An Artificial Intelligence Foreign Market Screening Method for Small Businesses

Article excerpt

INTRODUCTION

Since small businesses employ more than half of the U.S. private work force it is necessary for small businesses to be successful in their exporting efforts. According to Donald A. Manzullo, U.S. House Representative from the 16th congressional district of Illinois and chair of the Committee on Small Business, nearly 250,000 small businesses now export (2003). In addition many more small businesses are involved in exporting through subcontracting and supplying larger companies. Operationally defined, the Small Business Act states that a small business concern is "one that is independently owned and operated and which is not dominant in its field of operation (United States Small Business Administration, 2006)." Much of the related research focuses on Small and Medium Sized Enterprises (SMEs) which are commonly defined as businesses having fewer than 500 employees. The United States International Trade Commission (2006) reported that in 2004 exports of merchandise grew to $727.2 billion dollars.

Unfortunately small businesses seeking international markets face a number of impediments. Although they may be interested in growing their sales via exporting, they seldom know where or how to begin. Additionally, they don't have much time or money to devote to the effort. Consequently, they often either never seriously pursue foreign markets or they abandon any exploration efforts prematurely. The idea of finding the right global market for a product or service is, for a small business, a daunting task. There are slightly over two hundred potential foreign markets on earth, how, with limited time and budget, is an entrepreneurial endeavor supposed to decide which six to eight markets it should be seriously exploring?

The purpose of this research is to present an artificial intelligence (AI) based methodology of foreign market screening that is appropriate and available for small businesses. Previous research in this area has demonstrated how Self-Organizing Maps or SOMs can be applied to market screening (Fish, 2006). This research furthers the field in a number of significant ways. First, previous studies have been for hypothetical large or medium sized firms, but this study employs data and experiences from an actual, small business. In this study, a small business case study was employed thus changing the nature of the methodology from that of large, well capitalized firms to an approach usable by smaller capitalized firms. Secondly, previous research demonstrated the concept using a limited number of potential markets (fifty-three) (Fish, 2006). This research used data from relatively inexpensive (thus accessible to small businesses) databases to screen all the markets on earth. Thirdly, quite often in this area of market screening, macro-indicators of general economic conditions, as well as, macro-proxies for the product are used as the screening variables. Small marketers face the additional challenge of locating a market where they can establish a toehold without being able to bring significant assets to the effort. Their success lies in being "a big fish in a little pond," because they don't have the capital to compete in the large ponds (that is, markets). This research developed an indicator of U.S. export gaps that should be of interest to a small business attempting to find a niche market. A U.S. export gap is defined here as a gap between the amount any particular country is importing of a certain product and how much of that import is coming from the U.S. Countries with large U.S. export gaps represent potential opportunities for U.S. exporters because the foreign market is receptive to imports but for some reason are not importing U.S. products. The ability of small businesses to be able to locate these gaps in small, but growing markets would be critical to the market screening process.

In this study we will use trade data over a five year period across five variables to build a data table that will be submitted to the SOM program. …