Market Selection Process For Internationalization

Market Selection Process

As the technology produces leap in the communication, conveyance and monetary flows, the world remains to feel smaller. It is probable for the companies to conduct business in every corner of the world and it advances to the international trade. The international marketing is the application of the marketing moralities in more than one country. This report includes the selection process applied in terms of ascertaining the utmost suitable market to move in. The selection process is the important determinant behind the success of internationalization and in the early phase of the development. So, the report has comprised the market selection process for the firms seeking to internationalize. The report also considers the diverse approaches of SMEs and LSEs in determining the most suitable selection process. Finally it examines the choices obtainable to an international firm and the choice of market strategy.  

The market selection has important part at the international level. It is centered on the comprehensive assessment of the various markets with allusion to the convinced well-defined measures and company’s possessions and objectives. The steps involved in the market selection method are given below:

Universal marketing objectives: It is the initial step in the market selection procedure to decide the export marketing purposes of the firm. These objectives enhance free trade at the global level. The market is selected to serve the specific international marketing objectives. It increases globalization by assimilating the economies of various countries. The international marketing promotes to the economic and industrial growth by eradicating the gap between the developed and the developing countries (Cavusgil and Knight, 2015).

Considerations for assortment: It is critical to lay down the limitations and evaluation measures for the proper assessment and choice of the markets. The constraints for the selection of the market can be a company’s resources, market situation, international environment, nature of rivalry, government policy and more.

Opening screening: The aim of the opening screening is to eradicate the markets which do not meet contemplation at the very beginning. The considerations used for the opening screening differ from produce to produce. Though, constraints such as per capita income, population size, configuration of the economy and political circumstances are usually used.

Short listing of markets: The preliminary screening eradicates the market which do not encounter deliberation at very beginning. There are a great number of markets which are missing even after the opening screening (Eriksson, Johanson, Majkgård and Sharma, 2015). The markets are further screened with the added information than was used at the opening screening phase. It can help a firm pursuing to internationalize.

Methods of SMEs and LSEs in determining the most suitable market selection process

Assessment and collection: The markets short listed are further assessed with allusion to the feasibility study and cost benefit analysis (Fan, Kühn, and Lafontaine, 2017). The markets are then graded on the basis of the whole attraction. Out of all the markets, finest one is selected for the product launching after considering the company’s capitals and external environment.

Test marketing: The market is verified on the small scale initially by producing in a share of the markets. This way a producer can get response about the market. It also helps producers in considering the whole reaction of the customers from an explicit market. The production can be commenced on a large scale after evaluating success on the small level.

Viable production: Once the product is verified in the designated market, the company goes forward with the huge production. The slight amendments can also be familiarized in the product mix through this phase (Eteokleous, Leonidou and Katsikeas, 2016) 

There is different transnational market selection process for the small and medium sized enterprises (SMEs) and large scale enterprises (LSEs). In the SMEs, the international market selection is merely a feedback to an inducement delivered by a change mediator. This mediator can seem in the practice of a spontaneous order. The government interventions, chambers of commerce and other negotiators bring foreign prospects to the organization’s consideration. Such circumstances lead to the external driven decision and the interested firm can responds to the opportunity in the given market (Mullen and Monin, 2016). The SMEs can make use of the approach for the international market selection given below:

Low psychic distance: The psychic distance can be described as variances in the semantic, philosophy, level of learning, manufacturing development and political system. The low psychic distance is identified as the low improbability about the overseas markets and low professed exertion of obtaining data about them (Forsgren, 2015).

Low racial distance: The low cultural distance is acknowledged as the low perceive modifications between the home and destination cultures. The culture difference is generally considered as a part of intellectual distance.

Low geographical distance.

Using the criteria explained above helps SMEs in arriving new markets with continually superior psychic distance. The choice is often narrow to the SMEs close neighbors as physical contiguity is prospective to reveal the ethnic resemblance, more understanding about the foreign markets and more ease in attaining evidence. It is considered that SMEs and the organizations which are already in the internationalization process are further anticipated to use physic space than LSEs with the international experience (Knight and Liesch, 2016).

Option accessible to the global firm and its choice of market growth strategy

The SMEs are suggested to make entry choices by choosing markets among the essentially unidentified markets whereas LSEs with the prevailing actions in various countries have to resolve in which of them to launch innovative products. The LSEs have stress-free entree to the product definite data by drawing on the existing operations. Such data can be obtained in the practice of prime information which is more precise than the subordinate database (Nordstrom and Renforth, 2015). The LSEs can be more practical than the SMEs. Making selection of the markets on the basis of the intuition and rationality can be satisfying for the SMEs. It includes practical international marketing strategy process planned in a methodical and step by step analysis (Magnani, Zucchella and Floriani, 2018). Moreover, in the small subcontracting, the organizations do not aggressively select the overseas markets. The choice of the international marketing strategy is completed by the partner attaining the central contract which pulls out the SMES into the global market.

