In this blog post, we will explore essential considerations when selecting the right export market for international expansion. We’ll discuss various crucial aspects of exporting, such as export modes, distribution challenges, pricing considerations, and more.
However, when a company decides to embark on international expansion, one pivotal question emerges: Where should they expand to?
What does it often look like? The company – producer calls to a consulting firm and asks: “Well…, we want to export but we don’t know where?” According to our experience, there should be three main stages to answer this question:
- Your export or internationalization strategy
- General screening:
- What is the political situation in the home country? Can you eliminate some countries at this stage?
- PESTEL analysis
- SWOT analysis
There is nothing very special about this stage. Students are usually educated to do this basic screening while studying in schools of business. The main idea here is to eliminate the countries that are too risky to invest in (the local political or social or legal situation is hard to predict, some trade barriers exist etc). When the first stage is done, the company can switch to stage #2:
- Detailed screening. Here we propose to use data about different countries from open sources like: worldbank.org; www.trademap.org
Every company should choose the assessment criteria (it depends on the product and its price) and the weight of the criteria to proceed with calculations. For example, if the company is selling babies’ cosmetics abroad and it’s expensive, then at least two criteria would be appropriate here: the number of kids annually born per capita and GDP PPP in the country (obviously, the poor people in the poor country can’t buy expensive cosmetics for kids). It might look like this in the example below:
- After the detailed screening, a company might have 3-4 chosen countries to start exporting. Still, it might have the budget for 1 or 2. How to choose? Here deep market research should come to the scene. The company is highly recommended to hire a local specialist, so, that this person is investigating the local situation with competitors, price structures, distributors, retail, or B2B channel (depending on the product or tech). This is done so, that the company is fully prepared to start local negotiation (it happens for example that a product is highly desired on the market, but a vendor can’t afford to provide the local distributor desired margin and marketing support etc).
Please don’t underestimate this stage. Local qualitative research will save your firm from financial loss in the future.
Good luck with internationalization!
