals and nine gold medals in 2005; two grand gold medals and four

Selecting International Business Opportunities 145

gold medals in 2004; and gold for three successive years at the 2003, 2002, and 2001 awards. Monde Selection also presented Cobra with the Interna-tional high Quality Trophy in 2006 for its achievements.

To maintain quality control, Cobra Beer retains its own staff in the out-sourced breweries. Consequently, within a year it has already captured 1.5% of India’s beer market. The upshot is huge, especially given that the beer market has been growing by 7%–8% a year in the previous 5 to 6 years and has risen by 27% this last year alone. “What’s really fascinating is that regulations regarding licensing laws are starting to show signs of becoming more lenient,” says Mr. Italia. Given the potential that the Indian market provides, Cobra Beer’s executives see India as an opportunity that the com-pany cannot miss.

Supporting Demand

Exporting remains an important function, although not the company’s primary focus. “We are taking a more reactive than proactive approach there by supporting demand in South Africa and the United States without overinvesting in those markets,” says Mr. Italia.

Although South Africa is a limited market, sales are doing well. The com-pany has a small office in the United States, where the beer is sold under the name Krait because American brewing giant Anheuser-Busch produces a malt liquor called King Cobra. Brand recognition has been the company’s biggest obstacle in the United States.

An underlying philosophy of Cobra Beer is to do things differently and to do them better. For example, while other beer companies sold beer in small bottles, in 2003 Cobra introduced its award-winning embossed bottle. To penetrate the supermarket sector, it introduced a full range of packaging formats, including cans and multipacks. Product development has also cre-ated significant sales opportunities. In 2005 the company launched Cobra 0.0%, an alcohol-free beer; Cobra Lower Cal, with half the calories of a regular Cobra; and King Cobra, the world’s first double-fermented strong lager sold in champagne-style bottles. “now we have launched fruit fla-vored beers,” Mr. Italia says. The drink is brewed as a beer first and then fruit extract is added.

In March 2006 Cobra launched The Cobra Foundation, its own indepen-dently run charitable trust, and in April held the inaugural CobraVision Awards, which were attended by British film and television stars.

Financing Initiatives

Innovative financing from government-backed small loan guarantees to invoice finance and factoring have played an important role in moving the company ahead. “We are one of the first companies in the UK to use what


is called a payment-in-kind instrument,” says Mr. Italia. Adopted first in the United States, the instrument operates like an unsecured loan with no cash payments and no dilution of equity to shareholders, only an increase in interest. “At the time you exit the company or in 5 or 10 years, you pay back the debt plus the interest that has added up,” he explains. It is a risky loan, but executives at Cobra Beer believe that the value they are building with the company far outweighs the debt. “When you are a small company com-peting with the giants, you have to do things differently,” says Mr. Italia. “This is how you change the entire marketplace.” Cobra Beer is so success-ful that it enjoys a retail value turnover of GBP125m, up from GBP80m reported last year (Thuermer, 2007).

www.cobrabeer.com

Chapter Objectives

1. Todevelopanunderstandingofhowtobestselectthemostappropriateforeignmarketforeachventure.

2. Todeterminethebestindicatorsforentryintoaforeigncountryormarket.

3. Toidentifyprimaryandsecondarysourcesforinformationonspecificforeignmarketindustriesorsectors.

4. Torecognizehowtocollectcountrymarketdata.

5. Todemonstratetheimportanceofpositioningtheventurecorrectlyandhowtopursuecompetitiveintelligencetoenhancethisstrategy.

6. Tolearnhowtoassesscompetitivestrengthsandweaknessesinforeignmarketsanddetermineastrategytocombatthem.

Introduction

Withsomanypotentialmarketsandprospectivecountriesavailable,criti-cal issues for the global entrepreneur are foreign market selection andentry strategy (the focus of Chapter 7). Should the global entrepreneurenter the top prospective country or should he or she employ a moreregionalfocus?Shouldheorshechoosethelargestmarketpossibleoronethat is easier to understand and navigate? Is a more developed foreignmarketpreferabletoonethatisdeveloping?

Thesearejustsomeofthequestionsconfrontingtheglobalentrepre-neurwhendecidingwhichmarkettoenter.Themarketselectiondecision


should be based on past sales and competitive positioning, as well asassessmentofeachforeignmarketalternative.Dataneedstobesystemati-callycollectedonbotharegionalandacountrybasis.Aregioncanbeacollectionofcountries,suchastheEuropeanUnion,oranareawithinacountry,suchasthesoutheasternpartofChina.

A systematic process is needed to establish a ranking of the foreignmarketsbeingconsidered.Whyisrankingmarketssoimportant?Rank-inghelpsavoidtheproblemofsomanyentrepreneurs—doingapoorjobofestablishingarigorousmarketselectionprocessandrelyingtoomuchonassumptionsandgutfeelings.AsdiscussedinChapter1,therearesig-nificantdifferencesbetweendoingglobalanddomesticbusiness.Thesedifferencesandtheentireglobaldecisionprocessrequirethatthemarketselection process be a series of steps in which informed decisions aremadeateach stepbasedonasmuch informationaspossible.Thedatacollectedforeachitemshouldcontaininformationforatleast3yearssothatatrendisevident.Theglobalentrepreneurmustalwaysrememberthat a single data point does not make a trend, so any less than threeperiods of data needs to be interpreted cautiously. The same data col-lectedandanalyzedformarketselectionwillalsobeusedtodeveloptheappropriateentrystrategyandmarketingplan.

Foreign Market Selection Model

Although there are several market selection models available, one goodmethodemploysafivestepapproach:(1)developappropriateindicators,(2)collectdataandconvert intocomparableindicators,(3)establishanappropriateweightforeachindicator,(4)analyzethedata,and(5)selecttheappropriatemarketfromthemarketrankings.

Instepone,appropriateindicatorsneedtobedevelopedbasedonpastsales,competitiveresearch,experience,anddiscussionswithotherglobalentrepreneurs.Specificindicatorsforthecompanyneedtobedevelopedin three general areas: overall market indicators, market growth indica-tors, and product indicators. Market size indicators generally center onpopulation,percapita income,market for the specificproduct forcon-sumerproductsandfortypesofcompaniesandtheirsales,andprofitsofparticular industrial products. In terms of market growth, the overallcountrygrowth(grossdomesticproduct,orGDP)shouldbedeterminedaswellasthegrowthratefortheparticularmarketoftheventure.Finally,appropriateproductindicators,suchasexportofthespecificproductcat-egorytothemarketandthenumberofsalesleadsandinterest,shouldbeestablished.

