Choosing the Right Market: Four Questions to Ask in the International Market Selection Process

In my blog Choosing the Right Market: Four Pitfalls to Avoid, I covered some of the key mistakes that people make when it comes to choosing an international market to expand a business to.

Because of the political, social and economic volatility that rocked the world in 2020, making smart choices on market selection is more important than ever. So how do you get it right?

In a word, “research”. Choosing the right market isn’t rocket science. It takes some time and effort, but if you do your homework before you reach any conclusions about which country is right for your company to expand to, you’ll be in a much better position to know that you’ve made the right decision when the time to choose comes. Here’s why.

Real data and evidence-based decisions

When you carry out real research on international markets, you have real data to back you up. That means that rather than going purely on ‘gut feel’ (which I don’t recommend), you’re empowered with the information to make evidence-based decisions that make commercial sense. That data and the confidence it gives will help you to get clarity about which international market is right for your company. Armed with clarity and confidence, you can start planning your international strategy quickly and from a solid foundation. And that’s a much better way to start than jumping in with your eyes closed.

Case-study:

A few years ago, a client came to Dearin & Associates for help with expanding his young engineering consulting firm, Geotron overseas. Here’s what he says about selecting a market:

“I had lots of drive and inspiration to take the company offshore in Asia, but one of my biggest early challenges was deciding where to go. I was tossing up between half-a-dozen different markets and wondering whether I should tackle several at the same time. It was an overwhelming prospect and I started to wonder whether or not I really could succeed internationally, or whether it was just some kind of a crazy pipe-dream.

When I had done research on all the places I was thinking of going to and crunched the numbers, things started to fall into place. I could see that some markets, like Indonesia and China had huge potential, but were also going to be challenging to work in, whereas others, like Singapore and Malaysia, were smaller, but more manageable for a boutique firm like ours. I also realised that it was ok to take things slowly and tackle one country at a time, rather than stressing myself out by trying to enter multiple markets simultaneously and spreading our small team too thin.

A year on, we’re setting up the firm in Singapore, we’ve acquired two major multinationals as clients, and we’ve concluded a strategic alliance with a third. I think focussing on just one country has helped us consolidate our efforts quickly and I’m surprised by how far we’ve come in a short time, especially when you consider that twelve months ago, I wasn’t even sure which country we should start with or whether an international expansion was something we could achieve”.

Decide how to choose

There are a variety of different ways that you can go about choosing an international market to sell to or expand to.
international-markets-image
Each of these methods has its pros and cons, none of them are necessarily better than others, and in the end, how you decide to choose a country to sell to will depend on what you want to achieve. Even so, it is a good idea to get clear on how you are going to choose a market, as doing will help you to develop criteria for evaluating markets – you won’t be just jumping in blind.
research-data-image

Do your research

No matter how you decide to choose, thorough market research is essential. The challenge here is knowing how much and what kind of research to do. The two common extremes are:

You might be wondering 

“What is the minimum amount of research that I need to do?”, but a better question is 

“What is the minimum I need to know?”

The most important question that you need to be able to answer is “Will people in this country buy what I am selling?”, but there are some other key considerations that you should also take into account as you go about selecting a market to sell to.

What is the 30,000 foot view?

To get an initial idea of which countries are the best candidates for you to consider as destinations for your international expansion, you should consider:

Once you’ve answered these questions, you should have a group of markets that you can choose from. 

For each of the markets that you think you want to go to, answer these questions:

businessman-dreaming-big-view

1. What’s the size of the opportunity?

To discover the size of the opportunity for your company in a market, you’ll need to know how many people in that country would want to buy your product or alternatively, what percentage of market share you think you could capture if there were no competitors. This is called calculating your ‘total addressable market’ (TAM). It’s important to get a handle on the size of the market you’re planning to target. Knowing the size of the TAM will give you an objective point of comparison with other markets. It will also help you as you go about estimating how many extra units of your product or service you’ll need to create in that market over time, and what resources you’ll require to do so.
fish-jumping-to-big-bowl-image

You also need to know whether people in your target country can afford your products and whether they are likely to pay a premium for them. The answers to these questions are linked to the levels of income in your chosen country, region or area, so it’s helpful to gather information on how much the average person in that country earns, how much the customers you are targeting earn and what people in that country typically spend their money on.

