3 FUNDAMENTALS FOR EXPORT MARKET RESEARCH

[Rokeya]

Companies that are prepared with good market intelligence can optimize their chance for succeeding in export markets while mitigating risks along the way. Three fundamentals for export market research include strategic planning, secondary research and primary research.

1. Strategic Planning
A basic starting point for American exporters is to develop an export plan or strategy that identifies where there is already demand for your product. From there, your research team needs to dig deeper to determine the size of the potential market, and what the competitive landscape looks like.

"The first step in entering an export market is to create a comprehensive global plan that looks at both opportunities and potential risks, which includes detailed market research," says Timothy Barnes, president of Asia Pacific Consulting LLC, based in Chapel Hill, North Carolina.

Barnes recommends that a company's market analysis identify a short list of at least five potential export markets. Key criteria include assessing various market factors, such as taxes, tariffs and free trade agreements. Other important considerations include the size of the market, regulations and standards, labeling and packaging requirements, political and economic risks and overall ease of doing business.

2. Secondary Research
Initial market assessments usually can be accomplished with secondary market research, which is sometimes is available at little or no cost. For example, market demographics and industry data are often available from government or trade association sources. But that data is not always up-to-date enough to provide a detailed and timely picture of current market conditions. Moreover, some products have specific applications or end-users. Detailed information about the market for highly specialized or targeted products also may not be readily available.
Still, government agencies and trade groups can be an economical starting point for preliminary market research. The U.S. government, for instance, provides free online access to its Country Commercial Guides, which include an overview of opportunities, regulations and business customs in more than 125 countries.

3. Primary Research
While secondary research sources can be helpful in conducting an initial market assessment, most exporters should conduct some level of primary research before making a big investment in a new market. This can range from surveys and interviews with prospective distributors or end users to attending trade fairs and even test marketing. There are also thousands of industry reports published each year. Some reports can be obtained for little or no cost, while others can cost thousands of dollars to purchase.

While collecting data on your own dime requires an investment, the benefit is market intelligence specific to your business. "Primary market research has the advantage of being tailored to your company's needs, and provides answers to specific questions," says Barnes. "For an upfront investment of $10,000 to $15,000, a company could save hundreds of thousands of dollars or more in potentially hidden costs or a failed market entry attempt."

Primary market research is particularly useful in helping American companies assess which countries offer the best potential for its products or services. "Once you have identified five to seven potential markets, a deeper dive is required to look at each market in more detail," says Barnes.

Why You Need to Understand Market Potential
A key factor before making a final decision on a new export market is a clear understanding of the competitive landscape in your industry. Product pricing, foreign exchange and credit risk are other important considerations. Companies that plan to enter a new market through third party re-sellers also need to research key agents or distributors, and be prepared to conduct the appropriate due diligence on potential partners. Language is often an important consideration, too, particularly for less experienced exporters.

Moreover, adds Barnes, you need to understand pricing structures in the target market, who the key agents or distributors are for your industry, and what the financial risks are. "Before shipping to any new market," says Barnes, "you should have a plan for mitigating your risks."

Barnes, who specializes in helping companies expand into the Asia Pacific region, warns that market research can make the difference between success and failure. "I often see examples where American companies who want to export for the first time view China as the ultimate market, and they end up spending large amounts of money to penetrate the country, often with disastrous results."

Failure to get into the weeds of primary market research can result in costly mistakes. For example, one American electronics manufacturer Barnes worked with decided it could supply the Japanese market via a manufacturing plant in China, instead of from an alternative facility in Mexico. But they had not done their homework. After a year struggling to compete, they realized that a 20 percent Japanese tariff on their Chinese-made product was killing their margins. Further research showed that under a free trade agreement between Mexico and Japan, the product could enter Japan from Mexico with no tariff. "Once they moved their plant to Mexico, the landed costs into Japan were much lower, and they managed to increase their market share dramatically," Barnes says.

Inbound Marketing Matters
Ed Marsh, president of Consilium Global Business Advisors LLC in Boston, agrees that strategic planning and market research are important steps in assessing global market opportunities. To help identify new opportunities, he also suggests that American companies make it easy for potential international partners to find them by using tools such as an SEO-optimized website and search engine marketing.

While the internet can help identify where there might be a market opportunity, an online inquiry is just the first step in determining whether the market is right for your product and company. Marsh says one of the keys to success for going global is to have an accurate understanding of your own export maturity level, and to identify markets and opportunities that will maximize your potential for success. "Smart managers recognize that they don't know what they don't know," he says.

Although developing a plan to expand into new markets overseas can be time-consuming and expensive, market research ultimately can help companies avoid costly missteps. Moreover, focusing on new international markets with proven potential may translate into less risk and a possible higher return on investment.

Source: americanexpress.com