Introduction
The most common cause for lack of success in the
export process is insufficient preparation and information. Export market research is
instrumental to a company’s long-term export success. At a minimum, to be adequately
prepared a company should focus on researching and/or identifying the following:
- Identifying the Top Markets
- Defining the Potential Customer
- Recognizing the Main Competitors
- Determining the Restrictions and Regulations on the
Product
- Understanding the Standard Business Practices in the
Destination Market
FAQ’s
How does a small company expand into international
markets?
In order to ease your company’s transition
into exporting, you can start by looking for the same types of customers in the
destination market as you have in the United States. This way, you may use a distribution
technique with which you already have some experience. This explains why over 60% of the
initial exports an American company has are to either the United Kingdom or Canada. Mexico
is also becoming a more frequent first destination, especially after the implementation of
NAFTA. There is a tremendous amount of marketing information available on these countries,
which allows for entry decisions to be made more quickly and with more confidence.
This may make this process sound a little simpler
than it actually is. You still need to be aware of all the logistical and strategic
implications that need to be addressed while selling products into foreign countries.
What else can we do to research an international
market?
Once you are prepared to make more of a human
resource and financial commitment to a foreign market, you can focus on more specific
issues such as market size, demographics, political and economic climates, legal and
regulatory factors, and cultural elements. You may also need to consider the marketing
infrastructure, currency exchange mechanisms, governmental controls over tariffs and
non-tariff barriers, local competitors, and any other data that may aid in forecasting the
potential (or lack of potential) in a given market. This information is known as secondary
market research and is available free of charge or at some nominal cost to you. It only
requires your patience in locating it, and then in evaluating it.
Before actively pursuing any marketing or
promotional efforts in a target market, you should strongly consider conducting some
primary, company-specific market research (see question below) to more accurately
determine your product’s potential. Although more costly than secondary market
research, it could well save your company the time and expense of targeting an
inappropriate international market!
What is the difference between secondary and
primary marketing research?
Secondary marketing research is information
that has been prepared by an outside firm or organization, although this does not
necessarily mean that it has less value for your company. The United States is well known
to have the best sources of secondary marketing research in the world, especially when it
comes to international trade. This is because we have been very marketing-oriented for
nearly 100 years and have many government entities that are experienced at researching
overseas markets. The information is made available to the business public to help them
make informed decisions for the expansion of their business.
Primary marketing research provides answers
to a company’s specific questions, and it is usually performed by the individual
company, or by a contractor (either arranged directly or through an export assistance
provider). It is usually conducted in the market itself, and for a very specific purpose,
consisting of interviews, focus groups, surveys, observation or experimentation. Or, it
could be as simple as making a phone call to a potential distributor and having them
describe the market conditions for you. Normally, as the market screening process
progresses, the need for primary marketing research increases. (Note: Food Export USA is
able to provide this type of information to companies in several overseas markets through
its Market Builder.)
How do I determine what I should be looking for
when building the market research plan?
You can start by making an evaluation of your
domestic market here in the U.S. Once you determine why your product sells and who uses
it, then you can determine which foreign markets may be best to target. Topics in your
analysis should include the following:
- Use of your product and end user
- The comparative advantage of your product
- Your most successful channel of distribution
- Trade publications and trade shows in your industry
By doing this analysis, you will be able to focus
more clearly on what your initial marketing strategy should be, and to what markets it may
be directed. You will also be able to clearly understand what your proactive reasons for
expansion may be.
What are the best market indicators to identify a
"top market"?
Not all indicators are always available in each
country, but your best markets will include many of the following factors:
- Similar sales and distribution methods as in the
U.S.
- A solid comparative advantage with good sales
potential
- Stable political and economic systems
- Low tariffs, restrictions and regulations
- The ease at which your buyer can convert their
currency into USD $
- Realistic transportation costs as a percentage of
the cost of goods sold
The "rifle approach" is better than the
"shotgun approach" in common export marketing philosophy. You may never
accomplish anything if you are not focused, and the most successful small business
exporters are those who stay focused. It is a matter of economies of scale in your efforts
(including time and money!). If you stray from a top market focus in the beginning, your
efforts become diluted and your chances for success more remote. Once you’ve worked
through your first tier of top target markets, you should then consider moving on to your
second, and even third-tier, options. In the meantime, focus on your objectives and stay
with them until it is time to proceed.
Why should I initially stay focused on my
"top market" prospects?
One definition of marketing is to attract and to
keep customers. If you start out by attracting too many of them, it may put such a strain
on your resources that you become overwhelmed and don’t really satisfy anybody (thus
losing valuable business). To prevent this from happening, you should focus your initial
efforts on building a solid base of satisfied customers in your top priority markets,
before you begin looking at secondary markets. Keep in mind that it takes time, effort,
expense, and ability to build foreign relationships, and you more than likely cannot build
them all around the world at the same time.
How many foreign markets should I consider
entering at one time?
This will depend on your capacity and other
resources, such as your experience, ability and cash flow. A realistic number for
beginning exporters to consider might be three. Here is an example of one possible
strategy:
North America: NAFTA: Mexico and Canada
Advantages: Free Trade Agreement; low or no tariffs
and barriers; lower transportation costs (including travel); lots of promotional
activities and marketing information; a strong demand for American value added food
products; English a common language for business; few exchange restrictions.
Asia: Singapore
Advantages: Free Trade area; high western
population and western orientation towards U.S. food products; high discretionary income;
great redistribution point to all Southeast Asian countries; high frequency of promotional
events; solid marketing information; English a common language for business; tremendous
port facilities.
Europe: The United Kingdom
Advantages: Number one first-time export
destination; tremendous preference for American product; common language and similar
tastes; high frequency of trade promotion and marketing information; lowest rate of Value
Added Tax (VAT) in the European Union; the EURO exchanges very close in value to the
dollar; a good redistribution point into the rest of Europe and into the Middle East and
South Africa.
Keep in mind that establishing your products in
each of these overseas markets could easily take a year or more with full-time effort. For
this reason, this would typically be more than enough "first-tier markets" for a
small or medium-sized food company to start out an export venture, if an adequate amount
of resources were allocated to each.
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