Welcome back to the September edition of our newsletter. It’s been a very hot summer in the UK with temperatures reaching over 40 degrees for the first time in history! Global warming is here and needs to be tackled sooner rather than later. Despite the heat, hopefully everyone in the Northern Hemisphere is back from their summer breaks suitably refreshed and ready to expand their international business.
The first question to ask is Where? Where are the best opportunities for my business? Throughout the articles in our Expert Exporter resource hub one theme is consistent – the need to focus. It is impossible to export everywhere at once. A scattergun approach simply will not work in the long term. You may have some short-term success by hitting the right customer at the right time, but to profitably expand your exports you need a well thought out and suitably resourced plan. It is counterproductive to try to enter 10 countries all at once if you only have the manpower and resources for one. Better to do one well and then move on to the next when the time is right.
How do you narrow down and identify your target market? Gut instinct? NO!
You need to take a much more measured and scientific approach than that, really get to know the possibilities for your product or service, decide which will be your target market(s).
Research your own data. Where do your enquiries come from? Where do you sell at the moment? Do you understand why? What are the drivers for those customers to buy from you? Is it a one off or is there a real market demand? Ask them for feedback.
Where your competitors sell.
Where do they have their own sales team, a distributor or agent? Where do they sell directly from head office? Where do they attend conferences and exhibitions? Where do they advertise? Are they a member of any overseas trade bodies? Have they invested in specific country approvals?
Get to know them better than ever before. They may well save you a lot of time, money and effort by pointing you in the right direction. Don’t worry that they are there first, it just shows there is a market and you already know what your value proposition is in order to sell against them.
Market Size Data
Competitors and in-house data are helpful, but what if they are misleading? Is there any official data on the size of market in your target country or countries? If not, is there any private research available or could you commission some? Consultants, like Go Exporting, often offer this as a cost-effective service to clients in order to build a longer-term relationship.
We’ve already looked at where your and your competition’s existing customers are, but we also need to analyse whether the buyer for your products or service is the same in each market.
Is there a different supply chain set up? Are there specifiers involved? Does the government or ultimate client purchase directly, or do subcontractors procure as part of an overall package or service? The distinctions may seem slight, but it can make a big difference to the ease of market entry and therefore the market potential.
Barriers to Entry
So, we’ve identified what appears to be a lucrative country for our products. There is a good market size and we have identified who the potential customers are. All seems good, but we are not yet ready to commit. First, we must identify the barriers to entry.
Are there approvals required before we can sell? Is there any national certification or government registration process? Is there trade body we need to be a member of? Is membership open or closed?
How strong is the local competition? Are there any well-established foreign competitors? We should not be frightened of competition, after all it is a sign that there is a market, but we should be aware of their strengths and weaknesses, their market position. Market share can be bought, but is it worth it in the long run?
What are the transport links like? Will freight costs make our product uncompetitive?
Is language going to be a barrier? Is English commonly spoken in business?
Look at all the angles to see where obstacles may lie which could derail or seriously delay market entry.
How are you going to sell in the target market? Will you demand your home currency? If so how will this affect sales? Is the currency readily available?
If you accept the local currency what are the likely fluctuations in exchange rate? Will you bank accept the currency or will you need a local bank account? Is that feasible without a local entity? Are you prepared to do that?
Currency can make or break market entry, so be clear what you are taking on from the beginning and your acceptable level of risk. If yours is a high margin product or service fluctuations are not such an issue, but for lower margins beware and ensure price fluctuation is built in to contracts of sale.
How politically and economically stable is the target country? Is the regime likely to change? What is the likelihood that international sanctions or tariffs are applied? Is the economy growing or shrinking? Do the banks have any liquidity issues or concerns?
How comfortable do you feel about the risk?
Consolidate & Rate
We have developed a bespoke system for comparing countries, allocating a score and developing a league table of potential targets. We utilise this when we carry out this process on behalf of clients to consolidate all of the above information, weigh up the pros and cons, the potential versus the risk.
This is used to give a rating for each country, from prime target, to do not touch. It’s a process which can take time and effort, but ultimately can save thousands in helping you make the best-informed decision possible.
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Download our new book The 7 Steps to Export Success on Amazon for full details and examples of our bespoke process.
Or for a no-obligation discussion on how Go Exporting can FastTrack your export growth please call +44 800 689 1423 or email email@example.com.