Steptwoiscollectingdataforeachoftheseindicatorsandconvertingthedata so that comparisonscanbemade.Bothprimarydata (original


informationcollectedfortheparticularrequirement)andsecondarydata(publisheddataalreadyexisting)needstobecollected.Typically,second-ary data is gathered first to establish what information still needs to becollected through primary research. When collecting international sec-ondarydata,thereareseveralproblemsthatvarytosomeextentbasedonthe stage of economic development of the country. These problemsinclude(1)comparability(thedataforonecountrywillnotbethesameas data for another); (2) availability (some countries have much morecountrydatathanothers,usuallyreflectingthestageofeconomicdevelop-ment);(3)accuracy(sometimesthedatahasnotbeencollectedusingvig-orousstandardsorisevenbiasedduetotheinterestsofthegovernmentofthe country; the latter is particularly a problem in nonmarket-orientedeconomies);and(4)cost.(TheUnitedStateshas theFreedomofInfor-mation Act, which makes all government-collected data that does notpertain to security or defense available to all. This does not exist in allcountries.)Forexample,oneglobalentrepreneurwasinterestedinopen-ingthefirstwesternhealthclubinMoscow.Hewasgoingtochargetworates:ahigherhardcurrencyratetoforeignersandalowerrubleratetoRussiansandother citizensof countries in the formerSovietUnion. Indeterminingthebestlocation,hewasinterestedinfindingareasofthecitywheremostforeignerslived.Aftersignificantsearchingtonoavailandahighdegreeoffrustration,hefinallywasabletobuythedataneededfromtheformerKGB(SovietUnionsecuritybranch).

When researching foreign markets, you will usually want economicand demographic data such as population, GDP, per capita income,inflation, literacyrate,unemployment,andeducation levels.Therearemany sources for this and other foreign information at governmentagencies, Web sites, and embassies. One important source of data isSTAT-USAand itsNationalTradeDataBank(NTDB),which isman-aged by the U.S. Department of Commerce. The STAT-USA databasehasgood information,due inpart to the largenumberofgovernmentagencies contributing information. This results in a large number ofinternationalreportssuchasCountryReports,CountryAnalysisBriefs(CABS), Country Commercial Guides (CCG), Food Market Reports,International Reports and Reviews, Department of State BackgroundNotes,andImport/ExportReports.

AnothergoodsourceofdataistradeassociationsandU.S.andforeignembassies.Althoughtradeassociationsareagoodsourceofdomesticandinternationaldata,sometimesmorespecificinformationcanbeobtainedbycontactingtheU.S.DepartmentofCommerceindustrydeskofficerortheeconomicattachéintheappropriateU.S.orforeignembassy.

Thecollecteddatathenneedstobeconvertedtoapointscoreforeachselectedindicatorsothateachindicatorofeachcountrycanbenumeri-callyrankedagainsteachother.Variousmethodscanbeusedtoachieve


this,eachofwhich involves some judgmentby theglobalentrepreneur.Another method is to compare country data for each indicator againstglobalstandards.

The third step establishes appropriate weights for the indicators thatreflecttheimportanceofeachinpredictingforeignmarketpotential.Foronecompanymanufacturinghospitalbeds,thenumberandtypesofhos-pitals,theageofthehospitalsanditsbeds,andthegovernmentexpendi-ture on health care and its socialized system were the best countryindicators in selecting a foreign market. This procedure results in eachindicator receiving a weight that reflects its relative importance. Theassignment of points and weights, as well as the selection of indicators,varies greatly from one global entrepreneur to another and indeed aresomewhatarbitrary.Regardless,thisrequiresintensivethinkingandinter-naldiscussion,whichresultsinbettermarketselectiondecisions.

Stepfourinvolvesanalyzingtheresults.Whenlookingatthedata,theglobalentrepreneurshouldcarefully scrutinizeandquestion theresults.Look for errors because mistakes can be easily made. Also, a “what if”analysisshouldbeconductedbychangingsomeoftheweightsandseeinghowtheresultsvary.

Thefifthandfinalstepisselectionofamarkettoenterandfollow-upmarketssothatanappropriateentrystrategycanbeselectedandamar-ket plan developed. China, India, Ireland, and Germany are countriesICU Global, a videoconferencing provider, is targeting, according tofounderandchiefexecutiveStephenMcKenzie.Thecompanyemployedsix people in the UK and had a turnover of approximately £3 millionpoundsin2007.ButMcKenziesaysit’seasytoexpandintoothercoun-triesevenwhenyou’reasmallbusinessaslongasyoucanprovide“thesamequalityassurancetoendusers.”Headds,“Technologyallowsyouto provide full-support, virtual operations in other countries.” Thecountriesinquestionhavebeenselectedbecausetheyofferthegreatestopportunities for ICU Global. “It’s good to have a base in Germanybecause you can easily access the rest of Europe,” McKenzie offers.“Meanwhile,IrelandhasalargenumberofcompaniesfromcontinentalEuropeandtheUnitedStatesinvestinginit,sothereisgoodopportu-nityinthecontextofnewtechnology.Then,there’sathrivingtechnol-ogycenterinIndia”(Woods,2008).

Developing Foreign Market Indicators

Whilesomeglobalentrepreneurs,especiallythosewhohavehadsuccessintheirdomesticmarkets,haveanideaofthebestforeignmarketstoenterbasedonsalesorpastexperience,mostdonot.Especially for this latter


group,it is importanttoidentifysomeindicatorsofpotentialsuccessinforeignmarketstoassistintheselectionprocess.

Internal Company IndICators

Several internal company indicators can be used to develop foreignmarketindicators,includingcompetitiveinformation,informationfromfellow global entrepreneurs, previous leads and sales, and trade showinformation.Indicatorsof foreignmarketswithgoodpotentialareonesthatacompany’scompetitorsareentering.Becausethisassumesthatthecompetitivecompanyhasdone itshomework inselection,caremustbetakeninusingthisapproach.

Anothergoodinternalwaytoestablishforeignmarketindicatorsistodiscuss the various markets with noncompeting global entrepreneurs.Sinceglobalization is a topic entrepreneurs like todiscussandassist in,theseindividualscanprovidesignificantinformationontheirexperienceinspecificforeignmarketsandadviceonthepotentialofyourcompany’sproductsuccessinthosemarkets.Thetimeandexperienceoftheglobalentrepreneurinthesecountriescansupplyexceptionalinsideknowledge.Perhaps you can even establish a mentoring relationship with a moreexperiencedglobalentrepreneur.

Athirdsourcefordevelopingmarketingindicatorsisyourowncompa-ny’s past sales and leads. Leads and actual sales, while doing businessdomestically,fromout-of-countrymarketsarebyfarthebestindicatorsofforeignmarketpotential.Careneedstobetakentoensurethatpotentialleads really are meaningful and not just distributors trying to establishproductlinesfortheircountrywithoutmuch,ifany,analysisofthemar-ketpotential.A sale toa foreigncountry is anothermatterbecause thissignifiesthatatleastforonecustomeryourproductcancompete.

