How To: identify the best market for you
To begin with, first-time exporters should consider opportunities in an international market that presents the fewest obstacles. Some of the biggest barriers to doing business overseas are currency, culture, language, opportunity and demand.
Answering the question “what is the best market to sell in?” might not be as easy as it first appears. English-speaking countries may seem like obvious destinations, but with the exception of Great Britain, the USA and Australia are sufficiently far removed from the island of Ireland to present considerable challenges, especially if your company has never exported before. Consequently, the “best market” may not be the one that, after careful analysis, is the one where you stand the greatest chance of being successful.
There is a strong case for continental Europe as a worthwhile destination for early-stage exporters from the island. It offers an easily navigable single landmass, strong transport infrastructure and a high-income population. Language and business culture, though different to ours, are barriers that are relatively easy to overcome. For example, the Netherlands has multiple points of access including one of Europe’s biggest ports, a primarily English-speaking business culture, and a high concentration of large multinational companies.
It might seem obvious to say it, but preparation is crucial if you hope to succeed in exporting. Experienced exporters say success in an overseas market is directly linked to how well-prepared the company is. The more knowledge you have in advance about the market, and the more due diligence you have carried out on your target customers and the competitive landscape, the less time you will need to spend in the field testing your thesis. Strong planning leads to better execution. Otherwise, the extent to which you fail to prepare is the extent to which your efforts will fail.
You are likely to spend a lot of time and money in a new market at first, which makes it essential to have chosen the right one. Talk to agencies that provide a range of supports to exporting companies, such as Enterprise Ireland or Invest Northern Ireland. Avail of market research and economic data to get a feel for what markets have the most opportunities. Attending international trade shows is a very useful way of showcasing your company to international prospects, while also gauging the extent of competition. Qualifying leads that emerge from such events could also help to guide your company in a particular direction.
When assessing a market, consider how easy and cost-effective it is to physically put products or people in the market. Are there several options for you to do so? What implications will it mean for providing technical support: do you have sufficient staff resources already, and is your head office geared up to have employees available at different office hours in order to take calls from customers in your chosen market? It’s important to know what export documentation you are likely to need. You should also start thinking about your preferred route to market, and which partner or distributor you plan to work with.
EXPORT CHECKLIST: TIPS FOR EXPORT SUCCESS
- Profile your existing customers in your domestic market – this will indicate some likely export destinations
- Base your decisions on where to sell through solid market intelligence: a combination of desk research, attending relevant industry trade fairs, and visiting your prospect market in person
- Combine desk research, attending relevant industry trade fairs, and spend time in your prospect market in person for deeper research.
Case study: Caragh Consulting
Mary Donovan is the founder and Principal Consultant with Caragh Consulting (www.caraghconsulting.ie). A Fellow of Chartered Accountants Ireland, she was previously a senior executive at Diageo and has more than two decades’ experience in designing and implementing successful change projects in large global organisations. Here, she offers advice to new exporters about how to identify the most suitable markets for their products and services.
HOW CAN COMPANIES DECIDE WHAT THE MOST SUITABLE EXPORT MARKET IS FOR THEM?
There is no point in picking a market if it doesn’t have the type of customers you’re trying to attract. It has to be cost-effective to reach them and you have to deal with whatever that throws back at you. So, if those customers are in Germany, you will have to deal with language issues and everything else that comes with that market.
For companies that already have a local customer base, they should already have a good understanding of their customer profile and through that, they can see if that profile shows up in other markets, allowing for the fact that you might have to customise your product in some way.
You go in on what is the true market size – the size of the customer base you’re trying to attract: the overall market might be very big but the addressable market might be quite small and niche. Then, you need to look at what is the growth potential in that market. But maybe the upside isn’t great, or else the market itself might be small but the upside potential is quite significant – is it a market you can make money in, or will the cost to serve outweigh the profits you will make?
Clearly, you need to think about the nature of the competition: once you get in there, can lots of others follow you?
You have to make that investment to find out whether it is a true opportunity or not, but you also have to do the work at home to see what it will take to scale to meet that opportunity – and that will vary from one business to the next. If you have a business where your incremental costs aren’t huge and you have potential to meet the demand without adding to your fixed costs, then you have an opportunity. But if you have to make a big investment to your business in Ireland, then the level of risk to you if that doesn’t come off is quite significant.
How do companies get the information they need to decide the best course of action?
The more facts you can bring to the table, from doing the background financial analysis and the visits on the ground, the better your decision will be. Nothing can replace the intelligence gained by going to a market and spending time in it.
My sense would be that many companies on the island export on an opportunistic basis, and they follow up on those leads.
One of the other sources of insight into this is where companies already have an online presence. Assuming they’re actually tracking the presence of their customers online, then if there’s significant demand from a particular country, then there’s opportunity that could be explored further. But many don’t have that kind of online presence. Very few manufacturers on the island trace their products through to the end consumer.
WHAT OTHER ISSUES ARE LIKELY TO CROP UP WHEN CHOOSING A NEW EXPORT MARKET?
There is another level, particularly as it relates to lifestyle and fashion, where you do really need to understand the idiosyncrasies of your end customers. For example, if you are selling into Japan, everything is smaller. Houses are smaller, so the size of your product needs to reflect that. For example, a bar of soap made in Europe looks like a briquette in a Japanese bathroom. Understanding that physicality is really important.
“Nothing can replace the intelligence gained by going to a market and spending time in it.”
WHAT’S THE BEST WAY TO START PLANNING TO EXPORT?
It really goes back to having a clear strategy that states: “we plan to move into one export market every two years”, or whatever it is, and then there is an appropriate budget allocated to it. It might be a single resource, but they have to budget to buy in resources as needed. It’s important that this is written in a plan and then there is real tracking as to the progress being made, what are the issues and the risks, and that a real performance update becomes part of the company’s monthly management meetings.
WHAT IS A COMMON MISTAKE THAT EARLY EXPORTERS MAKE?
If you were to ask many companies why anybody buys from them, they can’t answer the question. “Because I make it” is not a good enough reason! The discipline to do the deep thinking about why you make something and why people pay for it, is a really valuable insight, and it’s important to get directors in the company aligned with what that is.
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