Marketers find it extremely difficult to identify potential target markets in a global environment these days due to the highly competitive edge. However, companies prefer to enter markets with sufficient potential in terms of economic, cultural and political terms.
It is a fact that, a company cannot use the same strategy everywhere in the world. This is because of the contrasting features that prevent companies from drawing conclusions about target markets worldwide.
Factors Influencing The Selection Of Potential Target Markets In A Global Environment:
Per Capita income or Consuming Power of Customers: per capita economic growth rate determines the selection of target markets. Total population and per capita income determine aggregate consuming capacity.
Even the fastest growing countries in the world are experiencing economic slow down at present. This prompts countries to curb on imports and develop products manufactured from indigenous technology. Companies that intend to venture in to such countries may struggle to compete with their domestic counterparts. Apart from the income, other factors that determine the viability of target markets are:
Urbanization: According to statistics, the world population is around 6 billion and is expected to reach 8.5 billion by 2025. The major attracting factor of this population estimate is the pace of urbanization taking place in developing countries. It has been estimated that urbanization is booming at a staggering rate across the globe.
Political, Legal and Cultural Factors: A country’s political, legal and cultural factors determine the feasibility of business. For example, Brazil, Russia, India and China have proved their potentials in International business. However, these countries have sufficient potentials to emerge as the leaders in international market, but a variety of environmental factors affect their feasibility as potential markets. Political, legal and cultural factors determine how attractive a country is for fresh entrants.
Ethnic Factors: Firms have to consider the ethnic factors of the countries before venturing in to them. Only those countries that keep ethnic harmony with the company’s products will act positively to business.
Currency Stability: The stability of the target market’s currency is an important factor. Thus, companies will face serious problems, if they are operating in a country with unstable currency.
Infrastructure: Infrastructure plays a vital role, when it comes to shipping the merchandises to target markets. The communication department of a business is also prone to this.
Specific Factors in Target Market Selection:
Apart from the above-mentioned general factors, several other industry specific factors play a crucial role in the selection of target markets, which are:
Domestic Production and Consumption: As far as the future of the product is concerned, the domestic production and consumption styles determine the long-term success of a business. If the domestic production is more, the company will find fewer chances to grow.
Nature of Competition: A mature market is dominated bay huge numbers of players and thus, it has low feasibility, as new entrants struggle a lot to compete with existing players.
Overview:
Target market decisions in international business are affected by multiple factors. Therefore, only those companies, who consider these factors, will succeed in the international market.