The final sources for developing foreign market indicators are leadsfromdomesticandforeigntradeshows.Theseareusuallythemostimpor-tantgatherings forfirmsandbuyers inaparticularproductareaandassuchprovideagreatopportunitytogathermarketinformationtodeter-minemarketpotentialinvariouscountries.Theyalsoprovideanoppor-tunity foryoutogathercompetitive informationonbothdomesticandforeignproducts.

Primary Versus Secondary Foreign Market Data

Oneofthemostimportantfoundationsofanymarketselectiondecisionismarketanddemographicinformationontheforeigncountry.Thiscanbesecondarydata(datathatisalreadypublished)orprimarydata(original


datagatheredspecifically for theparticulardecision).Althoughprimarydataisgenerallymoreaccurate,itisalsomorecostlyandtimeconsumingtocollectversusdata thatalreadyexistsandhasbeencollectedby thirdparties.Itisusuallybestfortheglobalentrepreneurtostartthedatagath-ering process by first identifying the secondary data available about theforeigncountry.

seCondary data

Thefirststepinobtainingsecondarydataistoidentifytheclassificationcodes associated with the company’s product/service. These include theStandard Industrial Classification (SIC), the North American IndustryClassificationSystem(NAICS),theStandardInternationalTradeClassifi-cation(SITC),andtheHarmonizedCommodityDescriptionandCodingSystem(HarmonizedSystem);eachofwhichwillbediscussedinturn.

TheSICcode isappropriate foran initialappraisalof theextentandnatureoftheneedinaforeignmarket,particularlyforindustrialproducts.Standardindustrialclassifications,whicharethemeansbywhichthefed-eral government classifies manufacturing industries, are based on theproduct produced or operation performed. Each industry is assigned atwo-digit,three-digit,or,whereneededforfurtherbreakdown,four-digitcode.Thereare82two-digitindustrygroupings,suchas01AgriculturalProductionCrops;23ApparelandOtherTextileProducts;50WholesaleTrade Durable Goods; 57 Furniture and Home Furnishing Stores; 62Security, Commodity Brokers and Services; 70 Amusement and Recre-ation Services; and 94 Administration of Human Resources. Each two-digit group is further broken down into three- and four-digit groups,depending on the industry. For example, the three-digit groups for 72Personal Services are as follows: 721 Laundry, Cleaning, and GarmentServices;722PhotographicStudios,Portrait;723BeautyShops;724Bar-berShops;725ShoeRepairandHatCleaningShops;726FuneralServicesandCrematories;and729MiscellaneousPersonalServices.Whereneeded,eachthree-digitgroupisfurtherrefined.The721Laundry,Cleaning,andGarmentServicesincludessuchcategoriesas7211PowerLaundries,Fam-ilyandCommercial;7214DiaperService;7215Coin-OperatedLaundriesandCleaning;and7217CarpetandUpholsteryCleaning.

TodeterminetheprimarymarketdemandusingtheSICmethod,itisnecessary tofirstdetermineallpotentialcustomers thathaveaneedforthe product or service being considered. Once the groups have beenselected, the appropriate basis for demand determination is establishedandthepublishedmaterialontheindustrygroupsobtainedfromtheCen-sus of Manufacturers.Thentheprimarydemandcanbedeterminedfromtherelationshipestablished.TheWebsiteforusingtheSICcodeiswww.osha.gov/oshstats/sicser.html.


The North American Industry Classification System (NAICS) is anewer system designed to replace the SIC system. This newer system isbasedonasix-digitcodeversusthefour-digitcodeoftheSICsystemandhasnewindustries,particularlyintheserviceandtechnologysectorsthatwere not included in the SIC system. The NAICS system is used in theUnitedStates,Canada,andMexico,allowingforgreatercountrycompari-sons than previously available. The Web site for the NAICS system iswww.census.gov/epcd/www/naics.html.

OncetheglobalentrepreneurhasobtainedtheSICandNAICScodesforhisorherproduct/service,thesecanbeconvertedtothecodesystemusedintheEuropeanUnion.EachNAICSRev.1.1codeisshownwithitscorrespondingISICRev.3.1codeonaneasilyaccessibleWebsite(http://unstats.un.org/unsd/cr/registry/regso.asp?Ci=26&Lg=1).

Thefinaltwosystemsaremoreusefulforinternationaldata.TheStan-dardInternationalTradeClassification(SITC),developedbytheUnitedNationsin1950,isusedtoreportinternationaltradestatistics.Itclassifiesproducts and services based on a five-digit code, but frequently data isavailable at only the two- or three-digit code level. Approximately 140countriesreporttheirimportandexporttradestatisticseachyeartotheUnitedNations.ThedataarecompiledandprintedintheUnitedNations’International Trade Statistics Yearbook. The data are also available athttp://unstats.un.org/unsd.

ThefinalandperhapsbestsystemforobtaininginternationaldataistheHarmonizedCommodityDescriptionandCodingSystem,betterknownastheInternationalHarmonizedCodes.Eachproductorserviceisidenti-fiedbya10-digitnumberthatisbrokendownbychapter(first2digits),heading (first 4 digits), subheading (first 6 digits), and the commoditycode(all10digits).Someexampleinternationalharmonizedcodesare:

Name Harmonized Code

peanutbutter 2008.11.1000

grandpianos 9201.20.0000

farmedAtlanticsalmon 0302.12.0003

Care must be taken when using the Harmonized Commodity codesbecausetheymaybedifferentbetweencountries,aswellasvarywithinacountrydependingonwhethertheyareusedforexportingorimportingproducts.ThisisthecaseintheUnitedStates,wherethepurposeofthecommoditycodesisdifferentforimportingandexporting.Forimportingthecodeisusedtodeterminetheimportduty(ifany);forexportingtheprimaryuseofthecodeisforstatisticalreporting.ThisresultsintwosetsofcommoditycodesintheUnitedStates:onesetforimportingandonesetforexporting.TheexportingsystemofclassificationislabeledScheduleB, and the importing system of classification is called the Harmonized


Tariff Schedule (HTS), maintained by the Office of Tariff Affairs andTradeAgreements.

problems In ColleCtIng seCondary data

Thereareseveralproblemsincollectinginternationalsecondarydata.Thefirst,andperhaps themost troublesomeone, isaccuracy.Oftenthedatacollectedinacountryisnotdoneinarigorousfashion,resultingindatathatdoesnotreflectthetruesituationinthecountry.Or,particularlyinmorecontrolledcountries, thedata iscollected forapoliticalagendainsteadofforstatisticalreliability.

