Market Selection & Going International
Applied Market & Business Strategy (the “Strategy & Management Game”) - NIT / TUHH, Hamburg · part of my Technology Management MBA · study notes for revision.
The previous chapter was about who to serve inside a market. This one steps back and asks a bigger question: which markets should we be in at all - and if we grow abroad, which country do we pick first?
That matters a lot for CERMEDES. It’s a mid-sized German power-tool maker (drills, hammer drills, grinders) with a stagnating home market, and the board is openly asking whether the future is a bigger slice of Germany or a first move into a foreign country. Picking wrong is expensive and slow to unwind, so the trick is to make the choice systematic instead of gut-feel.
1 · Where can growth even come from? The Ansoff matrix
Section titled “1 · Where can growth even come from? The Ansoff matrix”Before choosing a country, it helps to be clear about what kind of growth you’re chasing. The classic tool here is Ansoff’s growth matrix - a 2×2 that crosses products (current vs new) with markets (current vs new). Each cell is a different growth route with a different risk level.
- Sell more of what you already make to who you already serve
- Levers: price, promotion, placement (distribution)
- Lowest risk
- Build something new for customers you already have
- Product innovation is the engine
- Take today’s product to new segments or new countries
- This is where internationalisation lives
- New product and new market at once
- Highest risk - two unknowns stacked
Reading it for CERMEDES makes each cell concrete:
| Route | What CERMEDES might do | Why it fits the cell |
|---|---|---|
| Market penetration | Push harder in Germany - sharper trade pricing, a promo campaign, more shelf space in DIY chains | Same drills, same German buyers; just squeeze more share |
| Product development | Launch a cordless battery platform or a smart-connected drill for its existing German dealers | New product, but sold to the customers and channels it already knows |
| Market development | Take the current drill range into, say, Poland, France or a Nordic country | Same product, brand-new geography - the internationalisation move |
| Diversification | Enter garden tools (mowers, trimmers) in a new export market | New product line and new market - the boldest, riskiest bet |
The rest of this chapter assumes the board has chosen market development / internationalisation - the amber cell - and now needs a disciplined way to pick which market.
2 · Reading a market before you enter it
Section titled “2 · Reading a market before you enter it”Going international sounds like “sell the same thing, somewhere else”. In reality every candidate country has its own set of factors, conditions and barriers that quietly cap how much of the market you can actually win. Before scoring anything, you map those limits.
The course example was fire-alarm and safety systems - video, intrusion alarms, fire detection, sprinklers and doors. It’s a telling example because it’s:
- a safety market where lives are at stake, so buyers are cautious and standards are high; and
- a law-driven market - almost every country has strict, and different, fire-safety legislation.
That combination means the product you sell has to be re-certified country by country, and a rival with the local approvals already in hand has a big head start. The general lesson transfers to CERMEDES: even a humble drill runs into voltage standards, plug types, CE-style safety marks, and established distributor relationships that a newcomer can’t just walk past.
| Barrier type | The question to ask | CERMEDES angle |
|---|---|---|
| Legislation | Are there import rules, tariffs or content requirements? | Post-Brexit UK, EU vs non-EU tariff lines |
| Regulation / standards | Must the product be re-certified or re-engineered? | Voltage (230 V vs 120 V), plug shape, safety marks |
| Distribution access | Can we reach buyers, or are channels locked up? | DIY chains may have exclusive supplier deals |
| Competitors | Who’s entrenched, and how would they react? | Bosch, Makita, DeWalt already dominate most markets |
3 · A repeatable method: screen → map → weight → score
Section titled “3 · A repeatable method: screen → map → weight → score”Once you accept that “biggest GDP wins” is too crude, you need a repeatable scoring method. The course used the BOSCH market-screening example, and the logic is four steps you can run for any set of candidate countries.
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Screen - choose your indicators. Decide which conditions actually make or break your business. BOSCH’s screen leaned on governance and tax indicators: political stability & absence of violence, voice & accountability, rule of law, control of corruption, and taxation. These mostly come from the World Bank’s World Governance Indicators, so they’re comparable across countries.
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Map - rate each country. Score every candidate country on every indicator using a simple scale - low / moderate / high (or a number, say 1-5). You’re translating messy real-world data into one comparable grid.
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Weight - decide what matters most. Not every indicator is equally important. Assign each a weight (the weights should add up to 100%). A firm that’s very corruption-sensitive weights “control of corruption” heavily; a firm chasing tax efficiency weights “taxation” more.
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Score - compute and rank. For each country, multiply each indicator’s rating by its weight and add them up. The weighted total gives you a single comparable score per country - and a ranking.
3.1 A small worked scoring table
Section titled “3.1 A small worked scoring table”Here’s the idea on three imaginary candidate markets for CERMEDES. Ratings are on a 1-5 scale (5 = best), and the weights reflect a firm that cares most about a stable, low-corruption operating environment.
| Indicator | Weight | Country A | Country B | Country C |
|---|---|---|---|---|
| Political stability | 25% | 5 | 3 | 2 |
| Voice & accountability | 15% | 4 | 3 | 2 |
| Rule of law | 25% | 5 | 3 | 3 |
| Control of corruption | 20% | 4 | 2 | 2 |
| Taxation (favourability) | 15% | 3 | 4 | 5 |
| Weighted score | 100% | 4.45 | 2.95 | 2.75 |
The maths on Country A, so the method is clear: (0.25×5) + (0.15×4) + (0.25×5) + (0.20×4) + (0.15×3) = 1.25 + 0.60 + 1.25 + 0.80 + 0.45 = 4.45.
