Choosing an export market
Market research is the key to reducing the degree of risk involved in selling into a new market. Before you begin any detailed market research you need to shortlist four or five of the most promising markets. You might do this initially on the basis of your own, your colleagues’ or professional export advisers’ knowledge of overseas markets. You should also ask yourself, “Do I really want to do business there?” Remember that if your export drive is successful you are likely to spend a significant amount of time in that country.
Typically, first time exporters are encouraged to look close to home for potential markets, and in particular at the markets of the European Union. In most cases this is sound advice. The most important area of the Union is the so called “Golden Triangle”, the area bordered by Paris, Cologne and Liverpool, which represents over three fifths of its population and wealth. The countries included (excluding the UK) are Belgium, France, Germany, Luxembourg and the Netherlands. These countries are traditionally the best export markets for UK firms.
Consider your first steps in exporting as a test market exercise where you can limit your risks and iron out any problems which might arise relatively quickly and cheaply and without destroying relationships with your customers. Choosing the market you will target first means taking into account a number of factors, including assessing the effects of something going wrong.
One specific market
Your objective should be to narrow down your choice to one specific market. When you finally make your choice you will need to take into account some broad considerations.
Research is the key to helping you select your target market. In thinking about which country to choose, there are some common issues to consider:
- Are there any barriers to trading with this country/area? These may be both overt and hidden and range from political sanctions and civil war to poor internal transport systems.
- What is the general market potential of the area? Who are the main customers for your type of product/service?
- Who will your major competition be? Are there any gaps in the market which you feel you could supply?
- Obtain a brief outline of the trade channels which operate, or are available in this country, and how you can access them. Will they impose any limitations on your strategy?
Producing listings like this will help you to make comparisons between different areas and may clarify your initial thoughts. The type of information that you will need should be readily available through export journals, and organisations which publish country features and reports on new markets. Enlist the help of your local business library to find back copies of such features. Importantly, talk to the people around you, including those in your own business, in other businesses, and who may have some knowledge of a particular country. You can then begin to grade potential markets in terms of suitability, potential and ease of entry. This should provide you with a second list, compiled from the most favourable choices of the first. You can now investigate these in more detail, looking at such things as sales of similar and related products, local production, competition (locally and from other imports) and who typically buys these products. Many sources of help are available and there are several organisations which can provide statistics and general advice about world markets.
Finalising your choice
You have been encouraged to think in terms of targeting a single export opportunity. You should also now be more aware of the kinds of opportunities that might present themselves to you. The time will come when you will need to finalise your choice in terms of the product or service you intend to sell and the market you intend to sell into. You will find it useful to ask yourself: 'what could I export?'
As well as conferring benefits on customers you will need to identify and promote a unique selling point (USP) for your product or service in your chosen export market. When considering what you can export you should aim to answer the following questions:
- What are your customers needs?
- How will you fulfil their needs?
- What is it about your product or service that is unique?
- What will encourage customers to buy from you rather than from your competitors?
- Where is my target market?
Draw up a short-list of potential export markets and prepare a thumbnail sketch of each one. For each market you choose, and there should be no more than four or five, you should aim to cover the following questions:
- Is my product or service likely to offer sufficient benefits to potential customers?
- Will I be able to offer service and support to customers in that market?
- Who are the competition?
- What pricing policy does the competition operate?
- Is the market static, growing, or declining?
- Do I really want to do business there?
You might find it useful to make a list of advantages and disadvantages on market overview sheets.