TGG helps businesses to analyse, select and enter global markets. We have years of experience working in multiple international markets across a wide range of sectors. This series of posts is meant as a high-level guide to help people through the complex world of international trade. We have selected 10 areas to focus on which we feel are crucial for success.
Step Two: Do the research
Don’t rely on a blank page. As bizarre as it may sound, we find that lots of companies enter a new international market having done virtually no detailed research on that market and this approach leads to a number of mistakes being made which are likely to jeopardise the success of any new market venture.
For example, many companies decide to enter a country on the back of a promising-sounding meeting. Maybe somebody is met at a trade show or an approach comes in via the internet and the opportunity seems too good to turn down. It is possible that you could get lucky and that such an opportunistic coming together might deliver the ideal partner – but this is rarely the case.
In depth, quality research into the market is absolutely essential despite the fact that it costs money and may slow you down in the early stages. It is essential because without the right detailed information and strategic advice at the outset your medium and long term growth is going to suffer.
A classic result of failing to do the correct research in advance is that organisations build their business in a new market on the wrong cost base. People often assume that, if it’s an emerging market everything will be incredibly cheap or conversely they think that if costs are 25% lower than at home then they should be OK. In both of these instances, your business might flounder – you won’t be able to attract the right calibre of people on the one hand, and on the other you are building a much more expensive infrastructure than your local competitors.
Bench-marking should be an essential element of any local market research. Make sure your cost base is sustainable. It is really difficult to deconstruct a poor cost-base retrospectively so it’s worth getting it right at the outset.
You need to chose your partners and employees wisely – people often go into a new territory and don’t really know what ‘good’ looks like in that country. If you don’t understand the cultural norms in a country it is very difficult to know what good looks like and you are in danger of choosing something that would look good in your own territory and transplanting it into a new market. Don’t be attracted to contacts in emerging markets because they are a good fit with your folks back at base if what you really need is for them to be a good fit in the local emerging market-place.
A key part of any research has to be to look at what time-frames are realistic in terms of bringing a return on your investment. All of the emerging markets are massively relationship oriented. People don’t want to do business with you until they are sure you are the type of people they would feel comfortable doing business with in the long run (in fact I’d be wary of people who want to jump into bed with you straight away). The combination of relationship orientation, unfamiliarity with the landscape and bureaucracy probably means that things will take longer to mature than you may have expected. You need to build realistic timescales into your investment and cash-flow plans from the outset.
There are many issues that need to be considered before committing the time, cash and bandwidth needed to successfully enter a new international market and we have listed but a few of them here. It costs money to commission good research but it costs a lot more to enter the wrong market, with the wrong product in the wrong way.
The next of step in or 10 step guide will look at developing cultural fluency.