Tools for Country Evaluation

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Trade Analysis and Analogy Methods

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 Widely Used method for country evaluation by

estimating its market size

In other words, Market size = Product +

Imports Exports

One can arrive at market size by using data

based on Indian Trade Classification (harmonized system)

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Indian Trade Classification (ITC) An 8-digit common code classification based on (HS) internationally adopted
Harmonized System of Nomenclature (HSN) has

been adopted in India for all trade related transactions, which facilitates international and domestic trade. This code has been developed by Ministry of Commerce & Industry and is popularly known as Indian Trade Classification (HS).
This common classification is expected to
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achieve improved tax/tariff administration/data

Main features of ITC

8-digit Common code classification ITC(HS) is

based on Harmonized Commodity Description system (HS).

Used for all trade related transactions This common classification is used by

different agencies like Department of Customs & Excise, Directorate General of Foreign Trade (DGFT), Directorate General of Commercial 3/25/12 Intelligence and Statistics (DGCI&S).

Coming back to the 1st tool

Published data on exim can be obtained

through WTO, International Trade Centre, and the UNCTAD. through customs and central banks. For instance, In India RBI and DGCI&S are responsible.

National Governments comply trade statistics

Production statistics are available through

organizations for broad product categories like agricultural commodities, textiles, steel, 3/25/12

For new product categories, with little

consumption and production in the past, various types of analogy methods are employed. development and comparable consumer behavior is selected whose market size is known. Also, a surrogate measure is also identified, which has similar demand to the product for the international market. time periods, which may be compared with similar demand patterns in two different countries can also be used.

Here, a country at similar stage of economic

Alternatively, the analogy method for different

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Market Size Indicators

Analogy method
Pick a country at the same state of economic

development as the country of interest and for which the market size is known
Based on premise that the relationship

between demand for a product and a particular indicator is similar in both countries

Example

Market Size Indicators

Analogy method
McDonalds uses a variant of the analogy method,

where penetration is the number of restaurants

Opportunity-Risk Matrix

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The internationalizing firm may choose variables for

Opportunities like - market size, growth,

future potential, tax regime, costs etc

Risks like Political, economic, legal,

operational etc In this tool, values and weights are assigned to each of these variables depending on the perceived significance by the firm. Therefore, it 3/25/12

Ranking of various countries may be made for

investment. Countries with low-risks and highreturns are often preferred investment destinations. projections.

Such grids can also be used for future

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Countries for investment can also be plotted in form of a matrix.

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Growth-Share Matrix
This technique offers a useful tool to evaluate

countries for different products based on their market share and growth rate. categories on the lines of BCG matrix. countrys exports or firms exports so as to facilitate segmentation of the products under the 4 categories.

Here, products are classified under 4

Such a matrix can be prepared either for

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Country Attractiveness Company Strength Matrix

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Analysis can be carried out based on business

attractiveness of countries and the competitive strength of the company.

Various factors like market size, market

growth, customers buying power, average trade margins, seasonality and fluctuations in the market, marketing barriers, competitive structures, government regulations, economic and political stability, infrastructure and psychic distance may be taken into account to assess the country attractiveness.

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The competitive strength of a firm is determined

by its market share, familiarity and knowledge about the country, price, product-fit to the market, demands, image, contribution margin, technology position, product quality, financial resources, access to distribution channel and their quality.

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Primary Markets these countries offer the

highest marketing opportunities and call for a high level of business commitments. The firms often strive to establish permanent presence in these countries.

Secondary markets Here, the perceived

political and economic risks are too high to make long-term irreversible business commitments. A firm has to explore and identify the perceived risk factors or the firms limitations in these countries and adopt individualized strategies like JV so as to tackle their limitations. 3/25/12

Tertiary markets These include countries

with high perceived risks and therefore allocation of forums resources is minimal. Generally a firm does not have any long-term commitment in such countries.

Ford tractors used this matrix and placed

India under the extreme right top of the matrix wherein the country attractiveness was very high but the competitive strength of the company was low. 3/25/12

Hmmm

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