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
Case-study:
“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.
- Many companies consider exporting or expanding in response to enquiries from potential customers overseas.
- Alternatively, you might decide to focus on markets that are close to your home market and culturally and economically quite similar. This reduces the likelihood that you’ll have to deal with huge differences in culture, regulations, customer expectations or economic structures.
- You could also target countries which have sizable populations and national wealth, where consumers are already familiar with and using products like yours.
- Perhaps you choose a country where you already have strong relationships, built through study, work or family ties. You believe you can build on those and that foundation of familiarity and trust becomes a key driver for your choice of destination.
- Or, you might decide to look for opportunities in completely new markets where you believe that you have a strong competitive advantage because, for example, no-one else sells a product or service like yours.
Do your research
- Doing virtually no research at all and making a poor choice of market, and
- Getting stuck in research mode and using it to delay taking action.
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:
- Which countries have the largest and fastest growing markets for my product?
- Which countries might be profitable markets for my product/service?
- Which foreign markets will be the easiest to enter?
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:
1. What’s the size of the opportunity?
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.
2. What about the demographics?
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.
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.
