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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
146 InTErnATIOnAL EnTrEPrEnEUrShIP
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
Selecting International Business Opportunities 147
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
148 InTErnATIOnAL EnTrEPrEnEUrShIP
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
Selecting International Business Opportunities 149
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
150 InTErnATIOnAL EnTrEPrEnEUrShIP
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
Selecting International Business Opportunities 151
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.
152 InTErnATIOnAL EnTrEPrEnEUrShIP
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
Selecting International Business Opportunities 153
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-
154 InTErnATIOnAL EnTrEPrEnEUrShIP
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
Selecting International Business Opportunities 155
• 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
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Selecting International Business Opportunities 157
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,
158 InTErnATIOnAL EnTrEPrEnEUrShIP
(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
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ePo
sitio
n in
life
cyc
le
Com
peti
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ays
to S
atis
fy N
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Doi
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ithou
tU
sing
pre
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way
Mod
ifyin
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esen
t way
Perc
eive
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ts/R
isks
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stes
and
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sum
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itySt
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arke
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elop
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tsTh
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ilabi
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dsG
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ditio
nsEc
onom
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ends
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com
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ities
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E: A
dapt
ed fr
om h
isri
ch, r
. D. (
2004
). H
ow to
fix
and
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ent t
he 1
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gges
t pro
blem
s th
at d
erai
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ines
s. n
ew Y
ork:
McG
raw
-hill
.
160 InTErnATIOnAL EnTrEPrEnEUrShIP
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.
Selecting International Business Opportunities 161
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.
162 InTErnATIOnAL EnTrEPrEnEUrShIP
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
Selecting International Business Opportunities 163
• 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
164 InTErnATIOnAL EnTrEPrEnEUrShIP
• 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
Selecting International Business Opportunities 165
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 (%)
166 InTErnATIOnAL EnTrEPrEnEUrShIP
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
Selecting International Business Opportunities 167
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.
168 InTErnATIOnAL EnTrEPrEnEUrShIP
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
Selecting International Business Opportunities 169
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.
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