Thesecondproblemiscomparability—thedataavailableinonecoun-trymaynotbecomparabletothedatacollectedinanothercountry.Thismaybeduetothedifferentmethodologiesused,errorsinthedatacollec-tion,ordifferencesinapplyingthecommoditycodingsystem.

Lack of current datainacountryisathirdproblem.Inmanycountries,especiallythosewithdevelopingeconomies,thefrequencyofdatacollec-tioncanbemuchlessthaninmoredevelopedcountries—perhapsaslongas5-yearintervals.Indynamicallychangingeconomies,4-to5-year-olddataisobsoleteandnotveryvaluableindecisionmaking.

Thefinalprobleminsecondarydataisthecost.Inmanycountriesthedatamayonlybeavailableatafairlyhighprice.

Sources of Country Market Data

Finding useful, accurate data for your country selection decision cansometimesbechallenging.Eventheglobalentrepreneurhashadexperi-encecollectingdataintheUnitedStates,theprocessofcollectingdatainothercountriesismuchmoredifficultandusuallymoreexpensive.Thereareseveralsourcesforbothcountrymarketandindustrydatadiscussedinthefollowingsections.

Country Industry market data

Economic and country data on such things as age, population, grossdomesticproduct,inflation,literacy,andpercapitaincomeisoftenavail-ablefromavarietyofsourcesdependingonthecountry.TheCIA World Factbookprovidesdataonvariousaspectsofacountrysuchasdemographicsof population, economic indicators, geography, military, politics, andresourcesavailable.ThisiscollectedbytheCIAfromnumeroussourcesandagencies andmadeavailable inayearly report.TheCountryCom-


mercialGuides(CCG)areproducedformostcountriesonayearlybasis.Each guide contains the following information on a country: executivesummary,economictrendsandoutlook,politicalenvironment,market-ingU.S.productsandservices,leadingsectorsforU.S.exportsandinvest-ments, trade regulations and standards, investment climate, trade andprojectfinancing,andbusinesstravel.Italsohasnumerousappendicesinsuchareasascountrydata,domesticeconomy,trade,investmentstatistics,U.S. and country contacts, market research, and trade event schedule.These are invaluable to the global entrepreneur in understanding thenumbers and trade possibilities in a country. Even though this data ismainlyU.S.focused,thereportscontainvaluableinformationforglobalentrepreneurs regardless of country. The National Trade Data Bank(NTDB), maintained by the U.S. Department of Commerce, is also animportant database available to the global entrepreneur at virtually nocost.TheNTDBdatabaseiscomprisedofinternationalreports,tradesta-tistics,research,andleadsontradingopportunities.

Another source of country market data is STAT-USA. This inter-national data source, managed by an agency of the U.S. Department ofCommerce, is enormous and includes the NTDB previously discussed,GLOBUS (Global Business Opportunities), and the State of the Nationdatabase. Contributed to by many governmental agencies, STAT-USAcontains a multitude of international and national reports availableincluding:

• AfricanDevelopmentBankBusinessOpportunities

• AsiaCommerceOverview

• BureauofExportAdministration(BXA)AnnualReport

• ComputerMarkets

• CountryAnalysisBriefs(CABS)

• DirectoryofFeasibilityStudiesandProjects

• FishandFisheryProductImportsandExports

• FoodMarketReports

• ForeignLaborTrends

• InternationalAutomotiveIndustry

• LatinAmerican/CaribbeanBusinessBulletin

• MineralsYearbook

• SteelMonitoringReport

• TelecommunicationsInformationandReports


• TradeAssociationsandPublications

• U.S.ForeignTradeReports

• U.S.InternationalTradeinGoodsandServices

• WorldAgriculturalProductionReports

• WorldBankInternationalBusinessOpportunities

Becausethisisjustasmallsamplingofthereportsanddataavailable,itis important that every global entrepreneur look into STAT-USA whencollectingtheneededinternationaldata.

OneofthebestsourcesofinformationisfromtheWorldBank,whichrankseverycountrywithvariouscriteriaontheeaseofdoingbusinessinthatparticularcountry.Theindexrankscountries(economies)from1to178andiscalculatedbyaveragingthepercentilerankingsoneachof the ten topics covered in Doing Business 2008. The criteria beingrankedinclude:easeofdoingbusiness,easeofstartingabusiness,deal-ing with licenses, employing workers, registering property, gettingcredit, protecting investors, paying taxes, trading across borders, andclosing a business. The rankings for selected countries are shown inTable5.1.Singapore,NewZealand,andtheUnitedStateswereranked1,2,and3respectivelyontheeaseofdoingbusiness.Australia,Canada,and New Zealand were ranked 1, 2, and 3 respectively on the ease ofstartingabusiness.

trade assoCIatIons

TradeassociationsintheUnitedStatesandthroughouttheworldarealso a good source for industry data about a particular country. Sometrade associations do market surveys of their members’ internationalactivities and are strategically involved in international standards issuesfortheirparticularindustry.

trade publICatIons and perIodICals

Therearenumerousdomesticandinternationalpublicationsspecifictoaparticularindustrythatarealsogoodsourcesofinformation.Theedito-rial content of these journals can provide interesting information andinsights on trends, companies, and trade shows by giving a more localperspectiveontheparticularmarketandmarketconditions.Sometimestradejournalsarethebest,andoftentheonly,sourceofinformationoncompetitionandgrowthratesinaparticularcountry.

156

Tabl

e 5.

