How to expand your business to new markets
The main difference between being opportunistic versus being strategic boils down to research.
Being opportunistic, as the word implies, involves jumping in the direction of where the opportunities arise. For example: You receive several inquiries from a large buyer in India, and say to yourself, we need to be doing business in India. Being strategic involves diving deep into the ocean of research to determine where in the world are your best opportunities—not to simply sell, but to make the highest returns.
“Smart research is the foundation of smart exporting,” says Rigutto. “We encourage companies to use data to validate assumptions and uncover hidden opportunities, especially in emerging markets where the potential is high, but less obvious.”
It takes a lot of effort to see a foreign deal through; there better be multiple potential buyers in that market to support the upfront costs.
Which is to say, initially, you’re not looking for specific customers, but rather, narrowing down which market offers the highest net potential. According to Amber Piché, an export advisor with the British Columbia-based Export Navigator, you should break down your research into three distinct parts: Regional, industry and market.
Regional research
By regional, Piché is referring to key indicators, including:
- Population density
- Gross domestic product (GDP)
- Government stability
- Protectionism
- Localization requirements
“The bottom line: You want to determine the relative ease of doing business in a particular market or region. To do that, you need to weigh a variety of indicators against each other to see the pros and cons of a market. You’ll definitely want to know if there’s a free trade agreement in place, since that can really add to the ease of doing business,” she adds.
Industry research
From an industry standpoint, you’ll want to look at how yours is performing in a particular market. Take a look at both the import and export sides of the equation to determine how much of a particular good or service is being imported by the prospective market, and which countries are currently exporting that good or service to that market. Those figures will help you calculate raw demand and competition.
You’ll also want to look at regulations: The target market in relation to the country’s population and what types of culturalization adaptations would be appropriate.
Market research
When doing market research, you’ll need to take a more detailed look at the competition, including local, as well as international players exporting to the region. This step involves fleshing out what you learned during your “industry” investigation. Ultimately, you want to understand current market penetration, future market potential and ideally, the average revenue per user.
Piché adds that once you’ve covered these three basic lines of inquiry, you’ll want to get more granular:
- Look into the logistics of getting your product to that market;
- Determine what would be the best market entry strategy; and
- Develop pro forma financials to analyze how doing business in a prospective new market would affect your bottom line.
Once you’ve completed your own research and come up with a preliminary market expansion plan, it’s time to validate your assumptions.
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