Exporting to international markets can be an attractive strategy for companies seeking to diversify revenues, increase their competitiveness and take advantage of new growth opportunities. However, export success depends not only on the characteristics of a product or service, but also on the quality of the market selection process. Strategic market selection can make the difference between a company with a thriving international presence, and a company that faces unnecessary risks.
Why is it necessary to make a good market selection?
It is crucial within a strategic internationalisation plan to develop a good selection of markets, as it will ensure that the company’s resources and efforts are directed towards opportunities with greater potential for success and less risk. Each market has economic, cultural, legal and competitive particularities that require strategic adaptation, and choosing the wrong market to export to can result in financial losses, operational attrition and a negative impact on brand reputation.
Proper selection allows identifying markets where there is real demand, feasible access and alignment with the company’s capabilities, which maximises profitability and strengthens the sustainability of international operations, which translates into greater chances of success in the company’s internationalisation process.
What criteria should be taken into account when selecting markets?
Before starting to compare data on possible target markets and international transactions between our country and potential markets, we must define some aspects that will condition our interpretation of these data. These aspects that we will reflect on before proceeding with the interpretation of the data are: the public at which our product is aimed, mainly according to their purchasing power, which will help us to delimit the countries to be considered according to their average income level; our experience in international markets, which we will have to take into account during the process due to logistical and operational issues, among others; finally, which market we consider to be a competitor as an exporter of the product we are working on, either to compare data or use it as a reference.
Once we have defined these aspects, we can continue with data collection and comparison, but, what data should we take into account? There is no defined criterion in this respect, and we can consider as many results as we consider appropriate, but in order to be able to make a quality selection of markets, with a firm and solid basis on which to justify it, we will take into account:
- The value exported of the product from the country of origin to the country of destination in recent years. It allows us to assess the trade history between the two countries, identifying whether there is a consolidated relationship and whether there is demand for the product in question.
- Trade balance. This will help to understand the dynamics between exports and imports, and thus to know if we export more than we import, and therefore, the needs of the sector in each market.
- Growth rates in exports of the product in recent years. Knowing whether exports of a product from one country to another have grown or decreased helps to identify whether a market is expanding and may be an opportunity, or whether it is stagnating.
- Value exported by the country considered to be a competitor. This indicator will allow us to measure the competitiveness of the market and assess how the main actors in the sector are positioned.
- Position of the destination country as a world importer of the product. This data reflects the relevance of the country as a consumer in the global market, which influences commercial viability.
- Total value of imports of the product in the country of destination. Knowing this value helps to determine the size of the market, the level of opportunities for new exporters, and our country’s share as a supplier.
- Unit price. Comparing the price helps us to get an idea of the prices that are stablished in the market, and compare it with our own price, measuring the competitiveness of the product against local and international competitors.
- GDP per capita. Key to measure the average purchasing power of the population and determine if the market can sustain the demand for the product.
- GDP growth rate. A positive GDP growth rate translates into a dynamic booming economy that can encourage exports and new product entry.
- Tariff applicable to the product between country of origin and destination. These are costs that we must take into account and that will directly affect the selling price of the product, which we will have to consider in order to measure the competitiveness of the product.
- Cultural distance. It can influence commercial relations and therefore the success or failure of communication in order to reach an agreement. The greater the cultural distance, the greater the likelihood of a culture shock.
- Distance in kilometres. Geographical distance influences logistics costs, delivery times, export efficiency… It is important to take into account according to our experience as exporters.
Exportest collects all these data according to the TARIC code and country of origin selected, and compares them among all the countries that have previously participated in the chosen tariff heading, ordering them according to their potential according to the chosen criteria. You can subscribe to Exportest through this link, and if you have any queries, you can fill in the form below this article or call +34 965 651 725.
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