RAT Test Assesses Demand in Global Markets

Sept. 5, 2013
New research helps examine international growth potential of small and medium-sized businesses.

A small to medium size enterprise’s success in new international markets can be determined with help from a RAT test. The answers to this test will help determine whether a company’s  products or services are relevant, appropriable and transferable.

This assessment is based on findings of a DHL Express research study, performed by Dr. Donald R. Lessard of MIT.

“A firm’s ability to exploit its capabilities in the international marketplace depends, in large part, on how it can systematically understand, standardize and replicate these capabilities and products in other locations,” said Ian Clough, CEO of DHL Express U.S.

According to Lessard’s research, once a firm “understands itself” then it should apply the RAT test to explore the capabilities that underlie its products and/or services and determine if they will “travel.” The capabilities developed in the home market must be relevant to the target market, appropriable to allow for the capture of the value they create and transferable so it can deploy its capabilities effectively in the target foreign location without requiring a local footprint that costs without destroying the potential value.

In one case study example, a 10-year old insulation company passed the RAT test because its product was universal and technically superior (Relevant), while being protected by trade patents (Appropriable) and was Transferable due to its high value of weight to volume ratio and relatively large ticket sales to small number of customers.

An estimated 95 percent of the world’s consumers live outside of the U.S. and the International Monetary Fund forecasts that over the next five years nearly 87 percent of world economic growth will take place outside of the United States.

“To shape an economy that is built to last, we’ve got to ensure that U.S. businesses can sell their products in as many markets as possible, especially if America is going to remain competitive in the 21st century,” said Francisco Sánchez, Under Secretary of Commerce for International Trade.

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