1 r

anki

ngs

of C

ount

ries

on

Var

ious

Bus

ines

s C

rite

ria

Econ

omy

Ease

of

Doi

ng

Bus

ines

s R

ank

Star

ting

a

Bus

ines

s

Dea

ling

Wit

h Li

cens

esEm

ploy

ing

Wor

kers

Reg

iste

ring

Pr

oper

tyG

etti

ng

Cre

dit

Prot

ecti

ng

Inve

stor

sPa

ying

Ta

xes

Trad

ing

Acr

oss

Bor

ders

Enfo

rcin

g C

ontr

acts

Clo

sing

a

Bus

ines

sSi

ngap

ore

19

51

137

22

14

2n

ew Z

eala

nd2

32

131

31

916

1316

Uni

ted

Stat

es3

424

110

75

7615

818

hon

g K

ong,

Chi

na4

1360

2358

23

33

115

Den

mar

k5

186

1039

1319

132

307

Uni

ted

Kin

gdom

66

5421

191

912

2724

10C

anad

a7

226

1928

75

2539

434

Irel

and

85

2037

797

56

2039

6A

ustr

alia

91

528

273

5141

3411

14Ic

elan

d10

1423

428

1364

2711

412

nor

way

1128

5594

636

1516

49

3Ja

pan

1244

3217

4813

1210

518

211

Finl

and

1316

3912

717

2651

835

75

Swed

en14

2217

107

736

5142

653

19Th

aila

nd15

3612

4920

3633

8950

2644

Switz

erla

nd16

3529

2012

2615

815

3725

33Es

toni

a17

2014

156

2148

3331

729

50G

erm

any

2071

1613

747

383

6710

1529

Chi

le33

3958

6834

4833

3443

6498

Sout

h A

fric

a35

5345

9176

269

6113

485

68M

exic

o44

7521

134

7148

3313

576

8323

hun

gary

4567

8781

9626

107

127

4512

53Tu

rkey

5743

128

136

3168

6454

5634

112

Chi

na83

135

175

8629

8483

168

4220

57n

icar

agua

9370

127

5913

068

8315

687

6963

Indi

a12

011

113

485

112

3633

165

7917

713

7B

razi

l12

212

210

711

911

084

6413

793

106

131

Indo

nesi

a12

316

899

153

121

6851

110

4114

113

6U

krai

ne13

910

917

410

213

868

141

177

120

4614

0

SOU

rC

E: W

orld

Ban

k D

oing

Bus

ines

s r

anki

ngs

2008

: ret

riev

ed A

ugus

t 27,

200

8, fr

om w

ww

.doi

ngbu

sine

ss.o

rg/e

cono

myr

anki

ngs/


Competitive Positioning

Onesimilarcauseofsuccessinbothinternationalanddomesticmarketsiscompetitivepositioning—knowingthecompetitionverywellandbeingabletopositionyourcompanyandproductinthatproduct/marketspace.Inpositioningyourcompanyinternationally,itisevenmoreimportanttoidentifythestrategyofeachcompetitivecompany.Thestrategywillsig-nificantlyaffectthemannerandcommitmentofacompanyinaninterna-tionalmarket,whichinturnaffectsthenatureanddegreeofitscompetitivebehaviorinthatmarket.Acompetitivecompany’sinternationalstrategymaynotbethesameasyours.Iftheglobalentrepreneuremphasizesthecompetitiveanalysistoomuchwithouttakingintoaccountthecompeti-tivecompany’sstrategy,thenheorshecancreateareactivestrategythatcanbetotallyineffectiveandinappropriateforhisorhercompany.Thisisparticularlyimportantindevelopingeconomieswheresomecompaniesusea“hitormiss”strategy,realizingthatmanyof themarketswill losemoneyandwillnotbeviableoveralongperiodoftime.

Theglobalentrepreneurshouldbegincompetitivepositioningbyfirstdocumentingthecurrentstrategyofeachprimarycompetitor.Thiscanbeorganized by using the method indicated in Table 5.2. Information oncompetitorscanbegatheredinitiallybyusingasmuchpublicinformationaspossibleandthencomplementingthiswithamarketingresearchproj-ect.Newspaperarticles,Websites,catalogs,promotions,interviewswithdistributorsandcustomers,andanyothermarketingorcompanyinfor-mationavailable shouldbereviewed.Articles thathavebeenwrittenonthecompetitorscanbefoundbyusingacomputersearchinanyuniversityorlocallibrary.Thesearticlesshouldbescannedforinformationoncom-petitorstrategiesandshouldidentifythenamesofindividualswhowereinterviewed, referenced,orevenmentioned in thearticles.Anyof theseindividuals,aswellastheauthorofthearticle,canthenbecontactedtoobtainfurtherinformation.AlltheinformationcanthenbesummarizedinthemodelprovidedinTable5.2.Oncethecompetitors’strategieshavebeen summarized, the global entrepreneur should begin to identify thestrengthsandweaknessesofeachcompetitor,asshowninthetable.

AlltheinformationincludedinTable5.2canthenbeusedtoformulatethemarketpositioningstrategyofthenewventure.Willthenewventureimitateaparticularcompetitororwillittrytosatisfyneedsinthemarketthatarenotbeingfilledbyanyothercompany?Thisanalysiswillenlightentheglobalentrepreneurandprovideasolidbasisfordevelopingthemar-ketentryplanfortheinternationalmarket.

OnemethodforanalyzingamarketopportunityinlightofcompetitionisshowninTable5.3.Usingthisevaluationprocess,variouselementsoftheopportunityareevaluated,suchas(1)thecreationandlengthoftheopportunity,(2)itsrealandperceivedvalue(s),(3)itsrisksandreturns,


(4) itscompetitiveenvironment,(5) its industry,and(6) itsfitwiththepersonalskillsandgoalsoftheentrepreneur.

Itisimportantfortheentrepreneurtounderstandthenatureandrootcauseoftheopportunity.Isittechnologicalchange,marketshift,govern-mentregulation,orcompetition?Thesefactorsandtheresultingopportu-nityhaveadifferentmarketsizeandtimedimension.Themarketsizeandthelengthofthewindowofinternationalopportunityformtheprimarybasisfordeterminingtherisksandrewardsinvolved.Therisksreflectthemarket, competition, technology, and amount of capital involved. Theamountofcapitalformsthebasisforthereturnandrewards.

Inthisevaluationthecompetitionandpotentialcompetitionarecare-fullyappraised.Featuresandpotentialpricefortheproduct/serviceshouldbe evaluated along with those of competitive products presently in theproduct/marketspaceinthecountry.Ifanymajorproblemsandcompeti-tive disadvantages are identified, modifications can be made or a newmarketinvestigated.

Therelativeadvantagesoftheproduct/serviceversuscompetitiveprod-ucts canbedetermined through the followingquestions:Howdoes thenewideacomparewithcompetitiveproductsintermsofqualityandreli-ability?Istheideasuperiorordeficientcomparedwithproductscurrentlyavailableinthemarket?Isthisagoodmarketopportunity?Onemethodforevaluatingtheideaagainstcompetingproductsorservicesisthecon-versational interview. Here, selected individuals are asked to comparethe idea against products presently filling that need. By comparing the

Table 5.2 An Assessment of Competitor Market Strategies and Strengths and Weaknesses

Competitor A Competitor B Competitor C

Product or service strategies

Pricing strategies

Distribution strategies

Promotion strategies

Strengths and weaknesses

SOUrCE: hisrich, r. D., Peters, M. P., & Shepherd, D. A. (2007). entrepreneurship: starting, developing, and managing a new enterprise (7th ed.). new York: McGraw-hill.

159

Tabl

e 5.

