ExportCompass - strategy tool for CEO. World Trade center "Riga". 2 Elizabetes Str., LV-1340, Riga, Latvia.

Data series

The 11 factors evaluated here are the most significant ones to evaluate export markets from different aspects:

• Market size
• Market volume changes
• Market saturation
• Price
• Price changes
• Competition
• Distance
• Purchasing power
• Political risk
• Commercial risk
• Import barriers

Export Index

For each of those factors an index is calculated whose value is from 0 to 1, where 0 is the lowest evaluation and 1 is the highest.

This mutual evaluation of the attractiveness of the countries in each factor gives the opportunity to compare the countries objectively, since the data used in each factor are from one reliable source, i.e., the methodology of the collection of data is the same for each country, and there is less possibility of making a wrong evaluation when using different data sources.

Strategy matrix

By using this kind of Strategy matrix, it is possible to determine the market evaluation for goods of high added value or luxury goods, as well as for low price products. This strategy is usually determined by the company's management or is elaborated by inviting a consultant. During export measures, this strategy may change if, as a result of export experience, the company has to revise its possibilities.

Benchmarking

By using benchmarking, a company can determine a range of restrictions for the selection of the perspective countries. Those restrictions are usually linked with the minimum threshold of requirements in relation to the market; these may be import volumes, price level, distance to the market, etc. Thus a company obtains the Export Index score for the countries whose market indicators are in line with the company's considerations.

Modeling and adding data

To perform this process independently in a company’s office, Export Compass Desktop software may be used

Further market examination

After having developed an Export Index, it is possible to obtain short Country profiles for each country of interest in order to ascertain or get an in-depth picture of the respective market. These Country profiles show indicators representative of the market as well as the structure of competition and its changes during the last 5 years.

Data series

The 11 factors evaluated here are the most significant ones to evaluate export markets from different aspects, like market size, market growth, price, distance, competition, risk etc.

Market size

• The amount of the physical (or value) market of the product during the last year.
• The highest evaluation, of course, is given to the countries with the largest import markets. In practice, this is also the most important factor followed by entrepreneurs who analyze different statistical indicators.

Increase of market volume

• Reflects the increase of the physical market volume of the product or of the market value (in case the evaluation of the physical volume is not possible due to product specification) during the last 5 years.
• The highest evaluation is given to those countries whose import markets have experienced the largest increase. A growing market is always more attractive to an entrepreneur since the share of increase is more free from competition than in cases where the market is restricted and where each company is struggling for its own "market centimeter".

Market saturation

• It shows the popularity of a product that is imported, i.e. the import volume is calculated per one resident of the country.
• Higher evaluation is given to those countries in which the import volume per one resident is higher, since in such a case it is more probable that it will be easier to introduce the product to the importer, and the market is already prepared for the respective product.

Price level

• Shows the average international sales price prevailing in the respective country.
• The highest evaluation is given to countries with the highest price level. A high price in a market creates sufficiently large possibilities for a company for marketing maneuverability.

Price level changes

• Reflect changes of the international sales price within a 5 year period.
• The highest evaluation is given to those countries whose import markets have experienced the highest rise of the average sales price. A price rise gives an opportunity to expand the market share and to make an additional profit also in the future.

Local competition of production

• The export volume of the respective product in the respective country, i.e. what is the export share in relation to import volume.
• The highest evaluation is given to those countries which do not export the respective product or export it in small amounts. This shows that the product is not produced in the respective country or is produced in such a small amount that is not sufficient for the local companies to start exporting it. No doubt, it is easier to penetrate this kind of market than a market where the local production is powerful, traditional and almost entirely accommodates the internal market.

Market distance

• Shows the transportation distance from your country to the respective country.
• The highest evaluation is given to those countries whose geographical location is nearer. The longer distance means basically higher transportation costs and longer time of transportation, however, it also indicates implicitly on non-traditionalism of a market, i.e. the farthest markets, with some exceptions, usually are also the markets of other culture.

