Avoiding pitfalls when entering small markets

Entering small markets is exciting. But there are – as you might imagine – some significant pitfalls. 

Worse still, some of these are like quicksand. It’s hard to get out once you’re in one of these predicaments.

In this article we’ll cover common pitfalls and some strategies for avoiding them. We’ll also look at some case studies of businesses that got into trouble but overcame the challenges they faced. 

Identifying common pitfalls

Businesses should begin by exploring the regulatory and legal challenges of operating in a small market. While countries might have fewer rules on their statute books, that doesn’t mean they have none. 

Look out for licensing requirements and regulations on imports. Some small markets have strange rules regarding bringing specific goods, like medicines and food, into the country. 

Also, explore the tax implications of operating in the target market. Customs duties, sales taxes, and land levies are often unanticipated costs. 

When engaging with foreign authorities, beware of cultural misunderstandings and missteps. While negotiation with government officials is acceptable in some places, it may not be in other locations. 

Double-check that your products respect the cultural sensitivities of the target market. Avoid using materials or methods locals don’t consider appropriate. Don’t set up products or services if the legal structure in the target country doesn’t support it. 

Lastly, ensure you are on the same page as your contacts in the foreign destination. Avoid blunders by arranging translators to communicate with locals who might not speak English.

Strategies for avoiding pitfalls

Once you identify common pitfalls you need to know how to mitigate them. The trick is to understand what you are getting yourself into before you start investing. 

General pointers include: 

• Do thorough market research and go beyond basic metrics, like demographics, that don’t provide much information
• Scour the small market for the challenges you will likely face if you enter (by exploring what’s gone wrong for other companies in the past)
• Hire a research firm to perform market analysis for you
• Partner with local businesses and build a network of people who can support you and provide business services when required
• Join industry events and associations and become an active participant

Case study example

H-E-B is an American grocery company that has successfully expanded abroad. The firm began with locations in Texas but wanted to expand into northern Mexico to access the off-season crops grown there. 

The company’s strengths grew because H-E-B could source the produce consumers wanted. The brand didn’t aim just for sales but also thought strategically about how its Mexico location could make its business less fragile, thereby avoiding small market pitfalls.

Conclusion

There are plenty of small market business success stories. But to become like them, you have to think like them. 

Use the strategies described above to avoid pitfalls and ensure your business’s wild success overseas.