5 Tips for Choosing the Right International Market for Your Business
At the International Business Accelerator, I recently taught a workshop with my colleague, Peter Evans on choosing the right international market for your business to expand to. This is a big topic and an important one, because if you get your choice of market wrong, it can have serious implications for the success of your international venture. It could also have a negative impact on your domestic business if things go badly.
We covered a lot of material in the workshop and I thought I'd share five of the most important points with you.
Research is vital ... and there are several kinds you can use
In pretty much all contexts, a good choice is an informed choice ... and choosing an international market to expand to is no exception. So, do your research! You can conduct market research to select the best export markets using either primary or secondary data resources.
If you are doing primary market research, you’ll be collecting data directly from the foreign marketplace through interviews, surveys and other direct contact with representatives and potential buyers. One of the benefits of primary market research is that the information is tailored to your needs and provides answers to your specific questions. On the down side, collecting the data can be time-consuming and expensive.
With secondary market research, data are collected from various domestic or Internet sources, such as trade statistics for a country or market reports from a variety of sources. Working with secondary sources is less expensive but secondary data has limitations including material that may be out-of-date or too general. Nonetheless, secondary research is a valuable and relatively easy first step for you to take and may be the only one you need, depending on what channel to market you eventually choose.
If neither of these appeal, you can always hire a company like Dearin & Associates to do it for you.
There is more than one way to select a market
The process of choosing which international market to go to can be done in a number of way, including randomly, which is a method I strongly encourage you not to use. We looked at two methods in the workshop, the 3-step method and the negative list method.
To summarise, the 3-step method works on the principle of "screen, compare, select". You start by surveying a large number of the available markets and choose up to ten to research. You develop a list of criteria and assess each market against those same criteria. Based on the results of that assessment, you then choose just two or three markets to research in depth, and end by selecting one.
The negative list takes the 3-step model and tips it on its head. Using this model, the focus is on ruling markets out from the get-go. Having chosen several markets to analyse, you then set to work to rule them out, based on a quick initial assessment that shouldn't take more than hour per country. Once you've found some countries that will fit the bill, you then research two or three in depth, before selecting one.
My preference is to use the negative list for the initial assessment and then follow it up with a version of the 3-step method to get more depth of perspective.
Knowing whether you can make a profit is key
Whichever method you choose, knowing whether you can make a profit before you start the process of launching into the new country is key.
Peter gave a great example during the workshop of how he had wanted to sell his company's food products in the UK because he loved the supermarkets there. He had invested time and money in travelling there from Australia multiple times, but when he did the calculations, he realised that although the dream was great, there was no way for him to make a profit selling into that market, because his costs were too high. Although he was disappointed not to be able to enter the UK market, Peter was also glad that he'd crunched the numbers before getting too far down the track, because it saved him time, money and much greater disappointment at a later time.
The size of the market for your product is relevant
Once you've established that you can make a profit in a particular market, it's also very important to work out how many people in that country are likely to buy what you sell. If no-one is going to buy it, its irrelevant whether you can make a profit or not.
Sizing the market is a step you should do after you've worked out whether you can make a profit because even if you've discovered a huge market for your product in a particular country (e.g. the US), if you can't sell at a profit, there is no point moving forward.
It's not all about the numbers
I've spent several paragraphs talking about the importance of numbers, but there are a variety of other important factors to consider as well. Are there tariff or other non-tariff barriers in the market you want to target, that will make it difficult or impossible for you to sell there? Do you have concerns about the political situation and risks that this might pose to your business? Are you worried that your product might be copied in the new country? Is the market close enough that if you have to travel there frequently you can do it without disrupting your domestic business and the rest of your life? Are you comfortable with the culture, the language and the food in the new country?
Some of these factors may not seem that significant, but there are all part of the process of weighing the pros and cons of different international markets.
Are you keen to finally take the leap into your first foreign market? Visit the Global Entrepreneur Awards for your chance to win a fully-funded, 12-month place on our International Business Accelerator (valued at $13,800). Entries are now open to apply today!!