It is significant to understand some considerations to expand operations overseas. There are various options available to the international organizations for the market expansion given below:

Indirect exporting: An international firm can make use of the indirect exporting as a market expansion strategy. The indirect exporting means retailing products to a channel partner who sells products to the consumers or to the importing retailers. The channel partners includes agents and distributors based on the target export market. It is the simplest method of the indirect exporting is to sell an intermediary in its own company (Martinez, 2014). Also it is the quick way to get products and services to the end users. In this method, an organization is not responsible for the collecting payment from the international customers or for coordinating the shipping logistics. This method is more beneficial for the international firm as the channel partners have knowledge and networks in the desired market (Amankwah-Amoah, Boso and Debrah, 2018).

Direct exporting: In the direct selling, an organization can sell products openly to the customers in the international market. The international firm can sell its products to the wide range of the customers, some of them can be treated as intermediaries in the desired market. The exports are direct as the intermediary is a customer based in the target market (Scholes, Mustafa and Chen, 2016). The important customers for the direct exporting comprises importers, distributors, retailers, wholesalers, consumers and more.

Joint ventures: The joint venture is an arrangement in which an international firm can come in agreement with the partners in the desired location. Both the partners approve to pool capitals for the determination of achieving a task. In the joint venture, both the partners are accountable for sharing the revenues, losses and costs allied with the production. The joint ventures turned into a separate business entity (Yan and Luo, 2016). It is the suitable method for the international firms seeking to conduct operations worldwide. It includes the minimum risk.

Licensing: An international firm can grow its business faster with the help of licensing. It is the written agreement in which a firm give permission to another party to use its rights under the specified parameters. In the licensing, a company can use the product specifications and technologies of the authorized company. The company need to come into the agreement before giving license to another company. It also includes royalty fees.

Franchise: The franchise is an innovative choice of the market expansion strategy. It is a marketing concept which can be used by the organizations for the market expansion. A company can sell its franchise in the international market for the business expansion. It includes know-how, procedures, use of the business models, brands and rights to sell products and services. It is effective for all small to large business enterprises (Shen, Mathiyazhagan, Kannan and Ying, 2015). It offers the trademark to another companies, these can manufacture the products by the original company’s name.

Conclusion:

The international marketing strategy is not always a rational and continuing system of the activities but it comprises numerous feedback loops. The market selection plays significant role at the global level. The market selection process considers the international marketing objectives, consideration for selection, preliminary screening, short listing of markets, assessment, test marketing and commercial production. There are different approaches for the SMEs and LSEs in determining the most appropriate market selection process. The SMEs are required to hire an agent in order to expand occupation in the global market whereas the LSEs can expand its product range and launch products in the foreign market without any agent. There are various options available to the international firm for the market expansion strategy. Indirect exporting, direct exporting, joint ventures, licensing and franchise can be effectively used by the international firms in expanding their market share.

References: 

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Eriksson, K., Johanson, J., Majkgård, A. and Sharma, D.D., 2015. Experiential knowledge and cost in the internationalization process. In Knowledge, Networks and Power (pp. 41-63). Palgrave Macmillan, London.

Eteokleous, P.P., Leonidou, L.C. and Katsikeas, C.S., 2016. Corporate social responsibility in international marketing: review, assessment, and future research. International Marketing Review, 33(4), pp.580-624.

Fan, Y., Kühn, K.U. and Lafontaine, F., 2017. Financial constraints and moral hazard: The case of franchising. Journal of Political Economy, 125(6), pp.2082-2125.

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Martinez, M.G., 2014. Co?creation of Value by Open Innovation: Unlocking New Sources of Competitive Advantage. Agribusiness, 30(2), pp.132-147.

Mullen, E. and Monin, B., 2016. Consistency versus licensing effects of past moral behavior. Annual review of psychology, 67.

Nordstrom, R.D. and Renforth, W., 2015. Hierarchy of Needs in Transition: A Theory of Business Motivation. In Proceedings of the 1983 Academy of Marketing Science (AMS) Annual Conference (pp. 282-288). Springer, Cham.

Scholes, L., Mustafa, M. and Chen, S., 2016. Internationalization of small family firms: The influence of family from a socioemotional wealth perspective. Thunderbird International Business Review, 58(2), pp.131-146.

Shen, L., Mathiyazhagan, K., Kannan, D. and Ying, W., 2015. Study on analysing the criteria’s for selection of shipping carriers in Chinese shipping market using analytical hierarchy process. International Journal of Shipping and Transport Logistics, 7(6), pp.742-757.

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