5 Step Approach to Entering New Markets
Planning for exporting, like any other business planning, is hard work. Although often overlooked, it is absolutely essential, writes Seamus Murphy from Business Boost International Ireland.
MDs and directors of SMEs are often tempted to jump on a plane and spend money on the hot export destination of the moment. While there are significant opportunities for businesses that have a strong unique offering, to ensure a return on investment and optimal results, it is advisable to target your first or next export market in a structured, business-like fashion.
When thinking about entering a new market, you should ask yourself these questions:
- Is the Management Team fully committed to the new strategy?
- Who within the organisation will be the champion of the export sales drive?
- If everybody is in charge, we all know that nobody is in charge. What impact does the new export drive have on the home or existing export markets?
- How will the gaps be filled by a key team member spending a couple of days a week out of the office, building partner relationships or a sales pipeline?
- Most importantly, is the budget there to deliver on this, is extra bank funding required? Are you committed to preparing a plan that can secure this funding?
1. Decide on a product and market sector combination
This can be done by clearly defining your value proposition. Identify which sector(s) most value the solution you are offering. Value proposition can be determined by asking “Why should your ideal customer purchase from you rather that anybody else?” The very best people to ask about your value proposition are your customers. What value do they derive from your relationship?
2. Research the best country for you to target
The answer to the question on what country to target is not always to be found just over the water. The United Kingdom is often the very best place to start, but other markets may prove to be more fruitful for your product and sector combination. A detailed analysis of what drives demand for your product across a number of countries will give you the answer to this question. You may still decide to go with the UK, but at the moment there is a lot of uncertainty around this market, and in general we have been slow to protect our businesses against the dreaded “Brexit”.
The UK market is also notoriously regional and it may be worth your while analysing the drivers of demand for your business across the regions, in order to really focus spend and manpower. The choice of Market Drivers can be relatively simple or very complex depending on the level of complexity of the product or service. Sometimes information can be found in a good library; Bord Bia and Enterprise Ireland have excellent databases and can provide access to a lot of relevant reports. Sometimes a small amount of money spent on this research can be a crucial step, particularly if seeking funding for the export drive. Third party impartial data showing a demand for your solution in a specific country could be very valuable when sitting down with your Bank Manager.
3. Develop an entry strategy that is best for your business, your budget and your vision
For most SMEs, the only short-term strategy is direct export. Joint ventures, branch office or wholly-owned enterprise are pipe dreams for the future. So, for the vast majority of exporters, the next steps are the most critical ones.
4. Find the right partner
Unfortunately, partner selection can be the greatest pit fall and potentially the most expensive (if it goes wrong) part of your next market entry. It is often the decision to which exporters pay the least amount of attention. Gut feeling, a likeability factor, and happenstance all seem to play a part in critical business decisions, rather than cold common sense and some profiling and research. Agent or distributor selection is often more important than key employee selection and needs to be taken on with the same seriousness and diligence. Partners sometimes simply just do not do what they say they will do and they do not live up to their commitments in terms of sales, marketing support, and aftersales service etc. All these factors can compromise the profitability of your product in a market far away over which you feel you have little control. It is crucial for the exporting company to take control of the decision-making process when it comes to partner selection.
5. Manage your partners as you would manage any employee
Communicate clearly what you expect from the relationship from the start. What will they do to help sell your product/service? How will you measure success? Or how will you know they are doing a good job for you? Compare them regularly against other partners in a meaningful way and, as always, manage cash with an iron fist. Finally, consider how you will support your partners via training, shared marketing and other initiatives.
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