describe strategic advantage approach as it is used in market potential analysis

Market Potential and Market Sizing Analysis

Market analysis services from Mapping Analytics help you know the economic opportunity available to you in any geographic market. Whether you sell to consumers, to businesses, or both, market sizing provides intelligence you need to deploy sales and marketing resources effectively.

Benefits of Market Potential Analysis

Understand market potential for a single store, network of stores or a new market Deploy resources effectively by ranking markets in priority order Forecast total opportunity in terms of number of customers and revenue potential Estimate your market share

Market Potential Analysis: What We Can Do for You

Market potential analysis is a primary analytic service performed by Mapping Analytics. We have the people, experience, tools, and data required to perform sophisticated and accurate market sizing. A market potential analysis from Mapping Analytics may include:

A customer profile to understand where to find more like them Market penetration and market share reports showing performance in existing markets and expected performance in new markets Market ranking reports allowing you to prioritize resource deployment into new markets A geographic view of market opportunity on detailed maps

Next Steps
Learn about our approach to sizing market potentia

INTERNATIONAL MARKET EVALUATION

While many aspects of international strategy and its formulation are similar to their domestic counterparts, some key aspects are not, and hence call for different methods and different kinds of information. Gaining knowledge of international markets is one of these key differencesand a crucial part of developing an international strategy. In

order for a company to enter a new market, capture market share, and thereby increase sales and profits, it must know what that market is like. At a basic level, a company must examine different markets, evaluate the advantages and disadvantages of entering each, and select only the markets that show the greatest potential for entry and growth. When examining different international markets, a company should consider the market potential, competition, regulation, and cultural factors of each. Company managers can assess market potential by collecting data on the gross domestic product (GDP), per capita GDP, population, transportation, and other figures of various countries. This kind of information will enable managers to determine the spending power of the consumers in each country and determine if that spending power allows them to purchase a company's

Table 2 Differences Between Domestic and International Strategy Country GDP per Capita (2003 Estimate in US$) Luxembourg United States Norway Bermuda 55,100 37,800 37,700 36,000

Cayman Islands 35,000 San Marino Switzerland Denmark 34,600 32,800 31,200

Country Iceland Austria

GDP per Capita (2003 Estimate in US$) 30,900 30,000

products or services. Managers also should consider the currency stability of the different markets, which can be done by using documents from the home countries to determine currency value and fluctuation over a period of years. To select the best markets for entry, managers also should consider the degree of competition within different markets and should anticipate future competition in them as well. Determining the degree of competition involves the identification of all the companies competing in the prospective markets as well as their sizes, market shares, and prices. Managers then should evaluate a prospective market by considering the number of competitors and their characteristics as well as the market conditionsthat is, whether the market is saturated with competition and cannot support any new entrants. Next, managers should evaluate the regulatory environment of the prospective markets, since knowing tax, trade, other related policies is essential for a successful international business. This step entails determining the respective tariffs and trade barriers of prospective markets. Different types of trade barriers may influence the kind of business activity a company chooses for a particular market. For example, if a prospective market has trade barriers that restrict the entry of foreign-made goods, a company might decide to access the market through foreign direct investment and manufacture its products in that country itself. Ownership restrictions also may limit a company's interest in a particular market; some countries permit foreign companies to set up local operations only if they establish a partnership with a local company. In addition, managers should find out if prospective countries charge foreign companies higher taxes or if they offer tax breaks and incentive to encourage economic development. A final consideration companies must make concerning government is stability. Since some countries have rough government transitions resulting from coups and uprisings, companies must countenance the possibility of political turmoil that could substantially disrupt business.

The last step in international market evaluation is the assessment of cultural factors. To avoid difficulties associated with cultural differences, some managers look for new markets that have cultural similarities to their home market, especially for initial international market penetration endeavors. Unlike market potential, competition, and regulation, cultural differences are more difficult to evaluate. Nevertheless, managers must try to determine the consumer needs and preferences in the prospective markets. Managers must also account for cultural differences in labor relations such as worker motivation, compensation, hours, etc. if planning foreign direct investment in an overseas company. Moreover, a thorough understanding of a prospective country's culture will greatly facilitate any kind of global business enterprise. This cultural knowledge should include a basic understanding of a prospective country's beliefs and attitudes, language and communication styles, dress, food preferences and customs, time and time consciousness, relationships, values, and work ethic. This kind of cultural information is essential for developing an effective and realistic global strategy. Since conducting primary research is labor intensive and time consuming, managers may obtain preliminary information on prospective markets from books such as Dun & Bradstreet's Guide to Doing Business Around the World and Business Protocol: How to Survive and Succeed in Business, or the Economist's "Doing Business in" series, which list potential trade opportunities, policies, etiquette, taxes, and so on for various countries. After examining the prospective markets in this manner, managers are ready to evaluate the advantages and disadvantages of each potential market. One way of doing so is the determination of costs, advantages, and disadvantages of each prospective market. The costs of each market include direct costs and opportunity costs. Direct costs are those a company pays when establishing a business in a new market, such as costs associated with purchasing property and equipment and producing and shipping goods. Opportunity costs, on the other hand, refer to the costs associated with the loss of other opportunities, since entering one market rules out or postpones entering another because of a company's limited resources. Hence, the profits that could have been earned in the alternative market constitute the opportunity costs.

