Market Segment, Target Market, Potential Target - Factors to Consider before Starting Business - Essay Example

Market attractiveness report Name Institution Instructor Course Date Executive summery Before undertaking any business investments it is important for an investor to consider the demand trend of the products to trade as well as the target consumers. It is essential to identify an appropriate market segmentation method such as geographic and demographic criteria to help cover a large number of consumers. Copper metal is widely used in many various industries across the world. Therefore target market for copper includes a range of consumers ranging from electricians, schools, constructors, metal manufacturers, hospitals as well as engineering companies among other. Japan, China and South Korea are among Australia’s major copper exporters and biggest copper consumers making their markets viable for more foreign investments. However, these markets are often faced with challenges that tend to threaten foreign investments which include political instability and high corruption. This paper will analyze the market segment, target market, potential target as well as the various factors to consider before starting business. These factors include demographic, geographical, economic, legal and political factors. It will also tackle the potential challenges faced by the target markets. Market attractiveness report Copper is an important product widely used in plumbing, various electrical applications as well as building applications. It also used in metal alloys due to its high thermal as well as electrical conductivity ductile characteristics. It also holds a cultural significance to humans since it was the first mental ever used by man as early as 7000BC. Australia is among the world’s top copper producers, ranked top fifth on the list. It is Australia’s top ten most valuable product exports with 13 percent of the world’s resources of copper. It has substantial copper resources almost in every state including the Northern Territory, but predominantly found in Queensland and South Australia. Copper has been mined in Australia since its first discovery at Kaunda in Southern Australia in 1892. Currently, Australia produces more around 900 kilo-tonne of copper per annum, making it the sixth biggest producers after countries such as Peru, The USA, Indonesia, and Chile. Its most production are mined majorly mined from Mount Isa areas in Queensland as well as at the Olympic Dan Mine located in South Australia. Other regions include Osborne in Queensland, Teifer in Western Australia, North-parkes, Ernest Henry and Ridgeway in New South Wales. The major Australian copper exports include China, India, Japan as well as Korea ( Dringen, Scheiber & Mercer 2013). Market segmentation Market segmentation offers businesses with numerous possibilities of customizing unique elements in relation to product, price, place as well as promotion. As a marketer, I will segment my market through geographic criteria along with its demographic data to create more specific profiles. Nations with rapid economy growth and urbanization will be put into consideration. I will also target countries which are strategically located in terms of accessibility and with more consumers of copper as a commodity for export. I will also segment my consumers by benefits of my commodity. Target markets Copper has been a crucial material for man since pre-historic periods. It has even been incorporated in the naming of historic human stages following its discovery in the in late 18th century. Therefore my target market for copper will include a range of consumers including electricians, engineers, constructors, metal manufacturers, schools, hospitals and in the transport systems among others. This people tend to use copper in various industries and ways. Copper holds a multitude of uses ranging from electrical appliances, wires, utensils, roofing sheets to coins. Approximately three-fourths of copper is used in the manufacture of various power and wire cables, generators, switchboards, and electric motors. Copper is also used in plumbing and due to its high heat conductivity, copper is used in heat-exchanging apparatus including air conditioner coils as well as refrigerators. Powdered copper is used as pigment in many paints. Compound of copper are globally used as insecticides and fungicides, electroplating. Nearly 22% of copper is used in pipe industry. Source: Dringen, Scheiber & Mercer (2013). Economic, cultural, geographic, demographic, political and legal issues It is important for an investor to learn about the existing economic, cultural, demographic, legal as well as geographic location of your target trade partner. Becoming knowledgeable about other country’s culture before doing business will reduce the risk of failure. With regard to economy, as an investor in a foreign country, I prefer an economy where private commodities predominate. The country should policy paths that promote a stable as well as prosperous market economy which is characterized by private property. Cultures practiced in East Asia tend to be relatively different from those of the Western cultures. For instance, Chinese, Koreans as well as Japanese often practice Confucian values along with Chinese characteristics. In order to increase copper sale, the target market should uphold a culture of innovativeness in terms of constructions, engineering, decorations and transportation among others. It should have practice good ethnic relations. Domestic instability or conflicts with neighboring states will lessen the profitability of operating business because both domestic and export sales are impaired. Many production is disrupted, many facility damaged or destroyed. In addition, political instability tends to affect the value of national currency, hence reducing the value of assets and the future profits created by the investments. Hence, it is important to target a market in a country that value political stability since a conducive political environment is key to the success of any business. Geographical locations often play an integral part in the access to markets.it impacts on climate changes, resources as well as human development. The geographical location of the target market should be strategically located for easy transportation of the commodities. It should have navigable rivers, good natural harbors as well as long coastlines with well-built ports to accommodate big and bulky cargoes. In addition, the market target should also experience a stable environment free from destructive floods, landslides, monsoons as well as tsunami (Hou, 2013). As the significance of foreign direct investments intensifies, there is an increasing need for stable as well as well-tailored foreign investments regimes that enhance national well-being and sustainability. The market should also have clear laws and regulations that protect foreign investors. It should effective authoritative as well as universal legal policies that positively constitute to direct investments. Moreover, law and regulation are often key elements of quantity and quality of foreign investments, hence, the legal regimes governing the investments should incentivize and encourage more profits to avoid damaging the national economy and investments. The host country should at least provide loan guarantees as well as subsidies to help encourage more investments. It also important for the host country to have laws that promote fair compensations when there is expropriation. There should be trade agreements such as WTO