Many SMEs mistakenly assume that the cost of B2B market expansion is relatively low, believing they only need to secure a local partner or importer to facilitate expansion. However, the reality is far from this notion. When all inbound and outbound activities required to establish a presence in a new market are taken into account, the costs can skyrocket beyond initial expectations.
Let me give you an example to better understand the true cost of B2B Market Expansion. We recently assisted a European client in expanding within Europe, and the cost of market entry exceeded €40,000. This figure encompasses expenses such as information gathering, comprehensive market research, numerous B2B meetings, and essential trips. These are merely the tangible, external costs; intangible factors and internal resource expenditures, such as inbound marketing activities and employee-related costs, further inflate the overall expenditure.
In order to estimate the costs of market expansion, we introduce these three primary factors :
- Export readiness and Export Strategy (your own company) : This factor indicates how prepared your company is for interrnational expansion
- Target Market Complexity: Every market presents its own set of challenges and intricacies. By assessing the complexity of your target market, you can estimate the costs of market entry. High complexity leads to higher costs to enter the market.
- Product Sophistications: The nature of your product plays a pivotal role in determining the cost and feasibility of market entry. A very complex innovative product requires more effort to penetrate a market, which leads to increased costs.
Here’s a table illustrating estimated cost of Market Expansion based on the three factors:
| Market Complexity | Product Sophistication | Your Company Readiness Index | Estimated Cost (USD) |
|---|---|---|---|
| High | High | Low | $60,000+ |
| High | Medium | Average-low | $40,000 – $60,000 |
| High | Low | Average | $20,000 – $40,000 |
| Medium | High | Low | $40,000 – $60,000 |
| Medium | Medium | Average-Low | $20,000 – $40,000 |
| Medium | Low | Average | $10,000 – $30,000 |
| Low | High | Low | $30,000 – $50,000 |
| Low | Medium | Average | $15,000 – $30,000 |
| Low | Low | High | $0,000 – $10,00 |
By meticulously assessing these factors and sub-factors, SMEs can gain a clearer understanding of the costs involved in B2B market entry. Armed with this knowledge, businesses can formulate informed strategies and allocate resources judiciously, maximizing their chances of success in new markets.
In conclusion, while the prospect of expanding into new markets may seem daunting, a comprehensive understanding of the associated costs and complexities can empower SMEs to navigate these challenges with confidence and precision.
