Why is selecting an export market an important decision? For the simple reason that if you get it right, your results will skyrocket and if not, you will lose years and valuable resources in a country that will not provide the expected returns on your investments. This key step in the internationalization process involves researching potential markets, assessing the risks and rewards, and making a strategic decision about which markets to enter. Research is the foundation of successful market selection.
Learn as much as possible about the potential markets you are considering. This includes analyzing the market size, growth potential, competitive landscape and especially customer needs. In addition, evaluate the potential risks and rewards of entering each export market. Consider the potential financial returns, potential business partners, legal requirements, and any political or cultural challenges you may encounter. Once you have assessed the risks and rewards of each potential market, make an informed decision about which markets to enter. And finally, match that knowledge with the resources you have available, the expertise and experience of your team.
Assess the market opportunity and potential for growth
When assessing the market opportunity and potential for growth, it is important to consider both the current market size and the potential for expansion. Factors to consider include the current market trends, the size and composition of the market and the competitive landscape. Additionally, it is important to analyze the potential for new technologies and innovations that could open up new markets and opportunities.
Conduct research or identify relevant industry reports and trends. We recommend looking for industry reports and surveys, such as Euromonitor, DataMonitor, Mintel, Statista, which provide market size data. Industry reports can furthermore provide valuable insights on market trends, such as growth projections and customer spending. For example, if you are a manufacturer of tools for the mining industry, we would recommend searching for data such as the size of the mining industry, the projections of the industry for the next five years, the imports in the countries for tools like yours, expenditure per company etc.
Analyze competition in as much detail as possible as they are a good predictor of demand and a good indication of easiness to access the markets you are analyzing. Look at your competitors’ customer data to get an idea of their market share and trends. Remember, the presence of competitors shows the existence of a market. It is also interesting to look at where the subsidiaries of your competitors are located.
Make a list of all your current best customers and investigate if these customers are present in the countries you are analyzing. In addition, look out for the subsidiaries of your customers, these subsidiaries naturally become potential customers, and the approach will be more simplified. We gave you a bit earlier the example for the mining industry and this recommendation applies very well as in the mining sector, the actors are international. Understanding the international presence of your existing customers will help you open doors to global partnerships and strengthen your competitive position in the industry.
Talk to your future markets
Conduct surveys and interviews. Ask customers and industry experts about their opinions on market size and trends. This can help you get a better understanding of the market and how it may evolve.
Utilize open public and government data. Public and government data can be an invaluable resource to understand market size and trends. Look for relevant data sets in the OECD, World Bank, World Health Organization. You will easily find : Economic and Financial Data, Education Data, Health Data, Transportation Data, Environmental Data, International Data, Social Services Data, Crime and Criminal Justice Data.
For example is you are an food production company, one of this following data could be interesting to compare different countries allowing you to know which country have the most potential :
Food Price Trends: According to the World Bank, the average price of food has increased by 19.6% since 2000, and is expected to continue increasing at a rate of nearly 2.5% each year. This trend highlights the potential for increased profits in the food production industry as demand grows.
Urbanization: Urbanization is on the rise, with 55% of the world’s population now living in cities. This urbanization trend will likely lead to increased demand for convenience foods and other processed foods, creating a large potential market for food production companies. The data are free, available for all countries, collected and smoothed by United Nations Population Division.
Growing Demand for Organic and Natural Foods: The demand for organic, natural, and free-range foods is increasing among consumers who are looking for healthier options. This trend creates a large opportunity for food production companies to meet this growing demand. You could look at the share of organic area by country.
Countries’ cultural differences
Analyzing cultural differences between countries can help you to better understand the people, their values and beliefs, and how those shape their behavior. It can be used to identify potential challenges and opportunities when doing business in different countries, and to create better marketing strategies. Analyzing cultural differences can also help you to better understand the history and politics of a country, as well as its current and future trends. Finally, it can be used to develop an intercultural awareness that is essential in our increasingly globalized world.
Cultural distances play an important role in internationalization by creating barriers that can impede the success of international business transactions and operations. You need to be aware of cultural differences in order to successfully create relationships with foreign customers and partners. Cultural differences can affect communication, decision-making, and customer preferences. Understanding cultural differences can help you more effectively market products and services in different countries and ensure customer satisfaction.
Cultural differences in marketing adaptation can be seen in the way different countries approach advertising and promotional strategies. For example, in the United States, advertisements tend to be more direct, emphasizing product features and benefits, while in Europe, advertising is often more subtle and focuses on lifestyle and emotions. Also, the language used in marketing materials can vary greatly depending on the country or region.
Analyse Market Access
The legal environment is the framework in which businesses and other organizations operate, composed of laws, regulations, and other legal rules. Including both the internal environment within a company, and the external environment, which includes the legal framework of the country in which the company operates. It affects how companies conduct business, and includes topics such as contracts, intellectual property, labor and employment law, international law, and compliance with government regulations. It also includes corporate governance, antitrust law, and corporate social responsibility.
Companies must understand and comply with the laws and regulations in their home countries and abroad, in order to ensure their operations remain legal and compliant. Failure to comply with laws and regulations can lead to significant fines and other penalties, as well as reputational damage. Companies must also be aware of any changes in the legal environment, and ensure their operations comply with the new laws and regulations. Strength of legal rights index, available on World Bank, measures the degree to which collateral and bankruptcy laws protect the rights of borrowers and lenders and thus facilitate lending.
