International

Business and Trade

Leonardo B. Magaling
International Expansion and Global Market Opportunity Assessment
WHY EXPAND INTERNATIONALLY.
So many reasons why firms want to sell their products internationally, but the of the
most important reasons are:
1.To improve the cost-effectiveness/cost efficiency of their operations.
Both cost-effectiveness/cost efficiency mean getting better results without spending a
lot.
Both measure how well companies achieve their goals.
Both show the relationship between the resources used and the results achieved.
But they are different.
 Cost-effectiveness is about doing the right things.
 Cost-efficiency is about doing things the right way.
WHY EXPAND INTERNATIONALLY.
2. To expand into new markets for new customers. (Entry to new markets, gaining more
customers).
Even when your company has become successful domestically, it’s time to look at
markets overseas. Every market offers opportunities for success and failure. >>>Before
entering a new market, it’s vital to do research.
3. To follow global customers
Expanding customer base.
Global Market Opportunity Assessment:
GLOBAL MARKET OPPORTUNITY: refers to favorable combination of
circumstances, locations, or timing that offer prospects for exporting, investing, sourcing,
or partnering in foreign markets.
(there is a market space for the product/service. Unserved market which becomes the new
target market)
GLOBAL MARKET OPPORTUNITY ASSESSMENT:
 Means studying the potential of the new target market which is important in
developing a strategic plan for global market expansion.
Global Market Opportunity Assessment:
GLOBAL MARKET OPPORTUNITY ASSESSMENT:
includes a comprehensive analysis of the following:
company’s competitors, and consumers.
 details on market opportunities,
growth drivers and barriers,
industry cost structure,
distribution channels,
market trends, and other key success factors.
Global Market Opportunity Assessment:
Why is market research important in international business?
Market research allows you to mitigate your risk by being as prepared as possible for the
many challenges involved in entering a foreign market. Specifically, market research
allows you to:
understand customers needs and wants,
be more prepared to take on your competition,
avoid legal issues, and
develop a more viable strategy.
Global Strategic Choices:
choosing to expand internationally is rarely “black and white”.
The allure of global markets can be mesmerizing but choosing to expand internationally is
rarely “black and white”.
 Companies that operate in highly competitive or nearly saturated markets at home are
drawn to look overseas for expansion.
 But overseas expansion is not a decision to be made lightly, and managers must ask
themselves whether the expansion will create real value for shareholders.
 Companies can easily underestimate the costs of entering new markets if they are
not familiar with the new regions and the business practices common within the
new regions.
 For some companies, a misstep in a foreign market can put their entire operations
in jeopardy.
Global Strategic Choices:
The Why, Where, and How of International Expansion
WHY?
Positive economic logic.?
Differentiators.?

A differentiator is a characteristic of your product/firm that separates you from key

competitors and gives you a perceived advantage in the eyes of your target audience.
It's
how you distinguish what you sell from what your competitors do, and it increases brand
loyalty, sales, and growth.
Global Strategic Choices:
Examples of differentiators:
Apple products: Price.
Technology: Samsung was first to come up with foldable phones.
University of the Philippines introduces online teaching via UPOU (1995)
BatStateU is the National Engineering University.
ATENEO and DLSU: Tuition fees.
Global Strategic Choices:
The Why, Where, and How of International Expansion (pp361-362)
WHY?
If the differentiators are not present, >>>Don’t pursue.
If present then…WHERE?
What new countries fit our differentiators?
W/c one can strengthen/add to our differentiators?
If there are multiple opportunities HOW do we prioritize?
Global Strategic Choices:
The Why, Where, and How of International Expansion (pp361-362)
If present then…WHERE?
Tasks to do: (for the investors)
1)Analyze organizational readiness to internationalize
2)Assess the suitability of the firm's products and services for foreign market.
3)Screen countries to identify attractive target markets.
4)Assess the industry market potential, for products or services in selected target markets.
5)Select qualified business partners, such as distributors or suppliers.
6) Estimate company sales potential for each target market
Global Strategic Choices:
The Why, Where, and How of International Expansion (pp361-362)
WHY?
If the differentiators are not present, >>>Don’t pursue.
If present then…WHERE?
What new countries fit our differentiators?
W/c one can strengthen/add to our differentiators?
If there are multiple opportunities HOW do we prioritize?
HOW?
On your own? Do you need a local partner?
How big and how fast?
(STUDY: page 362, hard/soft criteria, business fit)
SUMMARIZING:
 Planning for international expansion involves doing a thorough study of the potential
markets into which the country is considering expanding. This includes understanding
the regional differences within markets, the needs of local customers, and the firm’s
own capabilities in relation to the dynamics of the industry.
 Common mistakes that firms make when entering a new market include:
 not doing thorough research prior to entry,
 not understanding the competition, and
 not offering a truly targeted value proposition for buyers in the new market.

