TOPIC 2: Analysis of Industries and External Markets Flashcards
(23 cards)
Reasons to Internalize Activities
1) Global value chain
2) New markets
3) Increased competition
4) Needs to change the strategies
5) Information and communication technologies
6) Innovation
7) Cooperation and Strategic Alliances
8) External Expansion
9) International Capital Flow
WHY WE SHOULD BECOME GLOBAL ? Demand Factors!
1) Gaining access to new markets
2) Risk diversification
3) Different economic cycles
4) New types of customers
WHY WE SHOULD BECOME GLOBAL ? Supply Factors!
1) Stock reduction
2) Production life cycle → to make + from - mature markets
3) Economies of Scale
4) Competitive advantage: lower cost, innovation, qualified labour force
5) Image → is an intangible asset that help us to sell products
6) Pressure from competitors
7) Higher competitiveness in domestic markets
8) Tax benefits, Subsidies, supporting export programs
Steps to select Initial Export Markets
FIRST → Research similar products in the countries you are interested in
SECOND → Determine the size of the Potential Market
THIRD → Consider how you will communicate with your international buyers.
FOURTH → Local culture to determine how your product will be perceived
FIFTH → Pricing of your product in each market is a key factor as well
Thing that need $: → if your price is not competitive maybe you need to invest
SIXTH → Geography
Information Needed
- Legislation
- Language, culture and religion
- Economic and political outlook
- Information about the industry, the market, consumption habits, distribution channels.
- Longer distance: Transport → depends of the product too
- Currency and exchange rate system → the way of doing business according to the exchange rate system is different
Risks in International Business
- Political Risks
- Commercial Risks
- Extraordinary Risks
- Financial Risk
- Exchange Rate Risks
Which are the 4 Stages of the Internalisation Strategy ?
1) Internal Analysis: Firm (SWOT analysis, VIRO analysis )
2) Competition Analysis: Industry and competitive environment (Porter’s Forces )
3) External Analysis: PESTEL Analysis
4) Diagnosis
Explain the Internal Analysis
It focus on identifying the firm’s strengths and weaknesses:
- Frim geographical location
- Available production capacity
- Technological level
- Financial resources
- Information about external markets
- Commercial net/external markets
- Human resources international experience
- Foreign Language knowledge
- Brand/firm image
- Management team motivation
- Ease of making decisions
WE HAVE THE SWOT ANALYSIS AND THE VIRO ANALYSIS.
Explain the External Analysis
It is focused on identifying economic, political, social trends that may affect the international performance of the industry.
identifying the factors related with the industry and international environment that may become and opportunity or a threat to the firm.
HERE WE HAVE THE PESTEL ANALYSIS
Diagnosis
Once the majors strengths, weaknesses, threats and opportunities have been identified, it is time to draw conclusions to define proper actions that leads to succeed in external markets
There are 2 types of conclusions: Commercial Strategy and Resources
Why we do the market segmentation ?
we need to know who is going to buy our product.
Consumption markets are diverse and complex.
What is a segment ? What is a market segmentation ? The segments can be ..?
Segment → group of consumers with similar characteristics
Segmenting markets allows the firm to follow different strategies according to the particular characteristics of each market
Segment can be:
National → related with the geography
Global
Which are the types of Types of Market Segments ?
1) Purchasing power
3) Socio-demographic characteristics
4) Cultural Characteristics
5) Consumer Behaviour
6) Place of residence
Characteristics of the + 60 segment market
They don’t usually buy houses, cars or durable goods, except if they change their pace of residence to buy a second hand house.
They purchase services: health care / culture / leisure
They also buy goods and services for their relatives
Characteristics of the Millennial Generation
More different to the other group
They were born in the 80s and 90s
They grew in a world dominated by the email, texting, sharing games and digital social media
They are urban in their habits
75% of them in the USA have, at least an account in social media compared with 30% of baby boomers and 50% of generation X
Less than 20% think that owning a house is important
They don’t see the usefulness of having a bank account
83% of them place the mobile beside bed when sleeping, compared with the 50% of baby boomers and 68% of Generation X
Percentages are even higher in the case of women and for males with university degrees
They are digital natives !!!!
In general terms, this generation likes to spend their money on experiences instead of owning things.
They are also digital natives because they are the first generation that is born with the technology.
The use of the internet is becoming more common and more general → The number of internet users has increased a lot over the years.
Characteristics of the Gen Z ( Zentennials )
Generation Z views their job as a means to an end.
Generation Z is entrepreneurial, it knows there is money to be made from good ideas.
From the time of their birth, the internet and cell phones ( for the most pat ) were commonplace. Gen Z wants instant gratification, and they know if that if they need information, it is easily accessible,
They research companies online, and rely on user reviews to back up their gut instincts about a company before they actually do business with them.
This group is very focused and competitive in most areas of life.
With limitless information at their fingertips → this generation has a lot of knowledge and exposure to many different topics:
→ with this breadth of knowledge, they constantly seek new ideas and experiences.
Gen Z preference to work independently
Having access to so much information, Gen Z has strong opinions and wants them to be heard → true
As consumers, Gen Z’s behaviour reflects their values - and the influence of an increasingly digital world
Gen Z kids can rely on their tech savvy and extensive social network to make informed purchasing decisions.
In much the same way that Gen Z use social media as a means to curate their own personal brand, they also look at their purchasing decisions as an expression of their values and identity,
They value personalized products, and they are drawn to brands who share their point of view on political issues
Which are the needs of the cities ?
Infrastructure → not only roads, is also the concept of smart cities, that is basically using modern technology in order to improve the way of living of the people in the cities, so you use technology and data to help the people to manage the city.
Housing → is needed in modern cities.
Controlling congestion and pollution → controlling pollution like for example the cars and buses → is important to control this to increase the way of living of the people.
Planning services
Food and water → you need to feed people
( all of these are opportunities for business )
Explain how the urban consumption works
Culture / leisure / entertainment → people in cities can afford this types of services ( not bc they have more money than the persons of rural areas is because these services are located in urban areas, like for example restaurants)
Financial Services → for example, there are some credit cards that are not often accepted in rural areas.
Digital social media → is highly consumed in urban areas.
We also can classify people by their level of income: Explain the main characteristics of the Middle Class
The middle class is the backbone of modern societies in economic, political and social terms.
The most important part of a country is the middle class, at least in the developing countries.
The middle class buys branded goods and services such as:
- Cars
- Consumer goods
- Education
- Holidays
- Financial services
- Insurance
The middle class is increasing globally → 30% of the global population
The middle class is a very good opportunity for business.
What is the main consumption of the middle class ?
Brands → can be identified by the quality and also can indicate a sign of prestige. There is also brand loyalty.
Goods and services that fulfill its aspirations
Status → To show that they are something, and everything is a sign of status.
who are the affluents ?
People with a net wealth between 500.000$ and 1 million US dollars ( excluding the main house )
Who are the millionaires ?
People with a minimum net wealth of one million dollars (excluding the main house)
What is the main consumption of millionaires and affluents ?
Luxury personal goods
Luxury cars
Yats
Artworks
Luxury housing
