Summary Foreign Market Selection Criteria

2493 words - 10 pages

this is a summary grade A in my master assignment, so hope to help somebody else.Summary - Foreign Market Selection CriterialBrief statement of understanding of the topicThe globalization of world economy and regional economic development create many business opportunities for companies that attempt to enter international markets. One of the very first concerns of firms that plan to start new or expand their existing international activities is the choice of one or more countries as target markets (Papadopoulos and Denis, 1988). In light of the difference between domestic business and international business in terms of political, economic and socio-cultural environments, selecting a suitable new foreign market is critical to the success of a company in international business. As Douglas and Craig (1989, 1992) have identified the selection of attractive foreign markets for existing products and services to be the primary concern in a firm's internationalization process. Also, Ayal and Zif (1978, 1979) stress that effective market choice is a strategic decision that affects export performance and establishing bases at appropriate foreign markets can be a key ingredient in the firm's global competitive positioning strategy.Given the importance of international market selection, how to choose an appropriate foreign country or region that will form a firm's target market has attracted considerable attention of many academics in international business literature. Several types of criteria have been suggested, including country-specific indicators such as macro-economic, political and cultural characteristics (Bradley, 1995; Douglas and Craig, 1983; Root, 1994) as well as market-specific indicators such as market size, competition, channels of distribution and the costs of operating in the market (Douglas, Craig, & Keegan, 1982; Young, Hamill, Wheeler, & Davies, 1989). As suggested by Mahoney, et al. (2001), there are a variety of factors a firm must consider in assessing alternative foreign markets, including:"the current and potential sizes of these markets;"the levels of competition the firm will face;"their legal and political environments, and sociocultural factors that may affect the firm's operations and performance.In addition, Kumar et al. (1994) summarized the whole process of broadly evaluating foreign markets as involving three stages: a) screening stage, b) identification stage, and c) selection stage. Different indicators can be used in the three stages. For example, macro level indicators such as political stability, socio-cultural factors and geographic distance, etc. can be used in the screening stage of the process to eliminate countries that do not meet the objectives of the firm. In the identification stage, firms need to assess information such as market size, market growth rate, level of competition and entry barriers (such as tariffs, taxes, import duties, and quotas), and identify potential country-segments based on this...

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