A business is ready for exporting only when it has determined that export fits in its long-term business goal plan. Entering an international market is not easy and needs a lot of work. The foremost important step is to assess the markets that you intend to enter into and research them thoroughly to fit your business needs. Researching a viable market is the most vital step in selecting the export destination. Knowing how international markets work and who your competitors are will help the business to function competitively and successfully. In general, market research provides businesses essential information on customer, competitors and market. Similarly, success in international markets depends on the international market research, which is especially important during the business-planning phase. International Market Research provides a base for strategic decisions and the information needs to be available fast and with the right filters.
During the planning phase of market research for international markets, there are two important questions that need to be addressed:
- What does the business hope to accomplish by expanding into international markets
- What to do and what not to do when expanding your business in foreign markets and how to avoid cross cultural blunders
Market research for international market involves finding out important information such as the demand for the product, the price point, the competitors, the government initiatives, cultural sensitivities, language barriers (if any), laws and regulations, etc. It is also important to research because it makes the business aware of the risks involved in an international market and helps the business prepare strategically for the same. Macro-economic indicators such as GDP growth, inflation, per capita income, employments rates, etc., can provide the business with all the necessary information it needs to set its base in a country other than its home country. During market research, these are 5 main steps to take when conducting research for exporting
- Identify potential export markets for your product or service
- Analyze each potential market
- Look where your competitors are based
- Understand Religious and cultural practices
- Understand Custom requirements & quarantine restrictions, Licenses, Free Trade agreements, Tariffs, etc.
The first step is obviously to find the target market. A target market can be easily found by a thorough country assessment that examines country’s geographic, demographic, economic, cultural, political, legal and infrastructure framework. This can also be done on the basis of the international markets that the competitors are expanding in. Once the business is able to establish where the competitors are exporting, it becomes easier to investigate and identify export trends and growing market for the product and/or industry.
After defining target markets, the business should focus on market assessment, which should involve examining the size, characteristics and projected growth of the target market. This should also include a thorough research on the competitor’s products, prices, marketing methods and distribution channels. This will help the business enter the international market more successfully, effectively and competitively. Also, consider the following key factors when assessing the target market for they define the extent of expansion possible in the international market
Market Characteristics: The Market Research needs to focus specifically on the size and growth, seasonal trends, absolute and comparative advantages, etc.
Competitive conditions: While doing any international market research it is very important to know who are your competitors in the market. To profile the competitors on basis of product and price and domestic and foreign will help the business to align the goals and objectives accordingly.
Financial, Legal and economic conditions: For any business the most important challenge that it faces in an international market is the new economic climate and the financial constraints. The business has to be aware of the cost of doing its business in specific markets. Tariffs, Barriers to Trade, Foreign Exchange, currency stability, local labor laws, intellectual property protection laws, consumer/ environment legislations, etc.
While expanding internationally, it is also important to research on the religious and cultural practices for they are sensitive issues and can determine how a business runs and survives in an international market. Cultural and religious blunders can hinder the effectiveness of the business. Different cultures respond differently to the product and to the business in general. Cross cultural communication difference will influence everything and if the business does not familiarize itself with the cultures, then it will be in for a shock.
Beyond this, it is important for the business to be aware of various legal and financial laws and regulations. The target market has to be well researched for exporting licenses or certifications needed; tariffs and tax regulations that could impact the business and most importantly information on custom requirements and quarantine restrictions. Market research for these particular items helps the business to be prepared legally and financially.
Most importantly, it is the product and its demand that drives the market research to its conclusion. It is important for the business to initiate a market research to be aware of the product that will have a chance of better reception in the market. Mostly, products that are unique in nature are patented and are of superior quality, have a better chance of doing well in the international market. However, research helps in identifying what the customer really wants and a decision on the choice of product to be exported on the basis of it. For example: Certain colors or designs may be acceptable in one country and may not in another. In such a situation, market research lets the business management be aware of the challenges the product could face in the targeted market. Also, it is very important to research distribution channels at this juncture. The working of the distribution channels or the vendors might differ between those of home country and in that of an international market. It is important for the business to conduct market research in order to carefully assess their operations, financial situations, market knowledge, marketing plans, technical ability, other products they may represent and their company background.
A business can research an international market by using both primary and secondary data sources. Primary data research is conducted when the researcher collects the data directly from the foreign market locations through interviews, distributors and agents and potential buyers or customers. The benefit of primary market research is that it is tailored according to the specific needs of the business. Even though it is more time consuming, complex and expensive, primary market research will help the business in the long run.
Secondary data research is when the researcher collects data from ‘secondary’ sources. In this, the international market researcher does not visit the targeted foreign location but uses trade statistics, Internet, trade magazines, published journals and business articles. This method of market research is inexpensive and helps the business to weed out countries and markets that are not suitable. The only problem with this research is that it may not reveal the true specifications of the market, the information can be outdated and distorted and may even not be specific to business needs.
In conclusion, Market research is very important for any business that is choosing to expand into the International foray. While there are many variables to consider while conducting an export market research, the main factors are to identify market potential, the competitive environment, ease of market entry and the presence of qualified agents and distributors.