How do you use market potential index to prioritize global expansion opportunities?

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If you are looking for new markets to enter, you need to assess the potential and attractiveness of each option. One way to do that is to use market potential index (MPI), a tool that ranks countries based on various dimensions of market opportunity. In this article, you will learn what MPI is, how it is calculated, and how you can use it to make informed decisions about your global expansion strategy.

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Abdelrzaq Al-Rababah

Dynamic Business Analyst | Export Strategies | Specializing in Market Research | Market Sizing Insights | Market…
Alexis Lyman, MBA

Etsy Shop Owner | Moissanite Fine Jewelry Design

1 What is MPI?

MPI is a composite index that measures the potential of a country as a market for a product or service. It is based on eight indicators that reflect the size, growth, intensity, consumption capacity, commercial infrastructure, economic freedom, market receptivity, and country risk of each country. Each indicator is assigned a weight and normalized on a scale of 0 to 100, where 100 represents the highest potential. The MPI score for a country is the weighted average of the eight indicators.

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Alexis Lyman, MBA

Etsy Shop Owner | Moissanite Fine Jewelry Design
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You can use MPI to quickly identify the countries that are most attractive for your business. MPI takes a range of factors such as population size, growth rate, economic stability, and income levels. With this, you can focus your efforts on exploring new markets. MPI provides valuable insights into market risk, so you can make more informed decisions about where to invest your resources. By combining the power of MPI and a comprehensive market analysis, you can find the best new markets for your business

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2 How is MPI calculated?

To calculate MPI, you need to collect data on the eight indicators for each country you are interested in. You can use various sources, such as the World Bank, the International Monetary Fund, the World Economic Forum, and the Heritage Foundation, to find the relevant information. Then, you need to normalize the data by dividing each value by the maximum value in the sample and multiplying by 100. This will give you a score for each indicator for each country. Next, you need to assign a weight to each indicator based on its importance for your product or service. The weights should add up to 1. Finally, you need to multiply each score by its weight and sum up the results to get the MPI score for each country.

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3 How can you use MPI?

MPI can help you compare and prioritize different countries as potential markets for your product or service. You can use MPI to identify the countries with the highest potential, as well as the countries with the lowest potential. You can also use MPI to analyze the strengths and weaknesses of each country based on the eight indicators. For example, you can see which countries have a large and growing market size, which countries have a high consumption capacity and market receptivity, and which countries have a low country risk and economic freedom. This can help you tailor your marketing mix and entry strategy to each country.

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4 What are the benefits of MPI?

MPI has several benefits as a tool for market analysis and selection. First, it is simple and easy to use, as it only requires data on eight indicators and a weighting scheme. Second, it is flexible and adaptable, as you can adjust the weights and the indicators according to your specific needs and preferences. Third, it is comprehensive and holistic, as it covers multiple dimensions of market potential and attractiveness. Fourth, it is objective and consistent, as it uses standardized and reliable data sources and methods.

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5 What are the limitations of MPI?

MPI also has some limitations that you should be aware of. First, it is based on secondary data, which may not be accurate, updated, or relevant for your product or service. Second, it is based on averages, which may not reflect the diversity and heterogeneity of each country and its regions, segments, and consumers. Third, it is based on assumptions, which may not hold true in reality or in the future. Fourth, it is based on a single index, which may not capture the complexity and dynamics of each market and its environment.

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Abdelrzaq Al-Rababah

Dynamic Business Analyst | Export Strategies | Specializing in Market Research | Market Sizing Insights | Market Penetration | Customer Outreach & Deal Facilitation through Networking
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In the Middle East and North Africa region, ongoing conflicts and instability in the past two decades make it hard for the Multidimensional Poverty Index (MPI) to give accurate insights. This could limit its effectiveness in understanding the market. To overcome this, relying on more direct data for analysis becomes essential.

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6 How can you improve MPI?

To improve MPI, you can take some steps to overcome its limitations. First, you can supplement MPI with primary data, such as surveys, interviews, or focus groups, to get more insights and feedback from your target market and customers. Second, you can disaggregate MPI by regions, segments, or categories, to get a more granular and nuanced view of each market and its potential. Third, you can update MPI regularly, to account for changes and trends in the market and the indicators. Fourth, you can combine MPI with other tools and criteria, such as SWOT analysis, Porter's five forces, or PESTEL analysis, to get a more comprehensive and balanced assessment of each market and its opportunities.

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Alexis Lyman, MBA

Etsy Shop Owner | Moissanite Fine Jewelry Design
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Enhance your evaluation of each market by integrating MPI with other tools, such as SWOT analysis, Porter's five forces, or PESTEL analysis, to gain a more complete, multi-faceted understanding of the potential opportunities

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How do you use market potential index to prioritize global expansion opportunities?

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1 What is MPI?

2 How is MPI calculated?

3 How can you use MPI?

4 What are the benefits of MPI?

5 What are the limitations of MPI?

6 How can you improve MPI?

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