3

Det

erm

inin

g th

e C

ompa

ny’s

Com

petit

ive

Posi

tion

Fact

orA

spec

tsC

ompe

titi

ve

Cap

abili

ties

Com

pany

’s I

dea/

Cap

abili

tyD

iffer

enti

al

Adv

anta

geU

niqu

e Se

lling

Pr

opos

itio

n

Type

of

Nee

dC

ontin

uing

nee

dD

eclin

ing

need

Emer

ging

nee

dFu

ture

nee

d

Tim

ing

of N

eed

Dur

atio

n of

nee

dFr

eque

ncy

of n

eed

Dem

and

cycl

ePo

sitio

n in

life

cyc

le

Com

peti

ng W

ays

to S

atis

fy N

eed

Doi

ng w

ithou

tU

sing

pre

sent

way

Mod

ifyin

g pr

esen

t way

Perc

eive

d B

enefi

ts/R

isks

Util

ity to

cus

tom

erA

ppea

ling

char

acte

rist

ics

Cus

tom

er ta

stes

and

pre

fere

nces

Buy

ing

mot

ives

Con

sum

ptio

n ha

bits

Pric

e V

ersu

s Pe

rfor

man

ce F

eatu

res

Pric

e-qu

antit

y re

latio

nshi

pD

eman

d el

astic

itySt

abili

ty o

f pri

ceSt

abili

ty o

f mar

ket

Mar

ket

Size

Pot

enti

alM

arke

t gro

wth

Mar

ket t

rend

sM

arke

t dev

elop

men

t req

uire

men

tsTh

reat

s to

mar

ket

Ava

ilabi

lity

to C

usto

mer

Fun

dsG

ener

al e

cono

mic

con

ditio

nsEc

onom

ic tr

ends

Cus

tom

er in

com

eFi

nanc

ing

oppo

rtun

ities

SOU

rC

E: A

dapt

ed fr

om h

isri

ch, r

. D. (

2004

). H

ow to

fix

and

prev

ent t

he 1

3 bi

gges

t pro

blem

s th

at d

erai

l bus

ines

s. n

ew Y

ork:

McG

raw

-hill

.


characteristicsandattributesofthenewidea,someuniquenessoftheideacanbeforthcoming.

Aninitialcompetitiveanalysisshoulddetermineifthereisreallyaneedfor,aswellasthevalueof,theideaintheinternationalmarketinlightofcompetition.Toaccuratelydeterminetheneed,itishelpfultodefinethepotentialneedsofthemarketintermsoftiming,satisfaction,alternatives,benefitsandrisks,futureexpectations,price-versus-productperformancefeatures,marketstructureandsize,andeconomicconditions(seeTable5.3).The factors indicated inTable5.3 shouldbeevaluatednotonly intermsofthecharacteristicsoftheidea,butalsointermsoftheidea’scom-petitivestrengthrelativetoeachfactor.Thiscomparisonwithcompetitiveproductswillindicatethestrengthsandweaknessesoftheidea.

Theneeddeterminationshouldfocusonthetypeofneed, itstiming,theusersinvolvedwithtryingit,theimportanceofcontrollablemarketingvariables,theoverallmarketstructure,andthecharacteristicsoftheinter-national market. Each of these factors should be evaluated in terms ofcharacteristicsoftheproduct/servicebeingconsideredandtheaspectsandcapabilities of present methods for satisfying the particular need. Thisanalysiswill indicate theextentof the internationalmarketopportunityavailable.

In determining the value of the product/service in the internationalmarket,financialscheduling—suchascashoutflow,cashinflow,contri-bution to profit, and return on investment—needs to be evaluated intermsofother ideas.Using the forminTable5.4, thedollaramountofeach of the considerations important to the new idea should be deter-mined as accurately as possible so that a quantitative evaluation can beperformed. These figures can be revised later as better informationbecomesavailable.

Finally,theproduct/service/internationalmarketmustfitthepersonalskillsandgoalsoftheglobalentrepreneur.Itisparticularlyimportantthattheentrepreneurbeabletoputforththenecessarytimeandeffortrequiredto make the venture succeed. Although many global entrepreneurs feelthatthedesirecanbedevelopedalongwiththeventure,typicallythisdoesnotmaterializeandthereforedoomstheventuretofail.Aglobalentrepre-neurmustbelieveinhisorherideasomuchthatheorshewillmakethenecessarysacrificestodeveloptheideaintoasoundbusinessmodelthatwillbethebasisforasuccessfulnewventureintheinternationalmarket.

International Competitive Information

Therearemanygoodinternationalsourcesforcompetitiveinformation,including both secondary and primary data. These include companyinformation,databases,journals,newspapers,tradeassociations,andper-sonalinterviews.


Company InformatIon

Particularlyforpubliclytradedcompanies,thecompanyitselfprovidesa significant amount of data useful to the global entrepreneur. This isoftenthebestandeasiestsourceofcompetitiveinformationandisusuallyvery accurate (particularly for companies in developed economies)because the information comes directly from the company itself. All

Table 5.4 Determining the Value of the Product/Service in the International Market

Value Consideration Cost (in $)

Cash Outflowr&D costsMarketing costsCapital equipment costsOther costs

Cash InflowSales of new productEffect on additional salesSalvageable value

Net Cash FlowMaximum exposureTime to maximum exposureDuration of exposureTotal investmentMaximum net cash in a single year

ProfitProfit from new productProfit affecting additional sales of existing productsFraction of total company profit

Relative Returnreturn on shareholders’ equity (rOE)return on investment (rOI)Cost of capitalPresent value (PV)Discounted cash flow (DCF)return on assets employed (rOA)return on sales

ComparisonsCompared to other investmentsCompared to other product opportunitiesCompared to other investment opportunities

SOUrCE: hisrich, r. D. (2004). How to fix and prevent the 13 biggest problems that derail business. new York: McGraw-hill.


companyliteratureandinformationregardingtheirinternationalactivi-tiesshouldbecollected.Sometimesthisisveryeasilyobtainedatinterna-tionaltradeshows,wheremoredetailedinformationisavailablefromtheindividualsmanningthecompany’sbooth.Ofcourse,theWebsiteofthecompanyshouldbethoroughlyexplored,aswellastheWebsitesofover-seascustomersanddistributors.Companiesareincreasinglyputtingmoreandmore important informationon theirWeb sites,knowing that it isavailableforeveryone.

The international advertising of each competitive company shouldalso be examined. This will be very helpful in developing the marketentrystrategyandmarketingcampaign.Thisisalsoparticularlyhelpfulinprovidingmuch-neededpricinginformation.Wheneverpossible,besuretodetermineiftheadvertisementwasplacedbythecompanyorthedistributor in the international market. If the advertisement mentionsonlyonedistributoras the contact andprovidesnodetailsonhow toreachthecompanyorifthereareproductsfeaturedfrommorethanonemanufacturer,theadvertisementwasprobablyplacedbythedistributor.Thisisimportantbecausethemanufacturer’sdirectinvolvementintheplacementof theadvertisementwouldsuggestastrongpossibility thattheparticularmarketisapriority.Directplacementofadvertisementsinamarketindicatesahugelevelofcommitmentandinvolvementintheparticularmarket.Theadvertisementsalsoprovideinsightintohowthecompetitive company is competing in the particular market; a com-pany’scompetitivestrategiesmayvaryfromoneinternationalmarkettothenext.