Purchasing power

• It shows the purchasing power of the people in the respective country.
• Higher evaluation is given to the countries with a higher purchasing power. The purchasing power indicates the level of the people's revenue, which determines the price level that can be determined by the exporter of the goods. If there is a low purchasing power in a country, it has to be taken into consideration that the price of mass-consumption products must be low to ensure trading opportunities for it. In those countries where the people’s purchasing power is high, a company has more maneuverability as regards determining of a product's price.

Political Risk

• Political situation of a state may influence significantly export transactions, because when these risks occur, money transfers may be stopped or delayed, currency value may change, business environment may get influenced, corruption may increase. These risks mean also additional costs for transaction insurance. Risk assessment is made on the basis of experience gained by and assessment made by export transaction insurers.
• The higher assessment is given to the countries in which such risks are the lowest.

Commercial risk

• Commercial risks related to possibility of transaction partners not making payments in due time or not paying at all for the concluded export contracts. These risks mean also additional costs for transaction insurance. Risk assessment is made on the basis of experience gained by and assessment made by export transaction insurers.
• The higher assessment is given to the countries in which such risks are lowest.

Import barriers

• It reflects the level of trade restrictions the respective country has introduced with regard to its import. This indicator includes both tariff and non-tariff restrictions (quotas, licences, subsidies, etc.). It is possible to view separately restrictions on agricultural and processing industry production.
• Higher evaluation is given to the countries in which these restrictions are lower.

Strategy matrix

Notwithstanding this calculation, the result obtained may not reflect the desired result since every product and company has its own sales strategy and possibilities, therefore the significance or weight of each abovementioned factor must be evaluated. The mutual significance of those factors is the so-called Strategy matrix which expresses the significance of each of those factors and which of them is less significant.

Strategy matrix example (importance of each factor)

By using this kind of Strategy matrix, it is possible to determine the market evaluation for goods of high added value or luxury goods, as well as for low price products. This strategy is usually determined by the company's management or is elaborated by inviting a consultant. During export measures, this strategy may change if, as a result of export experience, the company has to revise its possibilities.

Benchmarking

By using benchmarking, a company can determine a range of restrictions for the selection of the perspective countries. Those restrictions are usually linked with the minimum threshold of requirements in relation to the market; these may be import volumes, price level, distance to the market, etc. Thus a company obtains the Export Index score for the countries whose market indicators are in line with the company's considerations.

As a result of benchmarking, it is also possible to calculate the Export Index score for countries with the aim of determining the most perspective countries in the future, i.e. try to guess which will be the new fast-growing markets. For example, in this case, it is important to pay attention to those countries where the market saturation is low or minimum; however, there are features which could indicate to the opportunities in the future, for example, the region, market size growth, purchasing power, price change, etc.

Modeling and adding data

In a market evaluation, it is possible to use different strategy matrix and benchmarking considerations, therefore it would be important for an export manager to calculate different Export Index scores that are most adequate for a product or a company’s strategy. To perform this process independently in a company’s office, Export Compass Desktop software may be used, which is included in the Export Compass overview package. All data are included also in a Microsoft Excel file, which may also be used by the company’s export manager in the modeling process. The advantage of using the Export Compass Desktop software is onscreen report generation and printing and saving of the obtained results.

ExportCompass Desktop 1.1 screenshot

Sometimes companies have their own specific market evaluation data, so there is the possibility to add those data the existing Export Compass data as a new factor or factors. In such a way, a company can combine the specific market evaluation data that are in its possession with the Export Compass data.

Further market examination

After having developed an Export Index, it is possible to obtain short Country profiles for each country of interest in order to ascertain or get an in-depth picture of the respective market. These Country profiles show indicators representative of the market as well as the structure of competition and its changes during the last 5 years. Such Country profiles practically allow a company to develop the so-called short-list of the target countries.

On the basis of this short-list, a company can already plan its export activities like searching for an importer/distributor, exhibitions, in-depth researches, etc.