For many new or existing exporters, entering a new market can be one of the most costly line items in terms of expense. While the cost of entry for a business will vary widely based on the type of business, industry, customers served, distance from current locations, distribution (and other factors), for most businesses, entering a new market comes with a significant price tag. So, it’s important that you evaluate this correctly.

There are lots of questions and discussions at the top of these types of efforts:

  1. Where can we go to get new sales?

  2. What market is the right fit for us?

  3. What existing markets can we lever into new ones?

  4. Should we enter the market in ______________?

  5. Have we maximized our current markets in terms of sales?

Small and medium businesses often need to answer these questions (and many others) as part of a market analysis. You might’ve heard this described in other ways, like the “competitive landscape”, “market evaluation”, or some other term. It’s smart, really: before you go and spend a dollar against hiring someone in a region, hiring a consultant to do the work for you, translating marketing material or some other effort, there are a variety of things to consider:

Do your homework. Before you jump on an airplane, “You need to do both secondary research and primary research: time and money are not unlimited.”, relates expert Dr. Jonathan Calof, one of my colleagues in the Council of Competitive Intelligence.

He goes on to add that technology has made this much easier: the advent of Skype, Zoom and other online tools allow you to really get to know people and do primary research before landing on the ground in a new market. While this does not serve to fully vet the situation, it can give great in-depth information to help guide you in your decision-making.

When it comes to analyzing a new market, the more precise you can lay out your objectives, needs and requirements, the better.

Calof relates there are a number of areas to evaluate, including:

  • Is this the right country for me?

  • Is my product right for this market?

  • Do I have the right partner?

  • How do I market effectively there?

IS THIS THE RIGHT COUNTRY FOR ME?

According to Calof, you need to “consider your goals.” Why do you need to be in a particular market?

Canadian Tire is a great example of getting it wrong, relates Calof. Canadian Tire lost some $300M in a move into the United States because “they asked the wrong questions”, says Calof. They asked a consultant to “find us a location that matches our criteria for a store”, rather than starting with the question of, “Is the U.S. the right market for us? Does it operate in a way that we can deliver value and grow our base there?”

Other recent examples, like Target’s move into Canada, are prime examples of choosing the wrong country. Target’s move was even more expensive, costing $5.4 billion … quite the blunder.

Source

To understand if a country is right for you, you have to weigh it against the criteria that matters to your company. This might include factors like:

  1. Is there a total addressable market present that makes sense for me?

  2. Can I reach the market in a way that will provide a good ROI? What are the “rules of the game” in terms of relationships and “face time” and do I have adequate staff to do this?

  3. Is the culture consistent with the way of doing business in which I am comfortable? In some countries, bribery is prevalent: this raises not only ethical issues for Canadians, but legal ones as well under the CFPOA.

  4. Is the country stable? Looking at a country’s political and economic stability can be important as you evaluate current and future opportunities.

IS YOUR PRODUCT THE RIGHT ONE?

Bringing the wrong product into market (or trying to) can be devastating to a company. Examples like former NB-based company, Breviro Caviar, demonstrate what can happen when your export plans haven’t necessarily picked up on regulatory nuances: in this case, the company’s product wasn’t admissible into the US or European markets due to environmental regulations.

Calof relates three other examples:

  • There was a U.S. video compression software company that wanted to go into new markets. As they entered Peru, while the focus of the software company was the compression, the market really cared about the rate of transfer. The product was capable of what local requirements were, but they hadn’t considered it as a strategic advantage previously. He goes on to say to listen to what the market is telling you: the body language, the words, the amount of focus given a feature… this can tell you things that the market and customers want.

  • Another great example of understanding truly what the market wants is another tech company from Canada who entered the Indian market. The Founder energetically showed the Canadian trade representatives on the ground his product, and the locally-engaged officer began to question the value of the company’s high-tech taxi meter: “How will the taxi change the rate?”, asked the officer. “They can’t change it! It’s very secure and set centrally so it can’t be played with by outsiders.”, replied the Founder. The officer told the entrepreneur to enjoy a few tourist sites and get on the plane back to Canada, because the market would never accept the product. The market required the ability for drivers to change the rates as this was the everyday norm. Understanding the true realities of the market, especially from the would-be users, is critical. You have to understand the full picture. As Calof relates, “Get as much information at home as you can around your key information topics. Then you go to the market to validate and contextualize the information.”

WHO IS THE RIGHT PARTNER?

As David Arnold shared in HBR in Seven Rules of International Distribution: “Since markets are nationally regulated and dominated by networks of local intermediaries, corporations need to partner with local distributors to benefit from their unique expertise and knowledge of their own markets. The (companies) know that on their own, they cannot master local business practices, meet regulatory requirements, hire and manage local personnel, or gain introductions to potential customers.

So, when it comes to evaluating the right partner, what should you consider? Noted expert Dr. Paul Bemish has a great framework to help guide you:

DO YOU HAVE THE RIGHT MARKETING?

Finally, when evaluating the right market, you need to consider your marketing. While much of this would be dealt with after you’ve made the “go/no-go” decision for a market, you will need to analyze the market to understand how to properly communicate in that market, all the while, understanding what that market needs to hear.

There are many great examples of finding your way, but here are a few interesting/cautionary tales:

Closing Thoughts

While going into a new market can be a lot of work, you can also be well-rewarded for doing it right. At the end of the day, however, you have to start by really doing your homework and fully understanding the market: is it a fit for you, are you a fit for it, and if so, how are you going to go about entering it?

While this is far from comprehensive on the topic, we hope this post has given you some ideas on how to tackle getting started.

If you have questions about this, please get in touch with me. A version of this was originally shared here.