BUSINESS RESEARCH
BUSINESS RESEARCH
usiness research is undertaken to reduce uncertainties in the decision pro- cesS/t0 expand or narrow the alternatives under consideration, and to assess the merits of existing programs. The reduction of uncertainty would include attempts to answer such questions as: Is there a market for the product? Can qualified personnel be hired? Will the economic and political climate allow for a reasonable certainty of operations? Alternatives may be expanding by asking, Where are possible new sources of funds or sales? or narrowed by ascertaining, Where among the alternatives would operating costs be lowest? Evaluation and control are improved by assessing present and past performance: Is the distributor servicing sufficient accounts? What is our market share? Clearly, there is a myriad of details that, if ascertained, would be useful in meeting the firm's objectives.
How Much Research?
A company can seldom if ever gain all of the information its managers would like- This is due partially to time constraints, since markets or raw materials usus va uc may need to be secured before competitors gain control of them. Further-
more, contracts that call for bids or proposals usually have deadlines. The cost of information is another factor. The greater area to be considered by a multinational company, of course, compounds the number of alternatives and complexities. Therefore, it is useful to limit extensive information gathering to those projects that seemingly have the highest potential. One method is to estimate the costs of data collection along with the probable payoff from the data in terms of revenue gains or cost savings. In this way a company may prioritize research projects on the basis of expected return from the costs of the collection.
Problems in Data
The lack, obsolescence, and inaccuracy of data on many countries make much research difficult and expensive to undertake. In some countries, such as the United States, the government collects very detailed demographic and purchasing data, which are available very cheaply to any firm or individual. (But in the United States, some economists estimate that GNP figures may be understated by as much as 15 percent, and the 1990 census has been challenged by city and state officials who claim their populations have been un-dercounted.)23 Using samples based on available information, a firm can draw fairly accurate inferences concerning market-segment sizes and locations, at least within broad categories. Also in the United States, the fact that so many firms are publicly owned and are frequently required to disclose considerable operating information is an advantage in learning competitors' strengths and weaknesses. Furthermore, firms may rely on a multitude of behavioral studies dealing with U.S. consumer preferences and experience. With this available information a firm can devise questionnaires or test-market with a selected sample so that responses should reflect the behavior of the larger target group to whom the company plans to sell. Contrast this situation to that in a country whose basic census, national income accounts, and foreign trade figures are suspect and where no data are collected on consumer expenditures. In such countries, business is conducted in a veil of secrecy, consumer buying behavior is speculated upon, and middlemen are reluctant to answer questions. Here, expensive primary research may be required before meaningful samples and questions can be developed. (Reasons for some of the problems in international data are discussed in the Appendix at the end of this chapter.)
External Sources of Information
The number of organizations as well as publications that deal in whole or in part wjm information on international business is too large to explore in depth here. But in general the main sources are firms that make a living from supplying information, firms that would like to supply services connected with the conduct of international business, governmental agencies, and international organizations.
Individualized Reports In almost any country there are market-research and business consulting firms that will conduct studies for a fee. Naturally, the quality and cost of these studies vary widely. Generally, this is the most costly information source because the individualized nature of the study restricts proration among a number of firms. However, the fact that the client can specify the information wanted often makes the expense worthwhile.
Specialized Studies Some research organizations prepare fairly specific studies and then sell them to any interested firm at a cost much lower than for individualized studies. The studies sometimes are printed as directories of firms operating in a given locale, perhaps with financial or other information about the firms. Or they may also be about business in certain locales of the world, such as Brazil; forms of business, such as licensing; or specific products, such as baby food. They may combine any of these elements as well: For example, a title could well be "The Market for Imported Auto Parts in Germany."
Service Firms Most firms that serve international clients, such as banks, transportation agencies, and accounting firms, publish reports that are available to potential clients. These reports usually are geared toward either the conduct of business in a given area or some specific subject of general interest, such as tax or trademark legislation. Since these are intended to reach a wide market of firms, they usually lack the specificity a firm would like for making a final decision, but much of the data give useful background information.
Some of these organizations also are helpful in giving informal opinions about such things as the reputation of possible business associates and the names of people to contact. Management also may discern useful information from other companies operating in a given locale.
Governmental Agencies Governments are another source of information. Statistical reports on many topics vary in the quantity and quality from country to country. When a government or governmental agency has an interest in stimulating foreign business activity, the amount and type of information may be substantial. For example, the U.S. Department of Commerce not only compiles such basic data as news and regulations on individual countries, but also will help set up appointments with businesspeople in foreign countries.
