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Plate 17 of 19 · Marketing

Choosing markets: attractiveness and reach

About 6 minutes to read, then three questions that count toward your mastery.

Rank countries on what makes a market worth entering, on one scale and with weights you choose, then weigh how attractive each is against how hard it is to reach.

The idea

Market measures come in different units: GDP in dollars, growth in percent, population in people. An attractiveness score puts each on a common 0–100 scale across the countries you compare, lowest 0 and highest 100, then adds them up with your weights.

Size needs a log scale. GDP runs from a few billion dollars to tens of trillions, so on a raw scale the biggest economies sit near 100 and everyone else near 0. Growth is a compound annual growth rate: from $200bn to $300bn in five years is (300 ÷ 200)1/5 − 1 = 8.4% a year, not 10%.

Scores are relative: change the set of countries and every score can move. And attractive is not the same as reachable. Plotting attractiveness against reach, closeness to your home market, gives a GE–McKinsey-style grid: high on both is where to grow first; high on only one calls for selectivity.

The formula

scaled = 100 × x − lowesthighest − lowest, score = Σ weight × scaled, CAGR = (end ÷ start)1/years − 1

x
a country’s measure; for GDP, its natural logarithm
weight
how much each measure counts; weights are divided by their total so they add to 1
CAGR
compound annual growth rate
reach
100 next door, 0 on the far side of the planet

The market map also caps each measure at its 5th and 95th percentiles before scaling, so one extreme country can’t squash the rest.

A worked example

Plate 17

Compare three countries. A has a GDP of $50bn growing 6% a year; B, $400bn growing 3%; C, $2,000bn growing 1.5%. Size counts 60% and growth 40%.

  1. Logs of GDP: ln 50 = 3.91, ln 400 = 5.99, ln 2,000 = 7.60.
  2. Size scores: A 0; B (5.99 − 3.91) ÷ (7.60 − 3.91) × 100 = 56; C 100.
  3. Growth scores: A 100; B (3 − 1.5) ÷ (6 − 1.5) × 100 = 33; C 0.
  4. Weighted: A 0.6 × 0 + 0.4 × 100 = 40; B 0.6 × 56 + 0.4 × 33 = 47; C 0.6 × 100 + 0.4 × 0 = 60.

C ranks first on sheer size, but B, mid-sized and growing twice as fast as C, comes second, ahead of the small fast grower A. Change the weights and the order can change; that is the point of setting them yourself.

Try it

A and C as in the example; move B and the weights.

60%
$400bn
3.0%

Score three markets

C · 60the most attractive of the three
A: $50bn, 6.0% growth
40
B: $400bn, 3.0% growth
47
C: $2,000bn, 1.5% growth
60

Ranking: C, B, A. Without logs it would be C, A, B.

The common mistake

Scaling GDP without logs

On a raw scale B’s size score is (400 − 50) ÷ (2,000 − 50) × 100 = 18 instead of 56, its total falls to 24, and the tiny market A, at 40, overtakes it. The largest economy sets the scale and everyone else looks the same size.

Remember

  • Put every measure on 0–100 across the countries in view, size on a log scale, then weight them. Change the set and the scores change.
  • Growth is compound: CAGR = (end ÷ start)1/years − 1. Measured in US dollars it includes inflation and currency moves.
  • Weigh attractiveness against reach: strong on both, grow there first; strong on only one, be selective.

Check yourself

Three questions from the Learn room’s bank. Your answers update your mastery of this skill, the same as in Practise.

Use it on real numbers

Open Attractiveness score, in Marketing › Market map and try the idea on your own numbers.