Describe two criteria used to assess a market’s potential for a new product. Based on these criteria, what are the steps the managers of a global company will need to take in order to decide whether a foreign market is a viable market in which to introduce a new product?
Two criteria commonly used to assess a market’s potential for a new product are market size and market growth.
1. Market Size: This criterion considers the overall size of the market and the potential customer base for the new product. It is important to understand the total number of potential customers, their purchasing power, and the size of the target market segment. Market size can be determined by analyzing population data, consumer spending patterns, and market research reports.
2. Market Growth: This criterion focuses on the future growth prospects of the market. It assesses whether the market is expanding, stable, or declining. A growing market indicates increasing demand and potential opportunities for a new product. Market growth can be evaluated by analyzing economic indicators, industry reports, and trends in consumer behavior.
To decide whether a foreign market is viable for introducing a new product, the managers of a global company should follow these steps:
1. Market Research: Conduct thorough market research to gather data on the potential foreign market. This includes analyzing factors such as market size, growth rate, competition, regulatory environment, cultural preferences, and consumer behavior.
2. SWOT Analysis: Perform a SWOT (Strengths, Weaknesses, Opportunities, Threats) analysis to evaluate the company's internal strengths and weaknesses in relation to the foreign market, as well as external opportunities and threats. This analysis helps identify the company's advantages and challenges in entering the market.
3. Market Entry Strategy: Develop a clear market entry strategy considering factors like pricing, distribution channels, promotion, and product adaptation. This strategy should align with the specific characteristics of the foreign market and address any challenges identified in the SWOT analysis.
4. Risk Analysis: Assess the potential risks and challenges of entering the foreign market. This includes analyzing political, economic, legal, and cultural risks. Understanding these risks will help the company develop appropriate mitigation strategies.
5. Financial Analysis: Conduct a detailed financial analysis to determine the potential return on investment (ROI) of entering the foreign market. This analysis should consider factors such as market potential, sales projections, production costs, marketing expenses, and expected profits.
6. Pilot Testing: Consider conducting a pilot test or market entry test in a small-scale or controlled manner to assess the actual customer response to the new product. This can help validate assumptions and gather valuable market feedback before fully launching in the foreign market.
By following these steps, the managers of a global company can make an informed decision on whether a foreign market is a viable one to introduce a new product.