International Organizations and Agencies Numerous organizations and agencies are supported by more than one country, such as the United Nations, the International Monetary Fund, the Organization for Economic Cooperation and Development, and the European Community. All of these organizations have large research staffs that compile basic statistics as well as reports and recommendations concerning common trends and problems. Many of the international development banks will even help finance investment-feasibility studies.
Trade Associations Many product lines have trade associations that collect, evaluate, and disseminate a wide variety of data dealing with technical and competitive factors in the industry. Much of this information is available in their trade journals, whereas other data may or may not be made available to nonmembers.
Information Service Companies A number of companies have information-retrieval services that typically maintain data bases from hundreds of different sources, including many of those just described. For a fee, or sometimes free at public libraries, a firm can access these computerized data and arrange for an immediate printout of studies of interest.
Internal Generation
International firms themselves may have to conduct many studies abroad. Sometimes the research may consist of no more than observing keenly and asking many questions. Investigators can see what kind of merchandise is available, who is buying and where, and uncover the hidden distribution points and competition. In some countries, for example, the competition for ready-made clothes may be from seamstresses in private homes rather than from retailers. The competition for vacuum cleaners may be in the form of servants who clean with mops rather than from other electrical-appliance manufacturers. Surreptitiously sold contraband may compete with locally
produced goods. Traditional analysis would not reveal such matters. In many countries, even bankers have to rely more on clients' reputations than on their financial statements. Shrewd questioning may yield very interesting results.
Firms frequently set certain minimum criteria on which to base a decision. If a company regards a total market of 35 million as satisfactory, it is fruitless to spend the time and money on determining where within a range of 90 to 100 million the market actually lies.
Often a firm must be extremely imaginative, extremely observant, or both. A soft-drink manufacturer wanted to determine the market share it held vis-a-vis its competitors in Mexico. Attempts to make estimates from the points of distribution as management would do at home were futile because of the extremely widespread distribution. The manufacturer hit upon two alternatives, both of which turned out to be feasible: The manufacturer of bottle caps was willing to reveal how many caps were sold to each client, and customs supplied data on the volume of imports of soft-drink concentrate used by each of the competitors.
usiness research is undertaken to reduce uncertainties in the decision pro- cesS/t0 expand or narrow the alternatives under consideration, and to assess the merits of existing programs. The reduction of uncertainty would include attempts to answer such questions as: Is there a market for the product? Can qualified personnel be hired? Will the economic and political climate allow for a reasonable certainty of operations? Alternatives may be expanding by asking, Where are possible new sources of funds or sales? or narrowed by ascertaining, Where among the alternatives would operating costs be lowest? Evaluation and control are improved by assessing present and past performance: Is the distributor servicing sufficient accounts? What is our market share? Clearly, there is a myriad of details that, if ascertained, would be useful in meeting the firm's objectives.
How Much Research?
A company can seldom if ever gain all of the information its managers would like- This is due partially to time constraints, since markets or raw materials usus va uc may need to be secured before competitors gain control of them. Further-
more, contracts that call for bids or proposals usually have deadlines. The cost of information is another factor. The greater area to be considered by a multinational company, of course, compounds the number of alternatives and complexities. Therefore, it is useful to limit extensive information gathering to those projects that seemingly have the highest potential. One method is to estimate the costs of data collection along with the probable payoff from the data in terms of revenue gains or cost savings. In this way a company may prioritize research projects on the basis of expected return from the costs of the collection.
Problems in Data
The lack, obsolescence, and inaccuracy of data on many countries make much research difficult and expensive to undertake. In some countries, such as the United States, the government collects very detailed demographic and purchasing data, which are available very cheaply to any firm or individual. (But in the United States, some economists estimate that GNP figures may be understated by as much as 15 percent, and the 1990 census has been challenged by city and state officials who claim their populations have been un-dercounted.)23 Using samples based on available information, a firm can draw fairly accurate inferences concerning market-segment sizes and locations, at least within broad categories. Also in the United States, the fact that so many firms are publicly owned and are frequently required to disclose considerable operating information is an advantage in learning competitors' strengths and weaknesses. Furthermore, firms may rely on a multitude of behavioral studies dealing with U.S. consumer preferences and experience. With this available information a firm can devise questionnaires or test-market with a selected sample so that responses should reflect the behavior of the larger target group to whom the company plans to sell. Contrast this situation to that in a country whose basic census, national income accounts, and foreign trade figures are suspect and where no data are collected on consumer expenditures. In such countries, business is conducted in a veil of secrecy, consumer buying behavior is speculated upon, and middlemen are reluctant to answer questions. Here, expensive primary research may be required before meaningful samples and questions can be developed. (Reasons for some of the problems in international data are discussed in the Appendix at the end of this chapter.)