You should also research your industry sector. Is it booming in the country you’re considering or one that’s yet to be developed? Could you gain a first mover advantage? How does the size of your target market compare to that of another country? Where is the greatest commercial opportunity?

2. What about the demographics?

It’s worth checking out the demographics of markets you’re considering to get an idea of the age, gender and spread of the population, because this can provide clues about the state of the economy. For instance, with some exceptions, countries with young populations are more likely to have economies that are growing than countries that have ageing populations.
Demographics can also indicate whether there is likely to be demand for your offering in a particular country. For example, products and services aimed at babies and toddlers (daycare centres, baby formula, toys) are likely to be in greater demand in a country with a young, growing population than in a country with an ageing, declining population. Conversely, if you’re selling aged care services, you probably want to target a country where the average age is over 37 and birth rates are falling, rather than a country where more than 50% of the population is under 25 years of age and birth rates are steady or rising. Why? Because the first country is likely to have many elderly people and fewer young people to take care of them, which means that the elderly are more likely to need aged care services. The second country probably has fewer elderly people and a ready supply of young people who can care for them and bear the cost of public-provided aged care services, through the taxes they pay.
magnifying-glass-checking-targets-image
Demographics can also help you to decide where within a particular country to focus your attention. In many countries, most people tend to live around major cities and capitals, so these can be a good place to start. If your business is more likely to appeal to customers across the whole of a country, or in remote areas where population density (and therefore the volume of potential clients) is lower, you’ll need to think about how you’ll reach them and the cost per opportunity.

3. Who is our competition

Before you draw a conclusion about which country is the right place for you to start your international expansion, you need to get a handle on the competition.

A good place to start is by finding out whether your competitors in your home market are working internationally and where they are selling to. If you can find out how they are performing in that country, even better. Their website, press releases and business news should give you some clues. Then you have to decide whether you want to compete with them, or choose to develop your business in another country where they haven’t established a base.

competitor-chess-wins-images

It’s likely that aside from the competitors you’re already aware of, there are a whole lot of competitors out there that you haven’t even considered. These companies might be local, or they might be global operations with a foothold in the country you’re targeting. You need to understand who these competitors are and assess what kind of threat they pose to you. This is significant because if you’re thinking of entering a  particular market and it turns out that there are numerous competitors already selling the same thing as you, you may be in for a tough time. This can be true even if your product has features that you believe really differentiate it from competitor products.

If you discover that your preferred country already has a number of competitors playing in your space, you’ll need to think long and hard about whether you are offering anything unique or different to the competition. You also need to consider how you’ll capture market share, as it can be difficult to win customers away from competitors who are already providing a good product or service.

Once you have a handle on the size of the opportunity in a country you’d like to sell to, the next question to ask yourself is:

“Are there any barriers to trading with this country?”

And in the next piece in this series, I’m going to do a deep dive on understanding barriers to international market entry, and what they might mean for you.

Whether you’re choosing your first international market or leaving the China market and aiming to make smart decisions on market selection, don’t miss our one-day masterclass, Choosing the Right Market in 2021 – Where to after China? We’ll be running a virtual session on 3rd & 4th March, or an exclusive in-person event in Sydney on 12th March – register here.

JOIN OUR MASTERCLASS

Choosing the Right Market in 2021

Where to after China?

VIRTUAL & IN SYDNEY

(3rd & 4th March, 2021) (12th March, 2021)
cynthia-image

Choosing the Right Market in 2021

Where to after China?

cynthia-image

VIRTUAL & IN SYDNEY

(3rd & 4th March, 2021) (12th March, 2021)
cookie-policy-iconv

This website uses cookies to enhance your browsing experience. By continuing to use this website, you consent to the use of cookies in accordance with our Cookie Policy.

   Keep in touch!


Subscribe To Our
Monthly Newsletter



Get the latest insights into international market entry.

Keep in touch!

Subscribe to our monthly newsletter

curve-icon

Get the latest insights into international market entry.