(AGAIN, the IMPORTANCE of RESEARCH)

PESTEL
PESTEL
The framework was initially referred to as a PEST analysis (Political, Economic,
Social, and Technological)
Recent development, Environmental and Legal factors were included, thus, PESTEL.
PESTEL
The analysis examines opportunities and threats arising from these factors.
PESTEL analysis is an important and widely used tool that helps show the big picture
of a firm’s external environment, particularly as related to foreign markets.

https://openstax.org/books/principles-marketing/pages/7-2-assessment-of-global-
markets-for-opportunities
PESTEL
PESTEL.
POLITICAL FACTORS. Factors driven by government actions and policies.
A country’s political stability can affect nearly every facet of the country, especially its
economic conditions.
 When there is increased political stability, the country’s economy tends to stabilize or grow.
Many investors choose to avoid entering markets that lack political stability, not only because
of the shaky economy but also because of potential changes in leadership, laws, and
regulations.
PESTEL.
POLITICAL FACTORS. Factors driven by government actions and policies.
Trade Regulations/Inhibitors.
Trade Regulations.
Trade regulations either promote or inhibit trade with other countries. Governments sets some
level of trade regulations.
The common trade regulations surrounding imports and exports around the world include
tariffs, quotas, trade blocs, and embargoes.
 Tariffs are taxes that governments impose on imports coming into the country. Tariffs can be
imposed as a percentage or dollar amount.
 Tariffs are generally used by governments to bring more money into a country.
 Country dependent: Japan, has one of the lowest tariffs in the world at 2.5 percent for
nonagricultural products. The East African nation of Seychelles once had a much higher tariff
rate, at 25 percent.
PESTEL.
POLITICAL FACTORS. Factors driven by government actions and policies. Tariffs are
taxes that governments impose on imports coming into the country. Tariffs can be imposed as a
percentage or dollar amount.
 Tariffs are generally used by governments to bring more money into a country.
 Country dependent: Japan, has one of the lowest tariffs in the world at 2.5 percent for
nonagricultural products. The East African nation of Seychelles once had a much higher tariff
rate, at 25 percent.
Quotas are maximum allowable units to be imported into or exported out of a specific country.
 Quotas are often used by a country to protect a domestic industry. For example, if the US
government limited the number of Japanese automobiles to 2 million imports per year, this
would cause lower sales of imported vehicles and, in turn, higher sales of domestically
produced vehicles.34
PESTEL.
POLITICAL FACTORS. Factors driven by government actions and policies.
Embargoes are bans on trading a product with a specific country and are imposed between
countries that have different political ideologies.
Examples: The United States, has embargoes against Cuba, Iran, North Korea, and Syria that
prohibit all transactions with these countries without a license.
Trade blocs are intergovernmental agreements that remove barriers of trade within regions of
the world.
 There are currently 10 major trade blocs in the world. The United States-Mexico-Canada
Agreement (USMCA) and the EU27 are two prominent examples. The USMCA allows
free trade among Canada, the United States, and Mexico.
PESTEL.
POLITICAL FACTORS. Factors driven by government actions and policies. Corruption
Perceptions Index (CPI). An annual survey conducted by the Transparency International. A
measure of the perceived levels of public sector corruption. Marketers use this survey for
insights into country dynamics and can evaluate market viability of their product or service
offering. This guide helps company leadership determine how much work they may have in
understanding a country’s way of operating and what kind of work it would take to make their
product or service successful.
Range 0 (highly corrupt) to 100 (very clean).
Denmark, Finland, New Zealand (all scored 88, ranked 1 as clean)
Philippines (scored 33, ranked 116)
Most corrupt are Somalia (scoring 12), Syria and South Sudan (both scoring 13).
PESTEL.
POLITICAL FACTORS.
What investors should consider:
 How stable is the political environment in the prospective country?
 What are the local taxation policies? How will these affect your business?
 Is the government involved in trading agreements, such as the European Union (EU),
the North American Free Trade Agreement (NAFTA), or the Association of Southeast
Asian Nations (ASEAN)?
 What are the country’s foreign-trade regulations?
 What are the country’s social-welfare policies?
PESTEL.
POLITICAL FACTORS.
Examples:
Corporate taxation
Other fiscal policy initiative
Free trade disputes.
Antitrust and other anti-competition issues. The regulation of the concentration of
economic power, particularly in regard to monopolies and other anticompetitive practices
(ie: price fixing, price discrimination, cartel, predatory pricing etc…READ ON THESE)
PESTEL.
Economic Factors. Economic factors relate to the broader economy and tend to be
expressly financial in nature.
What investors should consider?
 What are the current and forecast interest rates?
 What is the current level of inflation in the prospective country? What is it forecast to
be? How does this affect the possible growth of your market?
 o What are local employment levels per capita, and how are they changing?
 What are the long-term prospects for the country’s economy, gross domestic product
(GDP) per capita, and other economic factors?
 What are the current exchange rates between critical markets, and how will they affect
production and distribution of your goods?
PESTEL.
Economic Factors.
Examples:
Interest rates. Interest rates might appear in a range of different places, imposed by a range of
different people. It’s obvious that the status quo for interest rates is of great interest to banking
institutions, but it might also affect companies whose strategies rely on taking out large loans.
Exchange rates. Exchange rates affects those who deal with export or import. Changing
exchange rates might affect how much a company has to pay to its international supplier to
satisfy them, which can affect profit margins, as well as take a lot of resources to stay on top of.
Recession. Period of temporary economic decline during which trade and industrial activity are
reduced, generally identified by a fall in GDP.
An economic recession (of whatever scale) has the potential to change the purchasing attitude
of customers, which might force companies to drop their prices or clear smaller volumes.
PESTEL.
Social Factors. They refer to shifts or evolutions in the ways that stakeholders approach
life and leisure, which in turn can impact commercial activity.
What investors should consider:
 What are the local lifestyle trends?
 What are the country’s current demographics, and how are they changing?
 What is the level and distribution of education and income?
 What are the dominant local religions, and what influence do they have on consumer
attitudes and opinions?
 What is the level of consumerism, and what are the popular attitudes toward it?
PESTEL.
Social Factors.
 What pending legislation could affect corporate social policies (e.g., domestic-partner
benefits or maternity and paternity leave)?
 What are the attitudes toward work and leisure?
Examples
Demographic considerations
Lifestyle trends
Consumer beliefs
Attitudes around working conditions
PESTEL.
Technological Factors. Technology is everywhere and is rapidly changing.
Management teams and analysts alike must understand how technological factors may
impact an organization or an industry. How they impact research and development
(R&D) in terms of costs and competitive advantage.
What investors should consider:
 To what level do the local government and industry fund research, and are those levels
changing?
 What is the local government’s and industry’s level of interest and focus on
technology?
 How mature is the technology?
 What is the status of intellectual property issues in the local environment?
 Are potentially disruptive technologies in adjacent industries creeping in at the edges of
the focal industry?
PESTEL.
Technological Factors.
Examples
Automation

