One of most important decisions in international marketing is market selection. The global market, made up of well over 200 independent nations with their own distinctive characteristics is too vast indeed.
It would be very difficult for a company to operate in all these markets. There are barriers which make entry to a number of markets impossible or very difficult. There may be markets which are not profitable or are worth the trouble. Further, there may be markets which are very risky due to political or other reasons.
Moreover, the company resources may not permit the operation in a large number of countries. There are of course companies which operate in majority of the countries of the world. These companies have not achieved such a massive expansion overnight. It has been a gradual expansion achieved over a long period. Further, all types of business do not lend themselves for such substantial international expansion.
A company which wants to enter many markets should do it systematically. Too fast an expansion without the resource and organizational strength for such an expansion could be suicidal. The Bulova Watch Company expanded into one hundred countries. It spread itself too thin, made profits in only two countries and lost around $40 million.
All these factors highlight the need for market selection. Even a company with ambitious plans and good prospects for global expansion has got to rank the markets for prioritization of the expansion plans.
Market selection is based on a thorough evaluation of the different markets with reference to certain well defined criteria, given the company resources and objectives. Marketing research therefore becomes necessary to obtain the data required for evaluating the markets.
It is also necessary to prepare a profile of the selected markets to help the company to formulate the marketing strategy. It may be noted that many of the items of information contained in the market profile are collected for the purpose of evaluation of the markets for market selection.
International Marketing Objectives:
The first step in any management decision making process is to determine/ ascertain the objectives.
The market selected to serve a particular international marketing objective need not necessarily be the best suited to achieve some other international marketing objective. Various markets may have different degrees of attractiveness from the point of view of different objectives. More about this is stated under the subtitle firm related factors little later in this article.
Parameters for Selection:
For proper evaluation and selection of the markets, it is essential to clearly lay down the parameters and criteria for evaluation. Important parameters often used for market selection.
After determining the criteria for market selection, the next important step in market selection process is to conduct a preliminary screening of the markets. The objective of the preliminary screening process is to eliminate the markets which are obviously not potential enough as revealed by a cursory look. The evaluation matrix requirement is described in this article in the paragraphs below.
The parameters used for the preliminary screening may vary from product to product. However, parameters like the size of population, per capita income, structure of the economy, infrastructural factors, political conditions etc. are commonly used. Information about some of the factors would enable a company to eliminate certain markets from its consideration. For example, in a country where there is no telecasting, there is obviously no market for TV sets. Similarly if the rural areas are not electrified, there may be no demand for electrical agricultural pump sets. If the household income of the majority of a country with a small population is very low, the demand for costly consumer durable will be limited. Further, there may be countries which should be omitted due to political reasons, including government policies.
A lot of information required for the preliminary screening is available from such publications as the Statistical Year Book of the United Nations and the World Bankâ€™s World Development Report.
Short listing of markets:
Preliminary screening enables to eliminate markets which obviously do not merit consideration at the very outset. There would be a large number of markets left even after preliminary screening. They are further screened with the help of more information than was used at the preliminary screening stage. The objective is to distill out a small number of markets which are likely to satisfy the companyâ€™s criteria for market selection for detailed analysis for ranking them and final selection.
Evaluation and selection:
A thorough evaluation of the short listed markets is done with reference to the specific parameters and criteria and the markets are ranked on the basis of their overall attractiveness. One or more market(s) is/are selected from the rank list.