Assessment of a country as a market - 4.2.2

Market attractiveness - A measure of the potential value of a particular market in a country. It can include short-term or long-term profit and growth rate of the market. A range of tools can be used to assess market attractiveness for a country, such as the Boston Matrix, PESTLE and Porter's Five Forces.

Disposable income - the total income of an individual has available to spend after paying income taxes and the addition of benefits.

Ease of doing business - how accessible markets are for a business

Infrastructure - the physical systems that a country (or business) require to operate efficiently

Political Stability - an absence of excessive fluctuations in the economy.

There are several key issues to consider when assessing the market attractiveness, for example;

1. Levels and growth of disposable income
2. Ease of doing business
3. Infrastructure
4. Political stability
5. Exchange rate

LEVELS AND GROWTH OF DISPOSABLE INCOME

Changes in disposable income are believed to have a strong relationship over time with the level of consumer spending on goods and services, which is why an assessment of the growth over time is a key measure of a country's market. Levels can be measured using GDP per capita. Those countries with high levels of disposable income will be seen as attractive to other countries/businesses as they can target them with highly differentiated products. 

However, those countries who have high growing levels of disposable incomes can also be seen as attractive, for example China can be seen as a rising star and so would be perfect for businesses to expand into through market development.

EASE OF DOING BUSINESS

Ease of doing business is how accessible markets are for a business, for example is there excessive bureaucracy, where rules and regulations increase the time taken to do business e.g. paperwork when exporting products. Often this is to do with the regulatory framework set by the government in a country, both local and national.

Singapore is seen to be one of the easiest countries in the world to do business with. Therefore, it is attractive as a market as costs will be reduced.

However in contrast, mainland China, although seen as very attractive in other actors in terms of size and growth, is more difficult to trade with, increasing business costs.

INFRASTRUCTURE

It is important to consider infrastructure such as roads, railways, airports, internet, phone facilities, gas, water and electricity supply. Developed countries such as the EU and USA tend to have better quality infrastructure making it easy to do business with e.g. getting a flight to the UK. 

However, developing countries have invested heavily in infrastructure in order to make the country more attractive as a marker as well as to help businesses operate more effectively e.g. internet speed and may therefore be seen as a more attractive destination to do trade.

POLITICAL STABILITY

An economy with fairly constant output, growth and low and stable inflation would be considered economically stable. Countries with less stable governments tend to be less attractive and riskier for a business to operate in. Political stability has increased in some areas of the world whilst declining in others.

Poor governance, particular in some less developed countries, has made it difficult to trade successfully. In some countries corruption is rife and is a major element in being able to do business which can make a country unattractive as a market.

Civil wars continue to impact in areas throughout the world. When there is a greater liklihood of civil unrest it means that a business is less confident in investing time and effort in doing trade with that country and so becomes unattractive to trade with. 

EXCHANGE RATES

Exchange rates can directly affect a business and determine how much of one currency has to be given up in order to buy a specific amount of another currency. 

A stronger pound makes for cheaper imports, but in turn this will make exports expensive/dear for customers overseas.

The problem is that exchange rates tend to fluctuate a lot so it is difficult to establish attractiveness of entering a market in a country based on this factor alone. However, by looking at historical data on a currency a business may be able to decide when it is best to enter a new market. 

Another issue with exchange rate is that any profit made in the foreign country from providing goods and services will be more expensive to repatriate (send back) to the UK as the business will have to turn the foreign currency back into £'s which may not always be favourable towards the UK and so can consequently negatively impact profits of the business.