Whenever organizations try to enter a market, they will encounter some obstacles or conditions that make entry more challenging, more expensive or even impossible. Without a full understanding of the different types of market entry barriers, organizations may choose an ineffective market entry strategy. The research and risk analysis completed as part of the feasibility study may reveal potential barriers.

Here are nine of the most common market entry barriers and potential strategies to address them.

1. Trade and economic sanctions

• Choose a different market not affected by economic sanctions
• Export a different line of products/services not subject to trade sanctions
• Delay market entry if it appears sanctions may be lifted

2. Export and import controls

• Select a different market with which to trade
• Develop alternative goods/services to trade

3. Customs tariffs and taxes

• Develop value-added activities in the target market, such as after-sales service, that are not subject to tariffs and will enhance the value of the more expensive product
• Start producing goods in the target market to avoid the need for importing
• Partner with an organization in the target market that will produce goods at its facilities

4. Import and tariff quotas

• Export to a different market
• Develop products/services that will not be subject to quotas
• Produce goods/services in the target market to avoid having to import

5. Government subsidies

• Develop value-added activities in the target market to increase the attractiveness to foreign purchasers
• Adapt the product or service to give it more appeal and justify the enhanced price

Want to learn more about developing a strategic plan for market entry? Check out the FITTskills Planning for International Market Entry online workshop!

6. Trade blocs (if the organization’s nation is not a participating member)

• Partner with an organization in a preferred trading relationship with the chosen market or in the chosen market
• Set up a subsidiary organization in the chosen market or in one that has a preferred trading relationship
• Invest in production facilities in the chosen market to avoid the need for exporting
• Adapt the product or service to enhance its perceived value and justify the increasing price

7. Political instability

• Enter the market for a short-term venture only
• Limit exposure by not locating facilities or employees in the country
• Request cash or an irrevocable confirmed letter of credit up front, before delivering goods or services

8. Customer preferences (product familiarity, religious and cultural aspects, language, etc.)

• Adapt products or services to appeal to the target market

9. Economic barriers (costs for land, construction, raw materials and resources, tax rates, market wage rates)

• In markets that will not bear the cost of the product/service, assess ways to cut costs
• Reposition product/service as a luxury item
• Specify payment in stable currencies
• Use hedge funding techniques to mitigate currency risk

How will you handle the market entry barriers facing your business?

Careful research will identify potential problems in a market and those problems will vary from one market to another. For example, Canadian exporters to the U.S. might not encounter many cultural barriers, but they will have to overcome those imposed by U.S. protectionist legislation.

It is important to evaluate exactly which barriers apply to which markets. Only then can decision-makers responsible for logistics, marketing and distribution develop a plan, recommendations and proposed solutions to overcome or minimize the impact of the specific barriers, allowing for the desired market penetration.

There are few barriers, no matter how difficult or insurmountable they seem, that cannot be overcome or at least minimized. The process requires a detailed study of each barrier and consultation with available experts, including local business people.

A preferred strategic approach is to use partnering to help overcome most, if not all, barriers to entry. Local partners can provide insights and useful advice into market dynamics, serve as representatives and agents, and become business associates and even permanent joint-venture partners. A careful use of partnering strategies can go a long way toward eliminating barriers, reducing risks and smoothing the way to market entry.

The post Overcome 9 of the most common market entry barriers with these strategies appeared first on Trade Ready.

Economic sanctions are measures imposed by national governments on specific countries, organizations or individuals that threaten certain interests or violate international norms of behaviour, in order to try to alter their decisions or actions. 

Iran sanctions origins

Canada originally imposed economic sanctions against Iran in response to its nuclear proliferation program. As a result of the application of these sanctions, there was an effective blanket prohibition on trade with Iran.

These types of sanctions can have an impact on your business in a number of ways, including prohibiting trade or other economic activity with a foreign market, and prohibiting or restricting foreign financial transactions.

Therefore, it is important to know whether your business is transacting with countries, organizations or individuals which may be subject to economic sanctions.

Canada makes “Amendments”

The Government of Canada has recently made important changes to its economic and trade sanctions against Iran (via the “Amendments”) to allow for a controlled economic re-engagement between the two countries.

Through significant roll-backs on prior commercial and trade activity restrictions, the Amendments, which modify both the Special Economic Measures (Iran) Regulations (“SEMA Regulations”) and the Regulations Implementing the United Nations Resolutions on Iran (“UN Regulations”), have resulted in an effective repeal of the blanket prohibition on trade with Iran.

The few surviving restrictions have a much narrower scope, focusing primarily on nuclear-related activity, ballistic missile activity, and transactions involving designated or listed persons.

As a result of the Amendments, business between Canada and Iran will generally be permitted unless:

• The consumer, or any intermediary in the transaction, is a Listed Person in Schedule 1 of the SEMA Regulations, or is a restricted party designated by the United Nations;
• The product being sold is listed in Schedule 2 of the SEMA Regulations; or
• The transaction is prohibited by restrictions under the UN Regulations.

It is also important for Canadian businesses to keep in mind that the SEMA Regulations still contain:

• A prohibition for any person in Canada or any Canadian outside Canada to provide any financial or related service to a Listed Person (which includes both individuals and corporate entities appearing in Schedule 1 of the SEMA Regulations) or to a person acting for the benefit of a Listed Person (Special Economic Measures (Iran) Regulations SOR/2010-165 (s.3(d));

• A prohibition against any person in Canada or any Canadian outside of Canada to export, sell, supply or ship any of the goods listed in Schedule 2, or to transfer, provide, or disclose any technical data related to the goods listed in Schedule 2, wherever situated, to Iran, to a person in Iran, or to a person for the purposes of a business carried on in or operated from Iran (Special Economic Measures (Iran) Regulations SOR/2010-165 (s.4(1) and (2));

• Most of the goods listed in Schedule 2 are nuclear-related materials and technology, weapons, arms and related materials, as well as goods or technology in relation to Iran’s ballistic missile program.

The UN Regulations contain restrictions on:

• The provision of nuclear-related material and technology to Iran;
• The provision of goods, technology, technical assistance, financial or related services in relation to Iran’s ballistic missile program and to the development of nuclear weapon delivery systems;
• The availability of property or financial services to Iran for the purpose of investing in specified nuclear-related activities in Canada;
• The provision of heavy arms and related material to Iran or services related to Iran’s use of such arms and related materials; and
• The procurement of arms and related material from Iran.

Canadian businesses, proceed with caution

Although it seems as though the doors may be open for Canadians looking to do business with or in Iran, it is important for Canadian businesses to keep in mind that despite the Amendments, certain restrictions and prohibitions are still very much applicable.

Ignorance of these restrictions and actions taken that violate the existing prohibitions under the sanctions could lead to serious consequences for those involved.

It is critical for businesses to keep in mind that diligence will absolutely be required in screening potential suppliers, partners and/or customers against Listed Persons to ensure proper compliance.

The post Canadian blanket ban on trade with Iran lifted but serious restrictions remain appeared first on Trade Ready.