Introduction
Roll Rite, LLC is a private company in the US that specializes in the manufacture of tarp equipment. It was the first company to design and manufacture a high-tech electric tarp system. The equipment is mainly used in the trucking industry. Owing to its aggressive growth caused by unrivalled innovations, this would be the right time for the firm to venture into international markets.
Based on the high number of prospective countries where the company would export its products, the process of identifying the best foreign markets to venture into could be a rigorous process. Business organizations sell their products and services in foreign markets that could result in improved sales growth and equity (Chan, Covrig and Ng 1501; Lileeva and Trefler 1070; Müller 100).
However, many companies do not conduct evidence-based analyses before they venture into foreign markets. As a result, such companies end up making huge losses. This paper discusses the data, market indicators and steps that the leading producer of tarp and allied products would utilize in order to select the best three markets to export its goods.
The need to rank markets
It is always prudent for business managers to rank potential markets so that they have an outline of the expected business trends. Managers should not rely on business assumptions that are not supported by real market data. This happens when some members of the team could have some hidden agendas, which could imply that foreign markets could be selected based on personal reasons rather than for gaining competitive advantages.
In order for the management team of Roll Rite, LLC to identify correct markets that have the potential to help the firm realize improved financial growth and competitive advantage, it should engage in series of informed decisions. The decisions could be made based on the market data obtained from markets with regard to attributes, strengths, and weaknesses of the firm and its manufactured goods. Thus, the ranking could provide an essential starting point that could support collective-based discussion to culminate in the selection of the best foreign markets.
However, Roll Rite, LLC will not basically rank potential markets to justify the selection of the viable markets. The involved team may make some other crucial considerations that could guide it to know the order of pursuing the identified foreign markets. For example, budget constraints of the firm could make it avoid some foreign markets that could be characterized by high operations.
If this happens, then the company could enter into markets that do not have very high scores, but which are marked by manageable financial costs involved in daily operations. In fact, the firm could venture into close markets like Mexico and Canada, although they could have lower rankings than African markets, which could be associated with high costs of operations. Also, the team in charge of analyzing the external markets could consider some important strengths of the firm, for example, a wealth of experience in regard to dealing with specific markets.
Therefore, the decision of the team will not only be based on the outcomes of analytical models used to assess foreign markets. Such models will be updated on a regular basis to reflect market dynamics and growth trends of Roll Rite, LLC. It will also be important for the management of the firm to remember that the analysis of market indicators is a long process.
How Roll Rite, LLC will select foreign markets
The firm has gained a substantial market share in the US due to its innovative products and excellent customer service. It has developed a great image in long durability of its products, which are manufactured using the best technologies. The firm has been recording consistent financial growth over the years though the market for tarp products has been marked by a high level of competition.
In an attempt to assess its potential in foreign markets, Roll Rite, LLC would want to identify the markets that could have the most potential for its tarp systems. Although the company is marked by a significant financial strength, it would like to enter markets that are characterized by high penetration rates and low investments in the forms of advertisements and promotion.
The management team has felt that it would be easier to enter into the markets that have been already using tarp systems imported from the US. On the other hand, it would be quite difficult to penetrate easily into foreign markets that use tarp systems produced by local manufacturers (Kim and Wei 90).
In fact, the local manufacturers could adopt low pricing strategies that could drive Roll Rite, LLC out of the market. Thus, the sources of tarp systems in foreign markets will be an important factor to consider before the management can settle on a particular foreign market. The following steps would be followed in a model that could enable the firm to accurately identify external markets that could help it to gain competitive advantage and improved financial outcomes.
Step one: Developing indicators
As a result of the management team analyzing past sales, conducting competitive market research, and discussing with other market players in the trucking industry, it argues that the following indicators would impact the final decision with regard to the choices of foreign markets.
Product-based indicators
These would include the level of US exports of tarp systems and components. The rationale would be that the firm has gained competitive advantage solely on product innovations and durability. It is documented that the firm has been doing pretty well in markets characterized by a high level of competition from other tarp systems’ manufacturers. Therefore, the most essential product-based indicator would be the level of exports from the US business rivals into external markets.
Past leads and sales would also be important product-based indicators that would influence the market choices. It is clear that the trucking industry is controlled by some US and foreign competitors. Thus, it would be essential to analyze the sales of these companies.
Industry size indicators
One of the indicators in this category would be the population. Generally, product sales correlate with the number of individuals that characterize markets. Therefore, larger populations would result in better sales than smaller populations. The per capita income of the people in specific markets would be quantified to determine income levels.
Populations that are marked by high income levels are also characterized by higher sales than the populations with low income levels. Also, it would require the analysis of the total market for tarp systems. This would involve the identification of specific market niches that have the potential for the products.
Market growth indicators
In assessing the potential of the foreign markets, the management team would determine the growth trends of the tarp systems’ markets (Petersen, Pedersen and Lyles 1110; Shrader 50).
