Toward a tradeoff model for international market selection
Section snippets
Overview of the IMS literature
IMS aims to determine the relative attractiveness of markets within a considered set, prior to the final in-depth assessment of the most appealing one(s) for expansion (Reid, 1981). Among others, Ayal and Zif, 1978, Chetty and Hamilton, 1993 stress that effective market choice is a strategic decision that affects export performance. Errors can be costly and may also dampen the firm’s export enthusiasm (Welch & Wiedersheim-Paul, 1980). Cooper and Kleinschmidt (1985) have shown that exporters who
Review and analysis of the shift-share model
Shift-share uses only one input variable, industry-specific imports at two time points for a selected basket of countries, and estimates each country’s market potential based on its rate of import growth relative to the others (Green & Allaway, 1985). The model’s logic is summarized in the Appendix, part A. Given its core strengths of simplicity and industry-specific orientation, a more intensive analysis was undertaken to examine whether the model’s major weakness, that it is limited to
Model development and method
The step-wise IMS modelling approach proposed in the seminal studies of Douglas, Lemaire and Wind, 1972, Dichtl and Koglmayr, 1987 was used to guide the development of the model. This consists of setting relevant criteria; specifying key constructs and their measures and allocating weights to them; setting rules for aggregating scale values and their weights; and using these to transform the data into an overall score. Because the model attempts to address a major gap in international research
“Two-dimensional” approach
The target markets were clustered by their values into even quadrants, based on the plotting described above for each of the six [exporting country ∗ product] sets. The results are shown in Fig. 2. Target markets in the upper right (high potential/low barriers) offer the best export opportunities, those in the lower left (low potential/high barriers) are the least promising, and so on.
Implications and conclusions
Research of this type is limited primarily by the deficiencies of secondary data. Key challenges include the lack of direct conversion schemes between the trade coding systems (the SITC codes alone have been revised three times since 1965 and some countries still report using earlier versions), varying data definitions, and the unavailability, unreliability, or aging of data for some countries, particularly less developed ones (e.g., see Nachum, 1994). Greater product specificity would also be
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