that discriminates against foreign commodities in favor of local goods (Pennemann, 2013). Demographics will significantly determine product references of consumers. It is important therefore to identify key customers through various demographic traits such as income, age, gender, and ethnicity. In order to make maximum profits, I will target a market with similar demographic characteristics that will help optimize a company’s profits and sales. Income is one of the demographic variables that impact business. The products will sell the commodities at an affordable price to all groups of consumers. Consumers with comparatively lower incomes will be given discounts on the products. Foreign target market My key foreign target market will include China, India and South Korea. South Korea is ranked 15th globally by nominal GDP. It is one of the fastest growing developed states in the 20th century. Globally, South Korea is ranked the 10th largest importer. It enjoys a stable economy with unemployment rate of 3.8%, GDP per capita of $32,020 and an inflation rate of 4,2%. India’s enjoys an economic freedom score of 55.2, making it the 119th freest nation in the 2013x index. It is the 19th world’s largest exporter. It has a GDP of $ 4.984 trillion with a growth of 3.986. Compared to Korea, India has a relatively high inflation rate of 9.31% with unemployment rate of 3.8. Following the market reforms in early 1978, China has experienced a centrally planned market based economy with a rapid growth of 10% in GDP. This has lifted more than 100 million out of poverty. With a population of more than 1.3billion people, China is ranked as the second largest economy globally with a freedom score of 51.9 making the 136th freest nation in 2013 index. However, China’s experiences high corruption with its judicial system vulnerable to great political influence. China has GDP of $8.939 trillion with unemployment rate of 4.1% and an inflation rate of 2.5%. ‘First choice’ International market According to statistics, China is currently is one of the world largest importer of copper and Australia’s largest exporter. Copper ore exports from Australia to china have increased readily from $8.8 billion in 2001 to about 77.1 billion in 2011 hence representing an average annual increase of 25.6 per cent. China holds a Gross Domestic Product of 7.8 percent with a growth of 10.4 percent per annum. Currently, china stands as the world’s second largest economy with an increased demand of more raw materials such as copper ore from other countries including Australia (Hou, X. (2013). The Organization for Economic Cooperation and Development (OECD) predicts that china’s gross domestic product (GDP) will rise to 8.2% in 2014. Tougher business conditions experienced both globally and in china, have significantly led to diminished financial performance for many European companies in China. However, in spite of the lowest business confidence since the onset of global economic recession, China continues to be a market priority and a backbone for global revenue generation with business confidence of 51.40 and annual inflation rate of 3.2%. Infrastructure development is a top priority for the Chinese government and therefore, China enjoys modern infrastructural systems including roads, rails, electricity as well as telecommunications (Pennemann, 2013). Challenges No nation is immune from corruption. The World Bank identifies corruption as one the biggest impediments to foreign investments in many countries across the globe. Corruption can amount to an additional 20% in tax hence discouraging investments as well as reducing profit margins. China suffers from a widespread of corruption hence making foreign investments difficult. It is ranked 78th out 178 nations by Transparency International Corruption Perception Index. Investing in politically unstable countries generates specific challenges and risks for foreign investors (Rinehart et al., 2013). Although China is politically stable currently, for most of the 20th century, the country has experienced tremendous economic as well as human losses as result of political instability. Business operations can be brought to a halt following hostilities hence putting investments at risk. Hence, in the context of conflict, as I foreign investor, copper exports are more likely to experience abrupt domestic demands as well as unavailability of local inputs as well as infrastructure making copper marketing difficult. There are a number of companies from Australia which exports copper ore in China. Hence this investment is bound to face stiff completion from the existing companies. As a result, the company plans to identify key generic competitive strategies which include cost leadership, focus differentiation as well as cost focus differentiation (Miller & Cross, 2013). Market strategy Partnering is useful strategy in foreign markets where culture. Business and social life is substantially different from your own. It helps one to identify local market knowledge and customers more wisely. In order to achieve a great market for copper, I will create a joint venture with a copper manufacturing industry in China. The host company will help market our products to the consumers. We will merge together to create a third company that will undertake business in China. Both profits and risks will be shared equally. Joint ventures are relatively cheap compared to greenfield investments because I do not have to build a manufacturing plant in China as well as incur the extra expenses that from government regulation on foreign investors (Miller & Cross, 2013). Conclusion With remarkable growth in international trade, learning more about your target market has become significant. For more than 100 hundred years, industrial demand for copper has greatly increased. Since 2001, china has experienced a rapid growth in both urbanization and industrialization, making copper use more relevant. Partnering is almost a compulsory when investing in foreign markets. Therefore creating a joint venture is an essential aspect of conducting business in China. Recommendation As Chinese, India and Korea data continues to rise, it is important for these countries to come with effective strategies to help increase its tolerance and resilience to inflation rates. They should also invest more in global economic development by creating more friendly legal policies that promote foreign investments. Both three countries experiences substantial rates of corruption, they should therefore work on increasing transparency especially when dealing with foreign investors. Reference Dringen, R., Scheiber, I. F., & Mercer, J. F. B. (September 11, 2013). Copper metabolism of astrocytes. Frontiers in Aging Neuroscience, 5. Hill, C. W. L., Cronk, T., & Wickramasekera, R. (2013). Global business today. North Ryde, N.S.W: McGraw-Hill Education (Australia. Hou, X. (2013). Community capitalism in China: The state, the market, and collectivism. Cambridge: Cambridge University Press. Miller, R. L. R., & Cross, F. B. (2013). The legal environment today: Business in its ethical, regulatory, e-commerce, and global setting. Mason, Ohio: South-Western Cengage Learning. Pennemann, K. (2013). Retail internationalization in emerging countries: The positioning of global retail brands in China. Wiesbaden: Gabler Rinehart, Ward, Sherris, Jacqueline D., Butler Ravenholt, Betty, & Blackburn, Richard. (2013). Contraceptive social marketing : lessons from experience. (Contraceptive social marketing : lessons from experience.) 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