InternatIonal databases

Therearefourprimarydatabasesthatprovidegoodsourcesofinterna-tionalcompetitiveinformation.TheseincludeDirectoryofUnitedStatesExporters, Port Import Export Report Service (PIERS), United NationsInternational Trade Statistics Yearbook, and United States Exports byCommodity.Eachwillbediscussedhereinturn.

TheDirectoryofUnitedStatesExporters,publishedeachyearby theJournal of Commerce,isacombinationofsomeinformationfromPIERSandcompany responses toaquestionnaire.Thedata for eachcompanyincludes

• Address

• Telephoneandfaxnumbers

• Numberofemployees

• Yearestablished


• BankSICcode

• Modesoftransportationused

• Contactnamesandtitles

• Commoditycodeanddescriptionofproductsexported

• Destinationcountries

• Annualtwenty-footequivalentunitsofcontainers(TEUs)

• Annualnumberofshipments

• CompanyPIERSidentificationnumbers

Sometimesoneofthemostimportantpiecesofinformation—destina-tion country—is not reported directly but simply indicates worldwide.The Directory of United States Exporters is available in both print andCD-ROMversionsdirectlyfromtheJournal of Commerceandcanoftenbeusedatthestatetradeassistancecenter.

Thesecondusefuldatabase is thePort ImportExportReportService(PIERS).The information in thisdatabasecomes fromthemanifestsofvessels loading internationalcargooutbound fromtheUnitedStates, aswellas themanifestsofall inboundshipments (imports).Althoughnotevery item is available in every situation, the information in the PIERSdatabaseincludes

• Productdescription

• PIERSproductcode

• Harmonizedtariffcodeanddescription

• U.S.andoverseasportname

• Containersize,quantity,TEUcount,andcubicfeet

• Steamshiplineandvesselname

• Manifestnumber

• Cargoquantityandunitofmeasure

• Cargoweight

• Voyagenumber

• Estimatedcargovalue

• Paymenttype

• Bankname

• Shipmentdirection


• U.S.andoverseasoriginsanddestinations

• Marksandnumbers

• NameandaddressofU.S.importer(importsonly)

• Billofladingnumber

• NameandaddressofU.S.exporter

• Containernumber

• Nameandaddressofforeignshipper(importsonly)

• Customsclearingdistrict(importsonly)

• Nameandaddressofnotifyparty

• ArrivalanddeparturedatesinU.S.ports

ThePIERSdatabasehasbeenexpandedtoincludetheshippingactivi-tiesofmostportsofLatinAmericancountriesandMexico.

AlthoughthedatafromPIERSisverygood,thereareseveraldownsidesto using this database. First, it is very expensive to use the ongoingmonthly serviceaswell as tobuy individual reports.Second, it isbasedonlyonwaterborneshipmentsanddoesnotincludeothershipmentsintoacountrysuchasbylandorair.Usually,however,thedataisworththecostasitprovidesdetailedcompetitiveinformation,includingsuchdetailsasthefrequencyandtimingofshipments.

Journals, newspapers, and trade assoCIatIons

Journals,newspapers,andtradeassociationsprovideanotherveryvalu-ablesourceofinformationoncompetition.Mosttradejournalsareveryindustryspecificandoftenfocusoninternationalactivitiesinthatindus-try.Therearealsoindustrytradejournalsinforeignmarkets.Fromthese,competitiveproductandothercompetitiveinformation,distributionlists,advertisements,andotherindustrydatacanbeeasilyobtainedatlittleornocostthroughthevarioussearchandretrievaloptionsavailable.ManyareavailableontheInternet.TheFinancialTimesregularlyfeaturesinfor-mationonmarketsandcompetition(seeFigure5.1).

Whilenotusuallyasvaluable,newspaperscanalsoprovidecompetitiveinformation,particularlythelocalnewspaperinthecitywherethecom-petitive company is headquartered. The local newspaper often providesinformationnotfoundanywhereelseinitscoverageofthecompanyandinterviewswithcompanymanagers.

Finally,tradeassociationsintheindustryoftenhavesummarydataonsalesandpricingintheindustry.Mosttradeassociationstrackinternational


trendsanddata.Evenjustalistofassociationmembersprovidesinforma-tionaboutthecompaniesinterestedinaparticularindustry.

personal IntervIews

Probablythebestandmostcomprehensivesourceofcompetitiveinfor-mationcomesfrompersonalinterviewswithindividualswhoreallyknowthe competitor company. By interviewing staff writers of journals andnewspapers, the global entrepreneur can obtain up-to-date informationandspeculation.Eventhoughtheyarenotcompanyspecific,governmentcontactsinaparticularcountrycanprovideinformationaboutcompetitivetrendsandchallenges. Industryexpertscanprovidedetailed informationontheindustryandusuallyoncompaniesinthatindustry.And,bestofall,foreigncustomersanddistributorscanprovidedetailedinformationaboutthelocalmarketandtheactivitiesofcompetitors.Theseareallanexcellentsourceofspecific,detailed,andtimelycompetitiveinformation.

While you need to analyze foreign markets and the competition, andadaptyourproductorservicetomeetlocalmarketneedstoexpandinter-nationally,youwillalsoneedapersontoruntheoperation.Nooneknows

Figure 5.1 Population and Wealth Shares by region

SOUrCE: United nations. (2006, December 9–10). Giles, Chris. Chinese to soar up the super-rich ranks. financial times, london, uk, p. 6.

0

5

10

15

20

25

30

35

China Other Latin North

America

India Europe Africa RichAsia-

Pacific

Population ShareShare of global wealth

By Region (%)


thisbetterthanBruceMcGaw,presidentofBruceMcGawGraphics,aWestNyack,NewYork,fine-artsposterpublisher.“AssmartasIamabouttheAmericanmarket,myknowledgedoesn’tnecessarilyapplyabroad,”admitsMcGaw.RatherthansendingoneofhisU.S.employeestoestablishaLon-don distributorship, he decided to search for a local manager to run hisUnitedKingdomoperation.Becausehedidn’twantto“runoverthereeveryotherweek,”hebegansearchingfor“someonetalented,whowouldtaketheballandrunwithit.”Theindividualneededthefollowing:

• Significantindustryexperienceandrealmarketplaceintelligence

• Anunderstandingthatcustomerservicewascentraltothecompany’ssuccess

• Theabilitytotakechargeandrunthebusinessasifitwere“hisownlittlebusiness”

McGaw found the right individual—a customer whose business wasstruggling. McGaw Graphics bought the company and the individualbecametheUKmanager.FiveyearslaterEuropeansalesaccountedfor$3.5millionofthecompany’stotal$15millioninrevenue;theUKoperationwasconsideredamarketleader.McGawusedasimilarstrategyinFrancewhenheacquiredabusinessrunbyanAmerican.“Whereyousetupyourbusi-nessisnotasimportantasfindingtherightpersontorunit,”saysMcGaw.Although his strategic plan includes expansion into Germany, Italy, andSpain,McGawwillnotmoveuntilhefindstherightmanagers(Fenn,1995).

