To start the export adventure, a prior process of research and reflection is necessary, based on data and information, and it is also recommended that the entrepreneur select a main target market and an alternative one.
For this first stage, you must take into account what type of services or products you provide, and for which of their categories you have the greatest response capacity and the best levels of quality and production.
Next, the question to answer is: where to? Sometimes the decision is easy, either because there is already a clear demand from a specific market, or because the entrepreneur already has certain connections that allow him to create the conditions to sell there. But, if this is not the case, it is important to map and execute a method to choose the market to which to export.
To make this decision, it is important to identify and analyze market intelligence information and consider several factors beforehand. This information can be collected from various official and reliable sources, such as:
- Market research databases and research reports available from your local foreign trade promoter (in your country). – It should be noted that you can also look for relative information in foreign trade promoters from other countries.
- Public databases that list export and import levels by sector by country. Such as the World Bank and Trade Map databases. Today, the Internet allows us to do very effective searches. It is important that you search multiple public sources and cross-reference your findings to confirm trends and data to help you validate the consistency and potential of the markets you identify.
Such market research is important for several reasons:
- The process enables a selection of markets and products, carrying out an evaluation of the potential of each one of them, prior to the final decision.
- It allows concentrating the company’s resources and avoiding mistakes.
- Information constitutes a business asset, an added value to the company that makes it produce more and better.
- Research is useful to analyze how to arouse interest in the product, how to attract customers and, in general, how to bring the company closer to the target market.
- It allows you to previously identify critical factors for the viability and success of the export initiative, such as: Price levels, tariffs, taxes, means of transport, competitors in the destination market, main players, economic and tax incentives or benefits in your country and in the target market. How and who is supplying the need in the target market? Is there already a created and stable demand in that country? Etc.
The factors mentioned above are largely focused on micro and macroeconomics aspects in the target market and the international trade environment.
At the macroeconomic level, it is important to study indicators of market size (population, its distribution, GDP per capita, unemployment rate, inflation, etc.), tariff and non-tariff barriers (the import regime, permits, licenses and formalities, exchange controls and other payment difficulties / issues).
Indicators of political stability of the country (its governmental regime, its degree of socio-political maturity), and indicators of market operation (such as distribution channels and their costs, degree of concentration, promotion methods and services , the main competitors), are also very important to map from the beginning. Finally, there are other macroeconomic data of interest, such as information on banks, transport, and units of measure concerning the product to be exported, which can be decisive in the definition of Prices, Promotion, Product and Place of your value proposition for that or those target markets.
On the other hand, the microeconomic information of the target market is very important to be able to adapt the product to these characteristics. These are, among others, identifying the levels of demand for the product, that is, who will be the final users or consumers of the product, how much they consume, how current or future their demand is, what are their purchase motivations, where they are located and how seasonal is their interest in the product. You must analyze which would be the ideal product for that demand: what characteristics would it have (components, design, packaging, tagging), what technical standards and approvals it would require and what would be its manufacturing process. Regarding the local offer, it is important to identify who the competitors are. Where are they located? What are their products? What motivations did they have to settle there?
Finally, it is convenient to analyze the foreign supply, that is, who are the wholesalers or distributors, what products they offer in those destination markets, among other aspects.
After gathering as much of the information cited above, the potential of each market should be evaluated to define the prior economic feasibility. To do it, you must answer these four questions:
- Does the target market have sufficient potential to justify the concentration of efforts?
- Is it a market in which the price does not erode the margins of the company?
- Is the product valued in that market for any competitive advantage?
- Is there an indicator that the demand for the product is growing?
If the answers to these questions are yes, then the entrepreneur would have found an interesting market for his export plan.