For instance, it would enter markets characterized by higher growth rates than those with stagnated or negative dynamics. In fact, it would be pretty hard for Roll Rite, LLC to engage with new distributors without past dealings with tarp systems from the US in a stagnant market.
Figure 1. A table showing the data for the three main market indicators (2013).
For simplicity, the value of imports from the US by foreign markets, average growth rate, and the ease of doing business were used as the indicators. Figure 1 shows that Canada imported products of the highest value from the US while Netherlands imported goods and services of the least value.
Although the foreign markets recorded good import figures, it is clear that a good number of foreign markets showed negative growth with regard to foreign products from the US. This observation brings complexity in the analysis of the best markets to carry out business. For example, although the United Kingdom is ranked number 6 in terms of the value of imports, the country recorded a decrease of about 13%.
Thus, Roll Rite, LLC would be careful not to venture into markets that might be attempting to reduce the value of products they import from the US. Such a move could lead to huge financial losses. It would be interesting to monitor the growth trend of Hong Kong over the next one year to assess if it still has high growth rate with regard to the US imports.
If the growth rates were maintained, then the company would consider the foreign market as an excellent vehicle to gain competitive advantage and increase market share. Although other ranking features will be introduced in the subsequent sections, Canada has recorded very high value of imports, and the growth rate is also good.
The higher the value of the ease of business market was given the easier it was to conduct business with the county. For example, China has the highest value of the ease of business. It could be that there are less legal hurdles that could hinder a company to operate in China. Also, it could have a conducive political environment that favours investments by local and foreign business establishments.
Step two: Changing the data into indicators that can be used for comparison
This step involves assigning the data to the indicators used in the first table some point scores so that the market performance outcomes for all the countries can be ranked using numbers.
Various approaches can be utilized, but team members will have to judge and apply the right scores so that there would be comparability between the indicators. In regard to Roll Rite, LLC, the country with the highest value of imports from the US was considered the benchmark upon which the other states in the table were assessed. The following table shows the data with specific ranks.
Figure 2. A table showing the three indicators of the foreign markets and their rankings.
Next, it was important to introduce scores into the table. For this case, the country with the highest value of imports, Canada, was assigned a score of 100. This was used as the reference score for other foreign markets. Also, the raw point scores for the other market indicators were assigned using a similar approach. The following figure is a table with the indicators, rankings and raw point scores.
Figure 3. A table showing the market indicators, rankings, and raw points.
Step three: Weighting indicators
Not all market indicators could have great significance in selecting the foreign market. In other words, some market indicators should always be considered more essential than the rest. It is recommended that every market indicator should be assigned a weight that correlates with its importance in foreign market assessment (Deng 80).
The three indicators were assigned values between 1 and 3 (3 was the highest weight). Specifically, the ease of business was assigned a weight of 3 while market growth and value of imports were assigned weights of 2 and 1 respectively. The ease of penetrating a foreign market by Roll Rite, LLC was a very important aspect in business operations. This was the most important indicator that should be assessed in detail when planning to venture into foreign markets where the firm has little or no prior experience.
The second most important indicator for Roll Rite, LLC was market growth because, without proper market growth analysis, the firm could start operations in a foreign market that has resolved not to engage in business, for example, with companies from the US (Yeaple 300).
Lastly, the least important indicator for the company was the value of imports because, based on its business aggression, the company could enter a foreign market with a low value of imports from the US, but end up gaining a significant market share and financial growth.
Figure 4. A table showing market indicators, rankings, raw points, and weights of indicators.
In order to arrive at the final scores, the weights of the markets and point scores were multiplied. The result was a score for each indicator. Afterwards, the three score values for each market were summed up to obtain the total score.
The following table shows the completed calculations.
Figure 5. A table with the calculated scores of the market indicators.
The following data show the order of the foreign markets based on their total scores that are shown in the above table. The highest scoring market is the top while the lowest scoring market is at the bottom.
Figure 6. A table showing the order of foreign markets based on their total scores.
The three best markets (Mexico, Germany, and Japan)
The three best scoring foreign markets were Mexico, Germany, and Japan respectively. The management team of Roll Rite, LLC should use the model results to form the basis for discussion as they plan to venture into the three markets that were shown to have the best scores.
Although Mexico was not characterized by the highest market growth, it was the second best market with regard to the value of imports from the US. Thus, it seems that the country has a conducive business environment that could benefit the company. Interestingly, Germany was marked by negative market growth trend, but it was the score best market in the overall score. The negative growth could have been contributed by political events, which could go away in the near future.
Thus, it is an ideal market that Roll Rite, LLC should focus on entering in order to increase its market share. Japan is a highly industrialized country and with a significant value of the US imports (Chen, Lee and Isobe 134; Makino and Montgomery 480).
Roll Rite, LLC could gain a substantial market share in Japan based on its innovative ways of manufacturing tarp systems. In conclusion, the model has presented an excellent approach to study the potential of foreign markets with regard to Roll Rite, LLC. The firm will focus on the outcomes of the model to launch further market research studies to understand the markets better.
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