Selection of markets is the first stage in International marketing. No matter how much attempt is made, the firm will not succeed unless it is marketing the right product in the right export market. It costs lot of time and money to find out a suitable market for a product. No firm has unlimited resources. Proper selection of markets would avoid waste in time and effort. The time and care taken to select the product and the market for initial export venture can minimize the risks and make ultimate success quicker and more certain. One product may be more acceptable in some countries than in others. It would, therefore, be better to concentrate on a few fruitful markets than to spread too thinly. Market concentration can lead to better debt collection and cash flow and savings in administration. Of course, after having established in one market, the firm can always move on to the other markets. This is what Larsen and Toubro did while it entered the export markets for the first time. They concentrated on Indonesia. After having established in Indonesia they moved on to other nearby markets. It is easier to extend operation in other markets because of the experience already gained in entering the first market. It is easier to increase business where you have a stronghold rather than increase business in new areas.
In some instances products to be exported might by their very nature have only a small number of possible customers in any one country making it essential to approach a large number of foreign areas simultaneously. This applies to some large items such as complete cement plants or to extremely specialized apparatus like the equipment to measure electrical voltages in the human muscle. So also in some cases, success might depend on high volume of production that it is essential to aim at every possible market simultaneously.
Criteria for classifying world Markets: The basic problem that a firm has to solve in the initial stage of planning its international marketing strategy is to identify global marketing opportunities. To identify and shortlist markets which offer or might offer in future opportunities that can be exploited by it, a classification scheme for segmenting the world markets is required. There are several bases of classification, principal among then are:
Classification on the basis of stages of demand: Keegan has produced a threefold classification of world marketers:
1. Exiting markets
2. Latent markets
3. Incipient markets
In the existing markets, consumer needs are known and are already being serviced by some products. The market opportunities can be assessed by estimating the consumption rate and the share of imports in current consumption. Latent markets have potential customers but because no one has offered a product to fill the latent need there is no existing market. Incipient markets do not exist in the present, however conditions and trends can be identified that point towards the emergence of future needs and preferences for product and services that will create a potent market, which if supplied will become an existing market.
Classification on the basis of Stages of Development: The world markets can be divided into four distinct segments, viz., industrial economies, more developed developing countries, raw material exporting economies and subsistence economies.
Industrial Economies: These countries lay more emphasis on research and development and devote their resources to production of more sophisticated products and will therefore like to import goods of simpler technology and simpler manufactures. These countries also have an acute shortage of labor and would, therefore tend to import intensive products like electronics and light engineering goods. They also tend to import spares and components and raw materials to feed their industries and many decorative articles because of their affluence. They are very particular about preventing further pollution and, therefore they would like to import not only anti-pollution equipment but also articles whose production has been banned for risks of pollution. They are willing to provide technology to set up production and processing facilities in developing countries. They provide a large market as they have no import restriction. In fact, the five major importing countries viz., United States, the United Kingdom, France, Japan and Germany, account for 40 per cent of world imports.