Once your business and key staff are primed to get started with international trade, it’s time to identify where your greatest growth opportunities lie. Researching new markets can be an expensive and a time-consuming process, but this is a crucial step on the road to finding success on the global stage.
A wide range of factors will have a bearing on your choice of the ‘right’ market. These range from potential demand for your products or services and the competition you’re likely to face there, to more practical considerations such as language and cultural barriers. Don’t overlook simple issues, such as whether your goods are suitable for long-distance shipping.
The right market isn’t necessarily the biggest market. One common strategy for businesses is to focus on new markets where there’s already a considerable degree of activity in their sector. However, winning new business in a highly mature market with well-established supply chains can be considerably more challenging. It’s also likely to require much more investment than successfully entering a smaller but less fiercely competitive market.
The importance of market research
Establishing whether there’s likely to be enough demand for the products you make or the services you offer is the logical first step in identifying suitable markets. International market research reports are one possible source of the relevant information, especially if you’ve already narrowed down your list of potential trading partners to a handful of locations.
You may be able to get useful market information from your customers or suppliers, or other firms in your industry through trade associations or organisations like the British Chambers of Commerce. Equally, your business may be approached by a distributor or retailer in a foreign territory to discuss supplying goods into that market. While this can be a useful indicator that a market may be worth exploring, it’s vital to carry out your own research in greater detail.
Establishing that sufficient demand exists in a particular market is only part of the story. Many other factors will dictate whether you can satisfy that demand while still being able to turn a profit.
- Distance and logistics issues: make sure your chosen markets are practical and economically viable for your products. Choosing a closer market might be more economical for transport compared to one further away, especially if your products have a shelf life.
- Existing competition: there may be sizeable demand for your products or services, but are domestic rivals already addressing this opportunity? If so, what competitive advantages do you have?
- Cultural and political considerations: dealing with language barriers and issues such as political instability can add significant costs and complications.
- Regulatory compliance: as well as tariffs and customs duties, consider whether you need to get licences for your products, and whether they might need to be adapted to meet local regulations.
It can often make sense for businesses to adopt a ‘start local’ approach to international trade. This can be a way of addressing both distance and cultural issues before moving on at a later date to explore market opportunities further afield. While the UK’s departure from the EU means that there are now a number of extra regulatory steps to trade with our closest neighbours, exporting to and importing from member states remains a viable and attractive proposition in many sectors of the economy.
Key action points:
- Identify the right market to target through research and networking. Think about the market’s growth potential and bear in mind that mature markets can be much more challenging to break into.
- Assess the competition you’ll face and whether you have any competitive advantage to exploit.
- Calculate the costs you’ll incur in meeting demand. Will a potential international business opportunity turn a profit?