Customs duty is a type of tax imposed on goods that are imported into or exported from a country. The amount of customs duty payable is based on the value of the goods, usually calculated as a percentage of the value of the goods. Customs duty may also be imposed on goods that are imported into or exported from a country in order to protect the domestic industries of the country. Check for each country what are the customs duties applied on the International Trade Center (ITC) to the hs code of the product you want to export. By comparing these rates, you will have a precise idea of the final cost of your product for export.
Exports by product analysis is a useful tool for evaluating the health of a country’s export performance. This analysis can provide insight into which products are driving export growth, as well as which products are not performing well. It can help to identify potential new markets for a country’s exports. For example, if a company is producing a particular product, such as electronics, it may be beneficial to target countries with a high demand for those products.
Country risk analysis
Risk of doing business
The risk of doing business varies depending on the type of business, the industry, and the location. The most common risks include market risk, operational risk, legal risk, competitive risk, and cyber security risk. Market risk refers to the risk of fluctuations in market prices caused by economic, political, or other external factors. Operational risk is the risk of losses caused by a company’s operations, such as faulty products or services, lack of qualified personnel, or inadequate processes. Legal risk is the risk of legal action or financial losses due to non-compliance with laws and regulations. Competitive risk is the risk of being unable to compete in the market due to new competitors or changing trends. Finally, cyber security risk is the risk of data breaches, identity theft, and other cyber security threats.
OECD country credit risk index classifies countries in connection with their agreement on minimum premium fees for official export credits. It is meant to evaluate the country’s risk and you can use it in our selection market process by comparing risk in different markets. The country risk encompasses transfer and convertibility risk and cases of force majeure (e.g. war, expropriation, revolution, civil disturbance, floods, earthquakes).
Corruption risk is the potential for financial loss, legal or reputational damage to a business that may result from unethical or illegal activities. It can take the form of bribery, fraud, money laundering, and other illegal activities. It can also include a lack of transparency in the management of finances and contracts, or a lack of oversight or compliance with laws, regulations, and industry standards. The organization produces the Corruption Perceptions Index (CPI) which ranks countries and territories based on how corrupt their public sector is perceived to be.
The CPI is based on surveys and assessments of businesspeople and country analysts and provides an annual snapshot of the relative degree of corruption by ranking countries and territories from 0 (highly corrupt) to 100 (very clean). The CPI is designed to raise awareness and promote the importance of tackling corruption in order to improve governance and the delivery of public services.
Social media to assess market potential
Social media can be used to assess market potential by tracking consumer conversations and behavior, as well as engaging directly with customers to gather feedback and insights. With the right tools, marketers can analyze consumer conversation and gather data about topics, trends and sentiment. This data can be used to assess the potential of a market and gain valuable insights into consumer needs and preferences. Additionally, social media can be used to directly engage with customers, understand their pain points and gain insights on how to best serve them. This data can be used to inform product and marketing decisions, as well as to assess market potential.
First, collect Instagram, Facebook or Twitter data. This can be done using various service providers such as Hootsuite, Keyhole or Brandwatch. To analyze it, they can do a sentiment analysis on social media by using natural language processing to identify and extract subjective information from conversations. This can include opinions, emotions, and attitudes of users about a particular topic or brand. Sentiment analysis can be used to gain insights into customer opinions, market trends, and public opinion. It can also be used to detect potential customer service issues and detect changes in customer sentiment.
Watch Prime Target’s webinar with Tatiana Miron, CEO of Prime Target and Jared Stufft, our data scientist, on how social media analytics can be useful for market selection and decision making. You will also hear about how companies put social media analysis into action and improve their results. Finally, you will witness how Prime Target integrates social media analysis in its solutions.
Make informed decisions based on the data
When you are done with conducting market analysis, it is important to structure your final decision making process. You will have a lot of quantitative and qualitative data. There are various ways to do it. We would like to present one of them. First, decide and consider the weight of each data point, meaning how important it is for your company’s global international success. Weighing is the process of assigning a weight to each data point based on its relevance to the analysis. This helps to ensure that the conclusions drawn from the analysis are based on the most important and relevant factors. Weighing also helps to limit bias and ensure accuracy in the analysis. For example, the most important data points can be given more weight in the analysis to ensure they are given the proper consideration. This allows you to make more informed decisions based on the data.
Key Take Away
Selecting an export market is an important decision for any business. It involves researching and estimating the potential size of the export market and its potential for expansion. Looking at the countries’ cultural differences to be aware of the level of adaptation and preparation to enter the market. Additionally, analyze the ease of access and the risk of each country. Use social media data to gain valuable insights into consumer needs and preferences and don’t forget to use ponderation to make informed decisions based on the data.
Prime Target can accompany you in your international business project, and assist you in market potential evaluation. Prime Target’s Market Ranking Report can help you evaluate the market potential of 5, 10 or 20 countries simultaneously, and identify new export markets with the highest potential. This comprehensive and personalized Market Ranking Report can minimize risk, saving time and money, as well as identify new business opportunities abroad.