4 · National culture - the factor spreadsheets miss
Section titled “4 · National culture - the factor spreadsheets miss”You can screen and score every hard number and still fail abroad, because the softest factor is often the decisive one: culture. A drill sells fine, but the business relationship around it - how you negotiate, manage staff, give feedback, close a deal - runs on cultural rules you didn’t grow up with.
The course used a working definition worth keeping: culture is “the collective programming of the mind” - a shared set of values, norms and modes of action that produces common attitudes and behaviours. The key logic (Hofstede’s) is that culture is treated as a national, not an individual, phenomenon.
4.1 Hofstede’s dimensions
Section titled “4.1 Hofstede’s dimensions”Geert Hofstede’s model scores each country on a set of dimensions. He started with four, then added two more. This is the standard MBA culture lens:
| Dimension | One-line meaning | High end looks like |
|---|---|---|
| Power distance | How readily people accept that power is distributed unequally | Steep hierarchies, unquestioned bosses |
| Individualism vs collectivism | ”I and my choices” vs “we and the group” | Individualism: personal freedom over group belonging |
| Masculinity vs femininity | Assertive, competitive, reward-focused vs caring, relationship- and quality-of-life-focused | Masculinity: decisive, material success prized |
| Uncertainty avoidance | How threatened people feel by ambiguity and change | High: rules, structure, low appetite for risk |
| Long-term orientation | Future payoff (saving, investing, perseverance) vs the here-and-now | High: patient, thrifty, long horizons |
| Indulgence vs restraint | Freely enjoying life vs suppressing gratification by strict social norms | Indulgence: fun and leisure are fine |
For CERMEDES this is not academic. Germany scores fairly high on uncertainty avoidance and long-term orientation - buyers there want proven quality and warranties. Enter a country that’s more indulgent, lower on uncertainty avoidance and more price-driven, and the same “solid, over-engineered, premium” pitch may simply not land.
5 · Erin Meyer’s Culture Map - culture you can act on
Section titled “5 · Erin Meyer’s Culture Map - culture you can act on”Hofstede tells you what differs; Erin Meyer’s Culture Map is more practical for day-to-day managing across borders. It breaks culture into eight behavioural scales, and - crucially - each is a spectrum, not a box. A country sits somewhere along each line, and what matters is the relative gap between two cultures, not the absolute position.
Meyer opens with the kind of question that makes it click: why does your American colleague cushion negative feedback with three compliments while the Dutch, French, Israelis and Germans skip the warm-up and go straight to the problem? Same intent, opposite delivery - and easy to misread as rude or wishy-washy if you don’t know the scale.
| Scale | One end ↔ other end | What it governs |
|---|---|---|
| Communicating | Low-context ↔ high-context | Is meaning said plainly, or read between the lines? |
| Evaluating | Direct ↔ indirect negative feedback | Blunt criticism, or softened and in private? |
| Persuading | Principles-first ↔ applications-first | Build the theory first, or lead with the practical point? |
| Leading | Egalitarian ↔ hierarchical | Flat and first-name, or status and clear chains? |
| Deciding | Consensual ↔ top-down | Group agreement, or the boss decides? |
| Trusting | Task-based ↔ relationship-based | Trust from good work, or from personal bonds? |
| Disagreeing | Confrontational ↔ avoids confrontation | Is open debate healthy, or harmony-breaking? |
| Scheduling | Linear-time ↔ flexible-time | One task at a time on the clock, or fluid and adaptable? |
For CERMEDES negotiating with a first foreign distributor, the map is a checklist: expect blunter or softer feedback, faster or slower trust-building, tighter or looser scheduling - and adapt the sales approach rather than assuming the German way is the neutral default.
6 · Putting it together: opportunity vs risk
Section titled “6 · Putting it together: opportunity vs risk”The final piece is a balanced scorecard of indicators - the practical checklist you’d feed into the screen → map → weight → score method from Section 3. The neat framing is opportunities on one side, risks and “distance” on the other. It stops you from being seduced by a big, attractive market while ignoring what makes it hard.
- Market potential: GDP, population (or urban population), imports; industry-level spend if you can get it
- Market development: GDP per capita, total employment rate
- Innovation & ICT: R&D and commercialisation indicators, internet / ICT adoption (e.g. from the Global Competitiveness Index)
- Labour market: wage levels (ILO), labour-market flexibility
- Administrative / political: World Governance Indicators; government’s future orientation
- Economic: inflation, unemployment, FX volatility, market access, domestic competition
- Socio-cultural: health, life expectancy, schooling, middle-class size, ESG pillars
- Operational: ease-of-doing-business, transport & utility infrastructure
- Cultural distance: language, GLOBE / Hofstede gaps
- Geographic distance: travel time, time-zone difference
The two “distance” indicators at the bottom-right are easy to forget and often decisive. A market can be attractive on every economic number, but if it’s culturally far (Section 5) and geographically far (long shipping, awkward time zones), the friction eats the opportunity. For a mid-sized firm like CERMEDES with limited management bandwidth, a nearby, culturally close, easy-to-operate market usually beats a big, distant, complicated one - at least for the first move.
Revision summary
Section titled “Revision summary”Next: Routes to Market → - getting the product to the customer through the right channels and entry modes.