If you are looking for new ways to grow your business, forge better trade routes, find new suppliers or locate new international markets for your products, consider doing business with smaller countries.
If you tend to look toward more traditional trade partners, you might be surprised at the benefits of trading in comparatively small or emerging economies.
First, some special considerations for small markets
Before we get into our six key reasons for doing business in small markets, it’s important to understand several unique factors that can influence your success. Small markets, often characterized by their emerging economies and developing trade environments, present both opportunities and challenges that differ from larger, more established markets.
Understanding the local economy
Small markets often have different economic structures compared to larger economies. It’s crucial to understand the local economic conditions, including growth rates, inflation, and key industries. In many small markets, specific sectors such as agriculture, textiles, or technology might dominate. By identifying these dominant sectors, businesses can better align their products and services to meet local demands.
Cultural nuances and consumer behavior
Cultural understanding is vital when entering small markets. These markets may have distinct cultural norms and consumer behaviors that influence purchasing decisions. Conducting thorough market research to understand local preferences, traditions, and holidays can help tailor marketing strategies effectively. For example, colors, symbols, and even numbers may carry different connotations in various cultures, impacting branding and advertising campaigns.
Regulatory environment
The regulatory landscape in small markets can be quite different from that of larger economies. While smaller markets may have fewer trade restrictions, they might also have unique regulations that need careful navigation. Understanding local business laws, tax codes, and import/export regulations is essential. Engaging with local legal experts or consultants can help navigate these complexities and ensure compliance.
Building relationships and networks
In small markets, building strong relationships with local stakeholders is often more important than in larger markets. Establishing connections with local business leaders, government officials, and community organizations can facilitate smoother entry and operation. Networking can provide valuable insights into the market and help overcome potential barriers. Participating in local trade shows, business forums, and community events can be effective ways to build these relationships.
Infrastructure and logistics
Infrastructure in small markets can vary widely. Assessing the quality of transportation, communication networks, and utilities is crucial for efficient operations. In some cases, underdeveloped infrastructure might pose challenges for supply chain management and distribution. Businesses need to plan for potential logistical hurdles and consider investments in local infrastructure or partnerships with local firms to mitigate these challenges.
Workforce and talent
One of the advantages of small markets is the availability of a young and growing workforce. However, the skill levels and training of the local labour force may vary. Investing in local talent through training programs and development initiatives can not only improve productivity but also build loyalty and reduce turnover. Collaborating with local educational institutions for internships and apprenticeships can also be beneficial.
Market entry strategies
Choosing the right market entry strategy is crucial for success in small markets. Options include exporting, licensing, joint ventures, or setting up a local subsidiary. Each approach has its own set of benefits and risks. For instance, joint ventures with local companies can provide valuable market knowledge and reduce entry costs, while setting up a subsidiary might offer greater control over operations but require higher initial investment.
Risk management
Finally, small markets can be more volatile due to political instability, economic fluctuations, and other factors. Developing a robust risk management plan is essential. This includes conducting thorough due diligence, diversifying investments, and having contingency plans in place. Regularly monitoring the market and staying informed about local developments can help businesses respond proactively to any changes.
And now, our 6 key reasons you should do business in small markets
Some reasons to do business in small markets include:
1. Fewer trade restrictions
Smaller markets tend to have fewer trade restrictions, according to researchers, and companies who do business there can find lower fees and less paperwork. The lower level of restrictions is aided by the governments of many small countries: seeing the value of international investment, officials are working to lower trade barriers and attract business.
2. Free trade agreements
Similarly, you might be surprised how many emerging economies have signed free trade agreements with larger countries. Canada has long sought out free trade agreements in smaller markets, and economists have speculated that small markets will become increasingly important to U.K. businesses as the government works on post-Brexit trade deals.
3. More direct trade routes
Those who move goods internationally know that supply lines are very rarely straight. Small markets might be able to help. If your trade routes are currently jagged and inefficient, you might be able to find more convenient or direct routes by sourcing or manufacturing your goods in smaller countries.
4. Surprising goods
If you are looking to import goods that aren’t currently available in your market, exploring smaller countries might help you find the unique good you’re looking for. Representatives of Britain’s Gaucho restaurant chain like to share the story of finding their wine supplier in a smaller market — Chile — after visiting the country on a trip organized by a local chamber of commerce.
5. A growing workforce
Overwhelmingly, emerging markets have younger populations, with the largest demographics falling in the 20s and younger crowd. That means that if you invest in an emerging economy, you will find an up-and-coming workforce to support your business.
6. A growing consumer base
Similarly, with populations growing into adulthood and entering the workforce, emerging economies also make for growing markets if you are looking for a place to export your goods. Many emerging economies are importing more, rather than relying on an export market, and are encouraging domestic consumption.
If you are ready to shake up your global supply chain, find a new source of goods or a new market in which to sell your goods, now is the time to look at small markets.
A great place to start is by researching which emerging markets have trade agreements or strong trade ties with your business’s country of origin. And, as you would with any new market, do your research to examine the demographics, economy, culture and stability of small countries that might be a good fit for your business.
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