How businesses can research, select and enter new markets
Once you have decided to expand your business internationally, the first big question to answer is where to go? You may already have a market or markets in mind, or you may have no idea where to start. A good way to approach this process is by breaking it down into three key areas:
• Step 1: Are you ready to launch into a new market?
• Step 2: Researching and selecting your markets
• Step 3: Deciding your market entry strategy
Let’s examine each of these in turn.
Step 1: Are you ready to launch into a new market?
You may not be able to answer some of these questions until you have chosen the market you want to launch into, but you will need to answer them all before launch.
• Does your business have sufficient budget for international expansion?
• Is the rest of the business supportive and willing to play their part?
• Do you have the right team in place to help you expand and if not, how will you get the right support?
•If you don’t have a local team in place, what is your plan to acquire local in-market expertise?
• Does your product or service need to be tailored before you can take it internationally?
• Are the logistics in place to support international sales? Can you handle deliveries and returns?
• Are you aware of local product legislation, licensing and tax laws?
• Are you prepared to make a long-term commitment to the new market? International expansion often fails when a business expects immediate sales success or hasn’t secured enough budget for the long term.
Step 2: Research and select your markets
If you are not sure where to start, create a long list of potential candidate countries. Questions to consider would be:
• How easy is it to do business in each market? Do you understand the regulatory landscape and what red tape you will need to navigate? Is your product compliant in each market?
• Is there a clear and growing demand for your product and service?
• Do you understand the local culture and local customs, and do you have input from local in-market experts?
• How do consumers make purchase decisions in each country?
• Do you have a clear understanding of who your competitors will be – both from a brand and an online marketing perspective – in your target markets? You may find you compete with brands from other sectors depending on local product or service usage.
• What is the internet penetration in each market?
• How stable is the local economy and is it growing?
You could consider carrying out a PEST analysis (evaluating Political, Economic, Social and Technological factors) for each market to help you understand the market and then map the implications of that onto a SWOT analysis (Strengths, Weaknesses, Opportunities and Threats) to give you an overview of a market’s potential opportunities and challenges.
Useful starting points for country comparisons include:
- The CIA World Factbook
- BBC Country Profiles
- Transparency International Corruption Index
- World Bank ease of doing business rankings
- Google Market Finder
These resources provide useful background, but we would not recommend relying on them in isolation to make your decision about market entry choice.
Step 3: Define your market entry strategy
You need to be able to answer these questions confidently:
• What are your business goals and how will you measure your progress?
• Do you want to go big or go small? A large-scale market entry will make more impact but will cost more and carry more risk. Alternatively, you could start with a smaller test, gather learnings and scale up from there.
• How will you market and distribute your products?
• How will you localise your offering – product, price, promotion, messaging etc?
• What level of investment will you need to deliver your marketing plan and meet your goals?
Different methods of market entry
• Online marketplaces – For those looking to reach international markets digitally, choosing a marketplace such as Amazon, Tmall or Etsy can be an accessible place to start. You can use the learnings you acquire to scale up from there.
• Online marketing – using a mix of SEO, paid search, online display and social media to create a digital marketing presence in a market.
• Exporting – sending your product abroad. You don’t have to invest in production facilities in the chosen markets which saves money. However, you have the cost of transportation and, potentially, warehousing.
For digital marketers, the three market entry approaches listed above are the simplest routes to market as you don’t need to invest in any infrastructure. In some markets you may require a physical presence to provide your goods and services. Where this is the case, there are a range of options you can choose from:
• Licensing – allows another company in your target country to use your intellectual property (IP) or to sell your goods or services. IP is usually intangible – e.g., brand name, trademarks, patents or production techniques.
• Franchising – Similar to licensing but working within a templated formula.
• Joint venture – where two companies establish a jointly owned business – one is local to the target market.
• Foreign direct investment – where you invest directly in facilities in a foreign market. This could be a new venture or a takeover of an existing company.
• Piggybacking – Involves two non-competing companies working together to cross-sell the other’s ideally complementary products or services in their home countries – an approach which requires a high degree of trust.
Don’t forget to use what you know already
In the vast universe of data that can help you figure out which markets are best for you, the most important questions for you to answer are:
1) How big is the opportunity?
2) How easy will it be for your company to do business in that market?
There is a third question, often overlooked, which is:
3) Have you already had success in that market?
Analysing your own data will help you answer the last question and determine whether you have a strong product-market fit:
• Are you seeing leads from a particular market, despite not investing heavily – or at all?
• Do you see a shorter sales cycle or a higher win rate in some countries?
• Is the pricing or profit higher in some markets?
Third-party data sources don’t know your customer or understand your brand like you do – only you can answer these questions. Marketers should always use their own data to help prioritise global marketing decisions and a good starting point is to look at your website data.
Use current website data to guide you
A good starting point is to look at where the traffic to your existing website is coming from, as it may be that you are already attracting an international audience without even trying. If so, this will tell you where to focus your international expansion efforts.
• Analyse the current traffic and sales-by-country data in your analytics dashboards.
• In Google Analytics, view your Locations report (Audience > Geo > Location) for in-depth information about the location of your visitors.
• Set up segments to break down international traffic by continent, country, region, or city, and to understand customer behaviour.
Use analytics data to create dashboards that show sessions by country, customers by country, and sales by billing country to establish the extent to which you are engaged in cross-border commerce. Comparing side-by-side segments helps inform your decision to expand.
Insights like these may emerge:
• If you discover European customers bounce on your checkout page then you might want to consider offering checkout in Euros, showing prices that include duties, or including more appropriate address fields.
• If you discover Australian visitors bounce on your returns page, you might want to add transparency and detail to your returns policy for international purchases.
When you have significant traffic from a particular region or country but – relative to your home country – a low conversion rate, consider creating a localised online store and checkout to boost sales.
• First, determine if you are ready to enter a new market – do you have the budget? The right team? Agreement from key stakeholders? Access to local in-market expertise?
• Is there clear and growing demand for your product in your target markets?
• Does your product need to be tailored for your target markets?
• Do you understand the regulatory landscape and logistical challenges in your target markets?
• Use your own internal data to guide you. Third-party data sources don’t know your customer or understand your brand – only you can answer these types of questions. Marketers can do a better job of using their own data to prioritise their global marketing decisions.
• A good starting point is to look at where the traffic to your existing website is coming from, as it may be that you are already attracting an international audience without even trying. If so, this will tell you where to focus your international expansion efforts.
• There are different methods of market entry. For those looking to reach international markets, choosing a marketplace such as Amazon, Tmall or Etsy can be an accessible place to start.
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To find out how Oban’s network of Local In-Market Experts can help you succeed internationally, please get in touch.
Oban International is the digital marketing agency specialising in international expansion. Our LIME (Local In-Market Expert) Network provides up to date cultural input and insights from over 80 markets around the world, helping clients realise the best marketing opportunities and avoid the costliest mistakes.