Contemporary Issues in Business, Management and Education PDF

Procedia - Social and Behavioral Sciences 110 ( 2014 ) 1166 – 1175
1877-0428 © 2014 The Authors. Published by Elsevier Ltd. Open access under CC BY-NC-ND license.
Selection and peer-review under responsibility of the Contemporary Issues in Business, Management and Education conference.
doi: 10.1016/j.sbspro.2013.12.963
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Contemporary Issues in Business, Management and Education 2013
Reasoning of export market selection
Algita Miečinskienėa*, Viktorija Stasytytėa, Justina Kazlauskaitėb
aVilnius Gediminas Technical University, Faculty of Business Management,
Saulėtekio ave. 11, LT-10223 Vilnius, Lithuania bJSC Rubineta, Savanorių ave. 180, LT-03154 Vilnius, Lithuania
Abstract
Selection of export market is a very important step for a company which is going to expand its business and to become more
global. Company should choose the markets in which export activity is most valuable. Scientists suggest different models for the
reasoning of export market selection decisions, but almost all of them agree that markets have to be evaluated according to the
most important criteria: economic, political, social and technological. Different criteria are important for different companies.
Determination of the most important criteria is the first step in the process of export market selection. After analysing the
significance of the criteria and their values, a target export market can be identified. The paper aims to present the scheme which
can help to determine basic export market selection factors and thus enable to find target markets. Analysis, synthesis and
comparative analysis, as well as expert evaluation methods are used. The findings of the research performed in the paper help to
decide in which markets export activity should be expanded according to the main factors from the point of view of particular
company.
© 2014 The Authors. Published by Elsevier Ltd.
Selection and peer-review under responsibility of the Contemporary Issues in Business, Management and Education conference.
Keywords: export; export markets; criteria; company; activity.
1. Introduction
The efficiency of export, as well as successful foreign economic relations is determined by the properly selected
international market. While economic relations develop, the needs of inhabitants grow and competition increases,
the efficient organization of export market research becomes an especially important factor influencing the
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1167 Algita Miečinskienė et al. / Procedia - Social and Behavioral Sciences 110 ( 2014 ) 1166 – 1175
productive international trade of a company. The levels of productivity for exporting firms are clearly higher versus
non-exporters (Delgado, Farinas, & Ruano, 2002; Temouri, Vogel, & Wagner, 2013).
The problems of export market selection are widely analysed by scientists in various aspects (Papadopoulos,
Chen, & Thomas, 2002; Alexander, Rhodes, & Myers, 2011; He & Wei, 2011; Ortiz, Ortiz, & Ramirez, 2012).
However, under changing environment, while companies are working under different conditions and in various
countries, the necessity appears to propose solutions for export market selection problems in order to adapt better to
the conditions of environment. It is often assumed that firms select markets on a rational basis, but it is undoubtedly
more realistic to recognize that a non-systematic, strongly personalized and essentially belief-driven market
selection process is a characteristic of many market selection decisions (Alexander, Rhodes, & Myers, 2007).
The company, having enough resources to invest in foreign markets, has to select particular markets for
investment. It cannot use all the possibilities available in international market. Thus companies should identify the
priority markets, the sequence of priorities and allocate resources. While resources are being allocated a decision is
made regarding the particular countries to sell the product, as well as the way of selling.
The successful selection of foreign markets is an important step in company activity, because:
• This decision impacts further actions in the selected foreign markets;
• The geographical distance of the foreign market and its location impacts the decisions of a company and its
possibilities to coordinate international operations;
• In the initial steps it can appear to be the key factor of success or failure in the international market.
The purpose of the paper is to analyse and generalize the proposed export market selection methods and models
and on the basis of the performed analysis to offer the integrated foreign market selection method, allowing to select
a target export market for a company operating in a particular field of activity.
The methods applied are: analysis of scientific literature, synthesis and comparative analysis, generalization,
expert survey.
2. Theoretical aspects of export market selection
The authors analysing the selection of export markets state that the market selection step is very important for a
company which is planning to export its products into foreign markets. A company should select the most proper
markets out of the variety of possibilities. The trend of decisions of the field under analysis is the creation of a
model evaluating certain factors. According to the selected factors the market segmentation/classification is
performed. Thus the most adequate foreign markets are being selected out of many available markets.
