Introduction to Exporting - Part 4

Chapter 4

Identifying Your Target Market 

Understanding International Market Research

After the export plan, market research can be the most important contributor to international success. There are about 190 countries in the world, and you obviously want to pick the right one(s) for your product or service.

To do this, you need information that will provide a clear picture of the political, economic and cultural factors affecting your operations in a given market. For example, you may already be aware of an opportunity in a foreign market, but need specific information to take advantage of it. Or perhaps you have a target market in mind and you want more detailed knowledge of the demand for your product or service.

Market research is the key to understanding your opportunities. It can confirm that an opportunity actually exists in a particular market and can help you analyze the market’s characteristics. It can give you the insight into how a new market can be developed. Most important, it helps you discover what’s important to your potential customers and what may influence their buying decisions. Although there’s usually a lot of detail involved, the three basic steps of international market research aren’t particularly complex. They are as following steps:

Step 1: Screen Potential Markets

Collect statistics related to your sector that show product or service exports to various countries. Identify 5 to 10 large and fast-growing markets for your product or service. Look at them over the past three to five years. Has market growth been consistent year over year? Did import growth occur even during periods of economic recession? If not, did growth resume with economic recovery?

Select some smaller emerging markets that may hold ground-floor opportunities for you. If the market is just beginning to open up, you may not have as many competitors as you would in an established market. Target three to five of the most promising markets for further study.

Step 2: Assess Target Markets

Examine trends that could influence demand for your product or service. Calculate the overall consumption of products or services like yours and identify the amount imported.

Study the competition, both domestic and non-domestic. Look at each competitor’s market share. Identify what affects the marketing and use of the product or service in each market, such as channels of distribution, cultural differences and business practices.

Identify any foreign barriers (tariff or non-tariff) for the product or service being imported into the country, as well as any domestic barriers (such as export controls) affecting exports to the country. Search for domestic or foreign government incentives to promote the export of the product or service.

Step 3: Draw Conclusions

After analyzing the data, you may decide that you should restrict your marketing efforts to a few countries. In general, new-to-exporting companies should concentrate on fewer than ten markets. One or two countries are usually enough to start with.

Please take note that exploring foreign markets can take longer and cost more than you expect. Be prepared for additional expenses for market research, product launches and personal visits. 

The Kinds of Market Research

There are many ways to study a market, so the second step of your international market research may take different forms. You might sometimes rely on a gut feeling, and at other times use sophisticated statistical techniques. The more detailed and objective your research, however, the better. There are two main types of market research, secondary and primary research.

Secondary Research

You do this in your domestic market, using data such as periodicals, studies, market reports, books, surveys and statistical analyses. Many of these are available online, as well as through chambers of commerce, economic development organizations, industry and trade associations, and domestic companies that are already doing business in your target market.

Primary Research

After completing your secondary research, you move on to the primary research phase. Here you collect market information through direct contact with potential customers or other sources.

Primary research almost always demands direct, personal involvement through interviews and consultations. Your foreign or domestic contacts will be able to help you better if you state your company’s objectives at the outset and present your questions clearly. For example:

Company Description—give a brief description of your company, its history, industries/markets served, professional affiliations (if any), and your product or service.

Objectives—briefly list or describe one or more objectives for your planned export product or service, based on your secondary market research.

Product or Service—clearly describe the product or service you want to export.

Questions—base your questions on your secondary research and be as specific as possible. You’ll get a better response if it’s clear that you’ve carefully researched your subject.

Here’s a checklist to help you summarize what you learn about a possible market. After you’ve created two or three profiles, you can compare them to see which one(s) present the best overall opportunities.

         Market Type

• A fully developed market (Canada, Germany, the U.S.)
• A developing market with rapid growth (China, India)
• A developing market with marginal growth (many African nations)
  Political Highlights
• The government
• Who’s who
• Major political themes
• Relations with your country, including trade agreements
  Economic Highlights
• The domestic economy
• Economic trends
• General imports and exports
• Imports and exports to and from your local market
  Business Information
• The currency
• The language
• Business practices and regulations
• Any differences in legal framework
• Government procurement practices
• Work relationships
• Office hours
  Partnering Options
• Domestic firms doing business in the target market
• Major firms from the target market doing business in local area
• Options for local partners
  Support for Market-Entry Strategies
• Industry associations
• Trade events in the target market
• Other networking options
• Trade media
• Research facilities
• Market research sources
  Cultural Considerations
• Greetings
• Forms of address
• Do’s and don’ts
• Cultural differences
• General tips
  Travel Tips
• Visa or other requirements
• Work permits needed
• Business support services
• Suitable hotels
• Telecommunications standards
• Tipping customs
• Electrical voltage
• Religious holidays