Small to medium enterprises experiencing success in their local market should consider the value of taking their product into a new market. This option becomes particularly viable when local market is reaching saturation. Alternatively, you may have identified a gap in another market that you should act on quickly.
There are ways to explore a new market and test the success of your product without having to make significant upfront investments. We explore the value of conducting thorough market research and the different options available for your market entry strategy.
Conduct Market Research
Unsurprisingly, you’ll need a comprehensive market research strategy for your product. You want to know how successful your product is likely to be once introduced into the market. This will help you decide how to invest and build your product’s footprint, without formally beginning the process. The best way to do that is to dedicate time to conducting preliminary research of the market.
Essentially, you’ll be looking to learn about:
• The nature of the country’s overall economy
• Market behavior in the particular industry or industries relevant to your product
• The status of potential competitors
• Consumer appetite for your product, and its size
• Who your target market is
• Your product/company’s ‘niche’ or competitive edge
• Wholesalers, suppliers, partners, and stockists that could support the production/sale elements of your business.
Set out your market research into three or four main segments that focus on economic overview, industry analysis, consumer demographics, and targeted research about your specific product.
With this information, you can make better-informed decisions about the launch and likely success of your product, before you’ve committed the funds to doing so. This stage of testing a new market will also help to determine the most likely effective advertising campaigns and strategies. Importantly, this research should help you identify whether your product will satisfy the unmet needs of a group or groups of customers.
To get a comprehensive overview in your research phase, seek information from both primary and secondary sources.
Primary research involves gaining first-hand information about the new market and potential customers. There are a number of techniques you can apply to gather this information, such as:
• Organizing focus groups
• Distributing an online survey
• Conducting phone or face-to-face interviews
This is your opportunity to understand the challenges, needs, interests, and preferences of buyers. You can then start building your ‘buyer personas’ – those you consider to be your target customers.
With primary research, you can also troubleshoot problems for your business before they occur. This can be done in two ways: through exploratory and specific research.
Exploratory research involves uncovering and addressing issues that your business would face as a group in the country. Specific research dives a little deeper than exploratory research and hones in on specific issues you’re interested in resolving.
This type of research utilizes public records available to illustrate elements of the economy/industry you’re investigating. You can draw conclusions by analyzing statistics, trend data, and public spending and reporting information. It’s through secondary research, that you can also build an understanding of your competitors.
You can deduce market and industry conditions using public, commercial and internal sources. Public sources are considered the most accessible and prolific. These are your government statistics and initiatives, or reports produced by think tanks and large (sometimes international) organizations.
Commercial sources are often business reports produced by private research agencies, that usually come at a cost. Because of their specific focus, however, they are a valuable resource for gaining insights into your industry of interest.
Finally, internal sources involve probing your own in-house expertise for information about clients, revenue, retention, and customer challenges. Use internal information to project business scenarios and draw conclusions on what consumers of your product want.
Understand Local Laws and Regulations
Your research process should also include an analysis of any restrictions to putting your product out on the market. Products with restricted components, such as cannabidiol from cannabis plants, may come with additional regulations around their production and sale.
If you’re working with restricted components, check which permits or licenses you’ll need in order to manufacture or sell them. Find out how much they cost, so you aren’t surprised with extra overheads when you enter the market.
Your business plan may involve importing ingredients or parts to produce your product locally, or exporting your product overseas. In that case, find out what regulations are in place for importing and exporting goods and your product. Know what certification or extra costs you need to accommodate in order to verify the components of your product.
Once you’re satisfied with your market and legislative research, use the information to form the basis of your business strategy.
Decide on your market entry strategy, based on your research. This will involve choosing the right business model for you, which could be any one of the following:
• Direct exporting: whereby you export your product to that country through an agent to build a customer base
• Partnering: working with a local firm to expand your business, which can be done to varying degrees. Partners can represent you locally or provide local expertise to overcome cultural/legislative barriers.
• Licensing: involves transferring the rights to the use of your product to another company. This can involve marketing or production and is particularly useful if the purchasing company has a significant share of the market.
• Joint Venture: share the risks of entering a new market with another firm by jointly managing a third, independent company.
• Buy a company: buying an existing local company can be beneficial if they already have a substantive share of the market. Ensure due diligence when investigating the viability of a local company
Perhaps the lowest risk way of testing your product in a new market is through the mode of piggybacking. This technique involves approaching large companies in your current market who have a footprint in your desired new market. By selling your product domestically, the larger firm can then stock it in their international branch(es).
This last approach is worth looking into, as it reduces the risk of failure for your business. Piggybacking utilizes the prominence of a larger company to market your product abroad. If successful, you’ll have built up a customer base, and can then decide to move into the new market yourself.
Work with a Professional Employer Organization
A Professional Employer Organisation (PEO) offers outsourced human resource services. Through a PEO, you can hire employees overseas without establishing a physical presence in the country.
PEO provides business payroll services and human resources support and complies with local legal and tax requirements on your behalf.
Hiring an employee in your desired country is another low-risk way to enter a new market without going ‘all in.’ Your overseas employee can conduct market research, network, and win clients before you invest in establishing a larger presence.
A PEO also offers ‘big company’ benefits and support for your overseas employee, so you can focus on local operations with minimum stress.
Don’t wait for a competitor to move into a market offering new opportunities. Though expansion is a big step, there are ways for your business to test your product overseas before making a long-term commitment or large capital investment.
Consider the tools you have at your disposal internally and publicly and different approaches to exploring a new market with minimum risk.