Kontinen & Ojala (2012) state that first of all a company engages in international trade with neighbouring
countries that have similar language, culture, political system, level of education, level of industry development, etc.
Also, this is especially true about exporting retailers, the companies tend to export into physically proximate markets
that are less structurally developed but in the process of development (Alexander, Rhodes, & Myers, 2007). This can
imply smaller competition in that market. Further, a company obtains more knowledge about foreign trade and
gradually starts developing its activity in the countries that are psychologically distinct. Xinming & Yingqi (2011)
notice that exporters can get acquainted more easily with language, education, social conditions and business
practice of a neighbouring country. In such a way risk and uncertainty can be avoided and expenses can be
decreased. Further a need appears to start relationship with other countries and their markets, as well as engage in
trade activity with them.
Some authors propose that for the selection of a foreign market out of a variety of possibilities, first of all a
company should use a screening method. Časas (2008) states that the indicators used for this method should be
obtained easily enough; also, they should be equal and comparable, for example, various macroeconomic indicators,
derivative indicators or other ratios related to company business. After several foreign markets are left for analysis, a
model is composed according company goals and its final product. A similar method is proposed by the
Papadopoulos & Martin (2011), where on the step of initial selection the analysis of secondary sources must be
performed. While performing analysis, the information about markets to be eliminated is gathered, and after that,
according to the selected criteria, the markets being left are evaluated. The objective of foreign market selection is to

1168 Algita Miečinskienė et al. / Procedia - Social and Behavioral Sciences 110 ( 2014 ) 1166 – 1175
develop a theoretical background in order to make the process as much continuous, efficient and productive as
possible.
Vengrauskas & Langvinienė (2009) propose a scheme for foreign market selection, which allows to consider the
importance of international business environment cognition, as well as the ways of reacting to various peculiarities
and differences of that environment. Also, the method proposed by the authors includes the process of comparison
of the country in which the core company is residing with the countries of secondary companies, and the market
search in order to sell the products or services in foreign markets.
The selection of foreign market for a global business is implemented by the following steps:
1. The core needs for foreign investments and trade. The needs of entering the international market are
evaluated; the potential of a company in a certain market is analysed.
2. Legal and political powers. The barriers to be encountered are considered (ex., the limitations of profit transfer
into another country), as well as other factors, such as political climate.
3. Economic and financial powers. In the third step such important financial ratios as inflation, interest rate and
credit offer are taken into account. The market demand (for example, using such ratios as purchasing power
indicator, GDP, etc.) and other market factors are estimated.
4. Ecological and geographical powers. This step is related with evaluation of climate, topography and natural
resources.
5. Demographic powers. The potential customers (average age of inhabitants, level of education, etc.) and
potential work force (loyalty of employees to a company, seeking for career, etc.) is evaluated.
6. Science development and technological innovations.
7. Socio-cultural powers.
8. The personal visit.
On every step, with the help of evaluation of the selected criteria, the market selection process takes place. Thus
the number of markets decreases with each step, until several target markets are left. The less attractive markets are
eliminated using the following criteria of the elimination procedure:
• Economic factors (too low level of income of citizens, etc.);
• Political climate (unstable political situation);
• Geographical factors (the country is too far away, the climate and relief conditions are inappropriate);
• Cultural environment (the language barrier and problems related with religion; low cultural and educational
level);
• Technological factors (low level of production and technologies, low employee qualification and competence);
• Foreign trade policy (high barriers of taxes, many non-tariff barriers limiting export, trade protection policy of
government).
According to Urbonas (2003), the separate stages of export market selection for particular companies can differ,
however, the initial market assessment, as well as the final market choice is common for all companies.
During the market selection procedure (Fig. 1), several criteria are selected that are appropriate and important for
an exporting company, and all the markets are selected that meet the determined criteria.
After that the second stage begins, where market macro-segmentation takes place. In order to determine the
interaction of the branches inside the country, markets are combined into branches, because it strongly impacts
export.
On the third stage the markets selected on the first stage are evaluated. The purpose of this analysis – using
various analysis methods, to reject the markets selected during the initial selection procedure if they do not comply
with the segment requirements. The criteria of the requirements are: market potential, demand in the market and
requirements for exporting company. The criteria proposed are evaluated with regard to time perspective using the
following methods of market volume assessment: