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Chapter 12.docx

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McMaster University

Chapter 12 Strategies for AnalyzingEntering Foreign Markets In deciding whether and how to enter a market a firm will match its internal strengths and weaknesses to the unique opportunities and needs of that market Foreign Market Analysis In order to successfully increase markets share revenue and profits in a new market firms must follow 3 steps 1 Assess Alternative Foreign Markets 2 Evaluate the costs benefits and risks of entering each market 3 Select the market with the most potential for entry or expansion Assessing Alternative Foreign Markets The firm must consider several factors including market potential levels of competition legal and political environment and sociocultural influences Market Potential Market potential is dependent upon the positioning of the firms products relativeto those of its competitors A firm must collect data relevant to the specific product line under consideration Firms must also consider the potential for growth in a countrys economy by using both Objective and Subjective measures Objective measures include changes in per capita income energy consumption GDP and ownership of consumer durables ex cars Subjective measures considerations that include prospecting markets for future growth even though these markets could currently have negative economic growth they also have high growth potential Levels of Competition Firms must monitor the current and likely future levels of competition The number and sizes of firms in the target market their market shares pricingdistribution strategies and their strengthsweaknesses should be identified The firm should weigh these conditions against actual markets conditions and their own competitive position Most successful firms continually monitor major markets in order to exploit opportunities as they become availableLegalPolitical Environment The firm must have a general understanding of the host countrys trade policies legal and political environmentsTrade policies andor trade barriers may induce a firm to enter a market via FDI
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