Summary

This chapter deals with how global entrepreneurs should research andselectthebestforeignmarketstolaunchtheircompanyortoexpandtheirbusiness.Findingthebestmarketforone’sproductorserviceisonlypos-siblewiththoroughresearchusingmultipleresources,includinginforma-tion from potential competitors. The chapter describes an effectivefive-step foreign market selection process that a global entrepreneurshoulduse:(1)developappropriateindicators,(2)collectdataandcon-vert into comparable indicators, (3) establish an appropriate weight foreachindicator,(4)analyzethedata,and(5)selecttheappropriatemarketfromthemarketrankings.Aglobalentrepreneurmustdeterminethebestindicatorsforwhetherornothisorhercompanywilldowellinthefor-eignmarketandthencollectinformationbasedonthoseindicatorsfromfederalandinternationalcommerceandtradeinstitutions,aswellasfromcompetitorsandotherglobalentrepreneursthatareworkinginthesamemarket. At least 3 years of detailed information must be collected andanalyzed.Theinformationwillbeeitherfromprimarysources,whichisa


morecostlyandtime-consumingprocess,orsecondarysources,whichisnormally much easier to access but not as specific. The main problemsthat a global entrepreneur will find with secondary data are its lack ofaccuracy,comparabilitybetweencountries/regions, lackofcurrentdata,and potentially high costs. Analyzing the strengths and weaknesses ofcompetitors’ strategies can give the global entrepreneur guidelines fordevelopinghisorherownstrategyandfordeterminingiftherightmarketexistsforhisorherproductorservice.

Questions for Discussion

1. Whattypesofinformationshouldentrepreneursseekoutbeforedecidingwhichforeignmarkettoenter?

2. Whatarethedifferenttypesandsourcesofinformationthatareavailable?

3. Whataresomepotentialproblemswithdatacollectedinanothercountry?

4. Jean-MarieisconsideringexpandingherbakerybusinessfromFranceintoCroatia.Whatinformationwouldhelpherdetermineagoodlocationtostartherbusinessthere?

Chapter Exercises

1. Pickabusinessandcreatethekeyindicatorsthatyouwillusetoanalyzethenewmarket.

2. UsingthesamebusinessyouchoseforExercise1,outlinetheinformationthatyouwillneedtocollectaboutthenewmarket.

3. Forthesamebusinessyouusedinthepreviousexercises,createalistofcompetitorsinthenewmarketandidentifyprimarysourcestointerviewaboutthesecompetitors.

references

Fenn,D.(1995,June).Openingupanoverseasoperation.Inc., 17(8), p.89.Thuermer, K. E. (2007, August). Cobra Beer—From small beer. Foreign Direct

Investment London, p.1.


Woods, C. (2008, April 8). ICU Global grabs international opportunities,www.realbusiness.co.uk/news/international-business/5213436/icu-global-grabs-international-opportunities.thtml

Suggested readings

Berry, H. (2006, December). Shareholder valuation of foreign investment and expansion. Strategic Management Journal, 27(12), 1123–1140.

In thisarticle,Berryargues that shareholdersmaynotvalueafirm’s invest-mentinadevelopingcountryifthefirmdoesnothavepreviousexperiencewithinternationalinvestmentorthemanagementofriskanduncertainty.Afterana-lyzing the foreign investments of 191 U.S. manufacturing firms over a 20-yearperiod, the author reaffirms her argument that prior international expansion,firmcapabilitiesandexperience,andindustryknowledgeaffectthevaluationoffirminvestmentsbyshareholders.

Blankson, C., & Kalafatis, S. P. (2007). Positioning strategies of international and multicultural-oriented service brands. Journal of Services Marketing, 21(6), 435–450.

Tofurthertheoperationalizationofpositioning,thisarticleexaminestheposi-tioningstrategiesofservicebrandsthatareinternationalormulticultural.Italsomeasureswhetheratargetgroup’sperceptionofafirm’spositioningstrategyfitswithboththemanagement’spresumedpositioningstrategyandthefirm’sactualpositioningpractices.

Lynch, R. (2006). International acquisition and other growth strategies: Some lessons from the food and drink industry. Thunderbird International Business Review, 48(5), 605–622.

Thisarticleexploresacquisitionversusorganicinternationalgrowthindevel-oping a profitable international growth strategy when markets are mature.Through a two-stage study of companies in the food and drink industry, theauthor identified acquisitions focused on the company’s current product port-folio as the most popular form of international growth. It also suggests thatorganic growth strategy is less risky and problematic than the more desirableinternationalacquisitionstrategy.

Waheeduzzaman, A. N. M., & Pradeep, A. R. (2006). Market potential and for-eign direct investment: Exploring the relationship in emerging markets. Advances in Competitiveness Research, 14(1), 44–60.

Using the Market Potential Indicator (MPI) of Michigan State University(MSU),thisstudyshowsthattheMPI’sindividualindicatorsofmarketsize,mar-ket growth rate, market intensity, market consumption capacity, commercialinfrastructure, economic freedom, market receptivity, and country risk do not


createafullexplanationofforeigndirectinvestmentinemergingmarkets.Usingfactoranalysisand thenregressing thosefindingson foreigndirect investment,thedimensionsofpowerofthemarket,opennessandgrowth,andcapacityandinfrastructure provide a better understanding of market potential and foreigndirect investment.Thesepreliminaryfindingsneedtobeexaminedagainusingmoredatatobetterunderstandwhatinfluencesforeigndirectinvestment.

World Bank. (2007).World development indicators. Herndon, VA: World Bank Publications.

World Development Indicators (WDI) isanannualpublicationofdataaboutdevelopmentfromtheWorldBank.Over900indicatorsinmorethan80tablesareincludedinthe2007WDI,coveringworldview,people,environment,economy,statesandmarkets,andgloballinks.

Selecting International 5 Business Opportunities...Selecting International Business Opportunities...

Documents

Transcript of Selecting International 5 Business Opportunities...Selecting International Business Opportunities...