1. Foreign Market
Selection Process
Kelly E. Fish, Ph.D.
International Business
Workshop

2. Overview
 Market Entry Strategies
• Exporting
 Foreign Market Selection
 How IBRC can help with the process

3. High risk/reward
Wholly owned subsidiary
Foreign Market Entry Strategies
Local
production
Joint venture
Local assembly
Contract manufacturing
Franchising/Licensing
Sales subsidiary
Low risk/reward
Direct exporting
Indirect exporting

4. Strategy Trade-offs
Control Asset Variable Fixed Market Overall
Entry Strategy Level Costs Costs Share Cost
Indirect Exporting
Direct Exporting
Sales Subsidiary
Franchising/Licensing
Contract Manufacturing
Local Assembly
Joint Venture
Local Production
Wholly owned
subsidiary

5. Indirect Export – Trading Companies (TCs)
Advantages
 Open new markets without expertise
or investment
 TCs cover market well and service
products they sell

6. Indirect Export – Trading Companies (TCs)
Disadvantages
 TCs control market selection and
marketing
 More of a foreign concept (Japan,
South Korea, Brazil, Western Europe)
 Product may not get attention it
deserves

7. Indirect Export – Export Management Companies
Advantages
 Instant foreign market knowledge
and contacts
 Sales are on commission basis
(variable cost)
 Potentially better feedback than TC

8. Indirect Export – Export Management Companies
Disadvantages
 EMCs may spread themselves too
thin with too many customers
 Product may not get attention it
deserves
 Market expertise/contacts can be
limited to one or two countries

9. Indirect Export – Piggyback Exporting
Advantages
 Rider benefits from carrier’s
established export and distribution
facilities
 Shared expenses
 Rider benefits from carrier’s
reputation

10. Indirect Export – Piggyback Exporting
Disadvantages
 Carrier seldom assumes any risk on
rider’s product
 Rider subject to carrier’s
strategy/reputation

11. Direct Exporting
Advantages
 Usually yields higher sales than
indirect exporting
 Company has greater control, better
market information
 Company develops in-house
expertise
 Company has greater freedom to
choose entering markets

12. Direct Exporting
Disadvantages
 Costs are higher than with indirect
exporting
 It may take longer to establish
market entry, distribution network,
etc.

13. Foreign Market Selection
The two most widespread mistakes of
market selection are:
1) ignoring or missing markets that offer
good potential for a firm’s products
and
2) spending too much time researching
markets that are poor prospects for
the firm

14. Foreign Market Screening
Target

15. Foreign Market Screening
1. Macro-level research
2. General market factors
relating to the product
3. Micro-level factors specific
to the product
4. Final screening
Target

16. Foreign Market Screening
Screening techniques
range from simple
minimum criteria
thresholds (Example A)
to clustering techniques
using artificial
intelligence (Example B).
Target

17. Example A – Targeting Countries
for Kidney Dialysis Equipment
1. Macro-level  GDP over $15
research billion
 GDP per capita
over $1,500
 Political stability

18. Example A – Targeting Countries
for Kidney Dialysis Equipment
2. General market  Less than 200
factors relating to the people/hospital bed
product  Less than 1,000
people/doctor
 Govt. expenditures
over $100 million for
healthcare
 Govt. expenditures
over $20 per capita
for healthcare

19. Example A – Targeting Countries
for Kidney Dialysis Equipment
3. General market  Kidney-related
factors relating to deaths over 1,000
the product  Patient use of
dialysis equipment
– over 40% annual
growth

20. Example A – Targeting Countries
for Kidney Dialysis Equipment
4. Final screening  Number of
competitors
 Distributor
reputation

21. Example B – Targeting Countries
for Kidney Dialysis Equipment
 Self-Organizing  GDP
Map  GDP per capita
 Total health
expenditure per
capita
 Total Health
expenditure as a %
of GDP
 Political Risk Index
 Cultural score

22. Example B – Targeting Countries
for Kidney Dialysis Equipment
Hong Kong Australia United States
India
Malaysia Jamaica Austria Japan
Philippines Singapore Canada
Ireland
New Zealand
Switzerland
United Kingdom
Ecuador Iran France Denmark
Guatemala Mexico Italy Finland
Indonesia South Africa Netherlands
Pakistan Norway
Turkey Sweden
Venezuela
Yugoslavia
Chile Brazil Argentina Israel
Panama Colombia Costa Rica
Peru Greece
South Korea Portugal
Thailand El Salvador
Spain
Uruguay

23. How the IBRC can help
your business

24. Provide export assistance to NEA businesses
1. NEA Business Contacts the IBRC
2. IBRC matches ASU Intern with NEA Business
3. Intern Researches International Markets and Develops
Export Strategy for the NEA firm under direction of IBRC
4. Intern makes Final report and end of semester

25. Provide export assistance to NEA businesses
• We have the expertise for oversight (Drs. Fish & Guha)
• We have the manpower (Students are cheap – free!)
• We have the country data
• We are committed to working with the U.S. Export
Assistance Center

26. Visit the ASU International
Business Resource Center on
the Web at:
ibrc.astate.edu