Now that you know why you should start thinking export and the three traits of successful export managers which guarantee successful entrance and expansion to foreign markets, it is time to learn how to do effective market research.
Market research represents a relatively simple but often a complex process. It is due to its importance in determining the scale of success. Effective market research can lead to new growth opportunities and higher profit margins. Market research is nothing else but the activity of gathering information to serve the needs and preferences of consumers. Consequently, when it comes to exporting, knowing how to do effective market research is crucial to serving the needs and preferences of consumers in foreign countries.
Market research ingrains two separate processes you should follow:
- Selecting target markets; identifying and screening potential countries for market expansion.
- Assessing the target markets; gathering information to narrow down the choice to one or two countries to which your new-to-export company should direct the efforts. This step consists of a more detailed examination of the:
- economic outlook
- market locations and different segments
- market characteristics (buying habits and preferences of the consumers, after-sale support, etc.)
- competition (who are they, what is their strategy for pricing, their actual position in the market and which are their strengths and weaknesses)
- distribution characteristics (distribution channels, trade margins and markups, potential partners’ preferences, distribution agreements, candidates to be your distributors, etc.)
- trade barriers (potential trade tariffs imposed, customs duties, excise taxes, etc.)
Selecting Target Markets
To begin with, you need to examine which areas offer the most potential for your product or service. For some businessperson, the process of selecting a market comes naturally. Specifically, it is based on their knowledge and experience, amongst other factors. However, for others, it might sound difficult. Therefore, it is always safe to start with general research. In this manner, you will be able to identify some potential countries where you could export. Remember, you will not be able to research a lot of countries.
In this respect, you should engage in obtaining information on the sizes of potential markets you have identified. In addition, you should consider differences in consumption and buying patterns, domestic and foreign competitors and market potential.
Foreign trade reports, market share reports, export information systems data reports, different directories on importers and exporters generated by the agencies and nongovernmental organizations operating in respective countries are fundamental sources to consult prior to selecting your target market.
Furthermore, you should strive to gain information on smaller geographical areas in order to pinpoint your marketing efforts afterward. Let’s be more clear on this.
The actual trick to selecting your target market lies in the ability to associate consumption variables with the sales of the product. For example, polyethylene which is used to produce plastic bags would be bought by companies who manufacture different types of plastic bags. Therefore, your research and marketing efforts should be based on the geographical areas where these companies operate.
Assessing the Target Markets
By now, you should have selected one or two countries to analyze more in-depth. Before continuing further, we encourage you to be decisive and very selective. Many companies fail because they do not narrow down their focus. Keep it simple. Choose only one category of the product line and only one market.
How to know which market to choose? By comparing different country tariffs, import quotas, the strengths and weaknesses of the competition, foreign exchanges rates and political stability in a particular country you will be provided with a clear answer. However, these are only some of the examples. It’s the research on different segments of a particular country that provides you with a whole picture. In this regard, we highly recommend that you store the data for each country you analyze. In case of exiting a foreign market, you can enter another one and you do not have to repeat the process of collecting data and assessing the target markets.
Foreign economic trade trends, doing business reports, country market profiles, background notes on different countries, reports generated by the Chambers of Commerce and Dun’s Exporters Encyclopedia are only some of the fundamental sources you would like to consult when assessing the target markets.
Networking with individuals operating in the same industry in the destination countries can also help while assessing the target markets.
Export Counseling is specialized in assisting companies to identify export opportunities, enter foreign markets and expand their businesses globally. Let’s talk about your business!