Is Your Company Ready to Succeed in International Markets? – Seven Questions to Ask Yourself – Part Two
Last week's blog post looked at four of the seven essential questions that businesses need to be able to answer "yes" to, before they expand overseas. These include understanding whether your company is ready to enter a new market, being confident that you have selected the right market, knowing if your product or service will suit the target market and understanding your international customers. This week, Cynthia Dearin deals with the final three questions that companies must ask themselves before they begin the expansion process.
5. Are you equipped to deal with the culture of the target market?
When you’re operating in a foreign setting, you want to feel as comfortable as you possibly can and you want the people you are dealing with to feel comfortable with you. This won’t happen if you’re not at least somewhat familiar with the culture of the country that you are going to.
By culture, I mean the way that people see the world and how relate to each other, particularly in a business context. If you’re planning on doing business in another country, you need to understand what is different about the way people do business there. You can’t afford to assume that things work the same way that they do at home.
You don’t need a degree in anthropology, or to have lived in the target country for years, but you do need to be thoughtful, alert and ready to see things from a different perspective. You also need to do your research, so that you understand the essentials of business etiquette in the country you’re heading to. How do meetings work? Are people flexible about time or fixated with punctuality? What is appropriate business attire? Are there topics which should be avoided? Are gifts expected?
If you’re not equipped to deal with the culture of the target market, go and get some help to make sure that you will be when you get there!
6. Do you know how the regulatory framework of the target market will affect your business?
Don’t leave home without making sure that you have checked out the regulatory environment of the market you plan to go to. Although trade barriers have declined rapidly over the last fifty years or so, they still exist in some markets and you will need to understand tariffs and duties as you work through your selection process - they can make a huge hole in your bottom line.
Also worth mentioning in this era of low tariff barriers are the dreaded non-tariff barriers such as standards and labelling - these can make an exporter’s life hell! For example, if you manufacture organic food, do you know how the testing body in your target market will evaluate your product? If don’t know and it turns out that your product doesn’t meet the standards, you’re going to be in a world of hurt.
7. Do you have a sound strategy for market entry?
Once you can confidently answer “yes” to the first six questions, it’s time to ensure that you have a credible strategy for entering your new market in place. This includes knowing what business vehicle you will use to export, how you will transport your products from the home market to the new market (or whether you will manufacture them in the new market) when you will begin exporting, what payment mechanisms you will use, what insurance is required and so on and so forth.
It’s important to get these details in place at the outset, so that you know what costs and risks are involved and so that you can mitigate those risks and minimise those costs as much as possible.
If you take the time to answer these seven questions before you export, it won’t guarantee that nothing goes wrong with the process, but it will help you to avoid nasty surprises and expensive mistakes. As they say “plan the work and work the plan!”
Take our Strategy Stress Test to assess your market entry readiness