Market Potential Indicator

Market Potential Indicator

Purpose of Indicator

As the name states, it is a measure of the market potential of a country using several dimensions, ratings, indexes and percentages. Currently, emerging economies comprise more than half of the world's population, account for a large share of world output and have very high growth rates, which mean an enormous market potential. With global marketing becoming more important, companies and marketers are attempting to determine which international markets they would like to penetrate and the appropriate marketing strategy.

Using the market potential indicator countries are distinguished by the recent progress they have made in economic liberalization using eight dimensions. Each dimension is given a weight to contribute to the overall market potential index.

Construction of the index

The market potential index was first constructed using only seven dimensions and was given the following weights: Market Size (4/20), Market Growth Rate (3/20), Market Intensity (3/20), Market Consumption Capacity (2/20), Commercial Infrastructure (2/20), Economic Freedom (2/20), Market Receptivity (4/20).

Market Size

In developing their business plans, companies of all sizes face the challenge of determining the size of their markets. The relevant market equals the company's sales if it were to capture 100% of its specific niche of the market. This index represents the total population.

Market Growth Rate

Another important dimension, the market growth rate is a combination of market factors used to predict the likely level of sales. It is usually expressed as a percentage per annum, at which a market is increasing in size.

Market Intensity

This index takes into consideration the gross national income per capita and private consumption as a percentage of GDP.

Market Consumption Capacity

Ranks the size of the middle class available in consumption/income.

Commercial