Each prospective market usually has a variety of advantages, such as the possibility for growth, which will lead to greater revenues and profits. Other advantages include relatively low material and labor costs, new technology gaining strategic advantage over competitors, and matching competitors' actions. However, each prospective market also usually has a number of disadvantages, including opportunity costs, greater business complexity, and potential losses stemming from unforeseen aspects of prospective markets and from currency fluctuations. Other disadvantages might result from potential losses associated with unstable political conditions.

ANALYSIS OF TWO INTERNATIONAL STRATEGIES

In the late 1990s after a significant amount of globalization had taken place, business analysts began to examine the success of various strategies for doing business in other countries. This examination led to the distinction between various orientations of international strategies. The main distinction was between multi-domestic (also called multi-local) international strategies and global strategies. Multi-domestic international strategies refer to those that address competition in each country or region on an individual basis, whereas global strategy refers to addressing competition in an integrated and holistic manner across country and regional boundaries. Hence, multidomestic international strategies attempt to appeal to the needs of customers in different countries or regions, while global strategies attempt to standardize products and marketing to work across boundaries. Instead of relying on one of these strategies, multinational companies might adopt a different strategy for different products or services. For example, a company might use a global strategy for its electronics and a multi-domestic strategy for its appliances. Critics of the standardization approach argue that it makes two questionable assumptions: that consumers' needs are becoming more homogenous throughout the world and that consumers prefer high quality and low prices over advanced features and functions. Nevertheless, standardized global strategies have some significant benefits. Companies can reduce their marketing expenditures, for example, if they use the same ads in all their markets. PepsiCo, for example, uses the same televisions ads in all of its national markets, saving an estimated $10 million a year. Besides marketing savings,

global strategies can lead to other kinds of benefits and advantages in areas such as design, packaging, manufacturing, distribution, customer service, and software development. Some people argue that companies must customize their products or services to meet the needs of various international markets, and hence must use a multi-domestic strategy at least in part. For example, KFC planned a standardized approach to its foray into the Japanese market, but the company soon realized it had to change its strategy to meet the needs of Japanese consumers and customize its operations in Japan. Consequently, KFC introduced smaller pieces of foods to cater to a Japanese preference, and located restaurants in crowded areas along with other restaurants, moving away from independent sites. As a result of these changes, the fast-food restaurant experienced stronger demand in Japan. The development of regional trading blocs has promoted an emphasis regional strategies as companies develop plans to take advantage of the conditions within various trading blocs such as the North American Free Trade Agreement (NAFTA), the European Union, the Asia-Pacific Economic Cooperation (APEC) and the Association of Southeast Asian Nations (ASEAN). In addition, the United States has signed 16 different trade agreements with South American countries, creating a foundation for a trading bloc consisting of all North and South American countries. Consequently, companies have been establishing regional strategies designed around these trading blocs. Nike, for example, established central warehouses for its European distribution, just as it has a central warehouse for its U.S. distribution. This strategy has enabled Nike to reduce its inventory, cut down on redundancy, reduce costs, and enhance availability. In addition, News Corporation originally relied on a global strategy with its STAR-TV satellite television network; attempting to provide the same television shows across Asia in English. The company quickly switched to a multi-domestic strategy, providing programming in local languages after receiving low ratings and advertising dollars with its first approach. A variety of corporate collapses, and the revelation of unethical and illegal practices in many international companies, has led to a focus on Corporate Governance and Ethics

in the early twenty first century. Issues of what constitutes socially responsible behavior are likely to be a major part of global strategy for the coming years. SEE ALSO: International Business ; International Management ; International Management ; Macroenvironmental Forces ; Multinational Corporations ; Strategic Planning Failure ; Strategic Planning Tools ; Strategy Formulation ; Strategy Implementation ; Strategy in the Global Environment ; Strategy Levels ; Transnational Organization Karl Heil Revised by Betty Jane Punnett

FURTHER READING:
Bartlett, C.A. and S. Ghoshal. "What is a Global Manager?" In Annual Editions: International Business. Dubuque, IL: Dushkin Publishers. Feffer, J. Power Trip: U.S. Unilateralism and Global Strategy after September 11. New York: Seven Stories Press, 2003. Florini, A. "Business and Global Governance." Brookings Review, Spring 2003, 58. Gupta, A.K., and V. Gorindarajan. Global Strategy and the Organization. John Wiley & Sons Publishers, 2003. Punnett, B.J. International Perspectives on Organizational Behavior and Human Resource Management. Armonk, N.Y.: MESharpe Inc., 2004.

Read more: Strategy in the Global Environment - organization, levels, style, advantages, manager, company, disadvantages, business http://www.referenceforbusiness.com/management/Str-Ti/Strategy-in-theGlobal-Environment.html#ixzz1YJ7Wj0fz