As U.S. companies have watched Europeans make inroads in Latin America, they
have pressured Washington to move more quickly on integrating Chile into NAFTA
and toward Free Trade Area of the Americas. MERCOSUL doesn’t represent only a huge
domestic market of 220 million consumers; with its entire Pacific Coast beckoning
toward Asia, MERCOSUL also stands to become an important low-cost platform for
world export. Yet two groups in the United States—labor unions and environmental-
ists—are skeptical about the benefits of a Free Trade Area of the Americas. Unions feel
that NAFTA has already led to the exodus of manufacturing jobs to Mexico where
wage rates are much lower. Environmentalists point out that companies unwilling to
play by the strict rules of the U.S. Environmental Protection Agency relocate to Mex-
ico, where pollution regulation has been lax.^10
Eighteen Pacific Rim countries, including the NAFTA member states, Japan, and
China, have been discussing the possible creation of a pan-Pacific free trade area un-
der the auspices of the Asian Pacific Economic Cooperation forum (APEC). There are
also active attempts at regional economic integration in the Caribbean, Southeast Asia,
and parts of Africa.
Yet, however much nations and regions integrate their trading policies and stan-
dards, each nation still has unique features that must be understood. A nation’s readi-
ness for different products and services and its attractiveness as a market to foreign
firms depend on its economic, political–legal, and cultural environments.
EVALUATING POTENTIAL MARKETS
Suppose a company has assembled a list of potential markets to enter. How does it
choose among them? Many companies prefer to sell to neighboring countries because
they understand these countries better, and they can control their costs better. It is
not surprising that the United States’ largest market is Canada, or that Swedish com-
panies first sold to their Scandinavian neighbors. As growing numbers of U.S. com-
panies expand abroad, many are deciding the best place to start is next door, in Canada.
■ Great American Backrub, Inc. Great American Backrub, Inc., a service busi-
ness that offers backrubs for stressed-out clients, looked north because it fig-
ured Canadians were as tense as Americans. It opened its first foreign location
in Toronto, Ontario. Ricardo Coia, president of the Clearwater, Florida–based
company, reasoned that by their mere proximity to America, Canadians “have
to try to resolve a lot of stress.”^11
At other times, psychic proximitydetermines choices. Many U.S. firms prefer to sell
in Canada, England, and Australia—rather than in larger markets such as Germany
and France—because they feel more comfortable with the language, laws, and culture.
In general, a company prefers to enter countries (1) that rank high on market at-
tractiveness, (2) that are low in market risk, and (3) in which the company possesses
a competitive advantage. Here’s how Bechtel Corporation, the construction giant, goes
about evaluating overseas markets.
■ Bechtel Corporation Before Bechtel ventures into new markets, the com-
pany starts with a detailed strategic market analysis. It looks at its markets
over the next five to ten years and tries to determine where it should be in
four or five years’ time. A management team looks at the big picture and does
a cost–benefit analysis that factors in the position of competitors, infrastruc-
ture, regulatory and trade barriers, and the tax situation (both corporate and
individual). Ideally, the new market would be a country with an untapped
need for its products or services; a quality, skilled labor pool capable of man-
ufacturing the product; and a welcoming environment (governmental and
physical).
Are there countries that meet Bechtel’s requirements? Each has its pluses and mi-
nuses. For instance, although Singapore has an educated, English-speaking labor force,
basks in political stability, and encourages foreign investment, it has a small population.
chapter 12
Designing
Global Market
Offerings^373