Technology infrastructure (like 5G, etc.)

Cyber security
PESTEL.
Environmental Factors. Environmental factors emerged as a sensible addition to the
original PEST framework as the business community began to recognize that changes to
our physical environment can present material risks and opportunities for organizations.
What investors should consider:
 What are the local environmental issues?
 Are there any pending ecological or environmental issues relevant to your industry?
 How do the activities of international activist groups (e.g., Greenpeace, Earth First!,
and People for the Ethical Treatment of Animals [PETA]) affect your business?
 Are there environmental-protection laws?
 What are the regulations regarding waste disposal and energy consumption?
PESTEL.
Environmental Factors.
Examples
Carbon footprint. the total amount of greenhouse gases (including carbon dioxide and methane)
that are generated by our actions. The average carbon footprint for a person in the United States
is 16 tons, one of the highest rates in the world. Globally, the average carbon footprint is closer
to 4 tons.
Climate change impacts, including physical and transition risks
Increased incidences of extreme weather events
Stewardship of natural resources (like fresh water)
Legal Factors. Legal factors are those that emerge from changes to the regulatory environment,
which may affect the broader economy, certain industries, or even individual businesses within a
specific sector.
PESTEL.
Climate change impacts, including physical and transition risks
Increased incidences of extreme weather events
Stewardship of natural resources (like fresh water)
Legal Factors. Legal factors are those that emerge from changes to the regulatory
environment, which may affect the broader economy, certain industries, or even
individual businesses within a specific sector.
Examples.
Industry regulation
Licenses and permits required to operate
Employment and consumer protection laws
Protection of IP (intellectual property)
PESTEL.
Legal Factors
Legal factors are those that emerge from changes to the regulatory environment, which
may affect the broader economy, certain industries, or even individual businesses within
a specific sector.
 What are the local government’s regulations regarding monopolies and private
property?
 Does intellectual property have legal protections?
 Are there relevant consumer laws?
 What is the status of employment, health and safety, and product safety laws?
PESTEL.
Legal Factors
Examples:
Industry regulation
Licenses and permits required to operate
Employment and consumer protection laws
Protection of IP (intellectual property)