External Sources of Information
The number of organizations as well as publications that deal in whole or in part wjm information on international business is too large to explore in depth here. But in general the main sources are firms that make a living from supplying information, firms that would like to supply services connected with the conduct of international business, governmental agencies, and international organizations.
Individualized Reports In almost any country there are market-research and business consulting firms that will conduct studies for a fee. Naturally, the quality and cost of these studies vary widely. Generally, this is the most costly information source because the individualized nature of the study restricts proration among a number of firms. However, the fact that the client can specify the information wanted often makes the expense worthwhile.
Specialized Studies Some research organizations prepare fairly specific studies and then sell them to any interested firm at a cost much lower than for individualized studies. The studies sometimes are printed as directories of firms operating in a given locale, perhaps with financial or other information about the firms. Or they may also be about business in certain locales of the world, such as Brazil; forms of business, such as licensing; or specific products, such as baby food. They may combine any of these elements as well: For example, a title could well be "The Market for Imported Auto Parts in Germany."
Service Firms Most firms that serve international clients, such as banks, transportation agencies, and accounting firms, publish reports that are available to potential clients. These reports usually are geared toward either the conduct of business in a given area or some specific subject of general interest, such as tax or trademark legislation. Since these are intended to reach a wide market of firms, they usually lack the specificity a firm would like for making a final decision, but much of the data give useful background information.
Some of these organizations also are helpful in giving informal opinions about such things as the reputation of possible business associates and the names of people to contact. Management also may discern useful information from other companies operating in a given locale.
Governmental Agencies Governments are another source of information. Statistical reports on many topics vary in the quantity and quality from country to country. When a government or governmental agency has an interest in stimulating foreign business activity, the amount and type of information may be substantial. For example, the U.S. Department of Commerce not only compiles such basic data as news and regulations on individual countries, but also will help set up appointments with businesspeople in foreign countries.
International Organizations and Agencies Numerous organizations and agencies are supported by more than one country, such as the United Nations, the International Monetary Fund, the Organization for Economic Cooperation and Development, and the European Community. All of these organizations have large research staffs that compile basic statistics as well as reports and recommendations concerning common trends and problems. Many of the international development banks will even help finance investment-feasibility studies.
Trade Associations Many product lines have trade associations that collect, evaluate, and disseminate a wide variety of data dealing with technical and competitive factors in the industry. Much of this information is available in their trade journals, whereas other data may or may not be made available to nonmembers.
Information Service Companies A number of companies have information-retrieval services that typically maintain data bases from hundreds of different sources, including many of those just described. For a fee, or sometimes free at public libraries, a firm can access these computerized data and arrange for an immediate printout of studies of interest.
Internal Generation
International firms themselves may have to conduct many studies abroad. Sometimes the research may consist of no more than observing keenly and asking many questions. Investigators can see what kind of merchandise is available, who is buying and where, and uncover the hidden distribution points and competition. In some countries, for example, the competition for ready-made clothes may be from seamstresses in private homes rather than from retailers. The competition for vacuum cleaners may be in the form of servants who clean with mops rather than from other electrical-appliance manufacturers. Surreptitiously sold contraband may compete with locally
produced goods. Traditional analysis would not reveal such matters. In many countries, even bankers have to rely more on clients' reputations than on their financial statements. Shrewd questioning may yield very interesting results.
Firms frequently set certain minimum criteria on which to base a decision. If a company regards a total market of 35 million as satisfactory, it is fruitless to spend the time and money on determining where within a range of 90 to 100 million the market actually lies.
Often a firm must be extremely imaginative, extremely observant, or both. A soft-drink manufacturer wanted to determine the market share it held vis-a-vis its competitors in Mexico. Attempts to make estimates from the points of distribution as management would do at home were futile because of the extremely widespread distribution. The manufacturer hit upon two alternatives, both of which turned out to be feasible: The manufacturer of bottle caps was willing to reveal how many caps were sold to each client, and customs supplied data on the volume of imports of soft-drink concentrate used by each of the competitors.
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