Even when conditions indicate that a potential market might be suitable, certain political and legal issues—such as import restrictions or lack of copyright protection—could make the market less attractive. When trading with another country, organizations are directly influenced by the political, legal and business conditions of that country. A crucial step in deciding whether a new international market is a feasible one for your business to enter is to identify and analyze any possible political risks. The first step in analyzing political risk is to collect and review as much of the relevant data related to this target market.

Review historic and current data related to political risks

The following 11 potential political risks can be identified and evaluated through research:

1. Political instability: A country’s level of political instability is determined by the likelihood that its government will be destabilized or overthrown by violent or unconstitutional means, such as terrorism and civil war. This instability can include a rise in nationalism, civil unrest and labour issues. It can result in frequent changes to the legal requirements, destruction or appropriation of property or goods, inflation volatility, rapid price rises and a decrease in the quality of life for the country’s inhabitants.

2. Political cycle:  The timing of the election cycle may have a bearing on the launch of a new international trade initiative, especially if there is the potential of a change in the type of political leadership, such as from dictatorship to democracy.

3. Hostility to foreigners, foreign trade or foreign investment: Some countries openly welcome foreign trade and investment by offering incentives or beneficial tax reductions. However, in other markets, discriminatory legislation, trade barriers, “buy-national” procurement policies, quotas and tariffs are applied to foreign organizations.

4. Corruption and control over commerce: In some countries, control over commerce can lead to situations in which organizations feel pressured to befriend, persuade or even bribe officials in order to secure the permits required to conduct trade. However, gift giving and bribery can result in severe criminal and civil penalties.

International trade research helps identify markets in which organizations are likely to face trade barriers unless they or their representatives act in an illegal manner.

5. Weak legal protection for property and Intellectual Property rights: In countries with weak protection for property rights, there is an increase in black market activities (e.g. where illegal copies of products are being manufactured, distributed and sold in a foreign market with the consent of the intellectual property owner). Organizations are wary about investing in such countries because of the possibility of large property losses when property is stolen or misappropriated without recourse or when contracts are not honoured. Intellectual Property rights are also important. The degree to which Intellectual Property is protected influences the flow of innovative ideas and creation of new products in a  country, which impacts creative and economic wealth. Intellectual Property includes inventions, literary and artistic works and symbols, images, names and designs used in commerce.

Looking to determine if your new trade opportunities are viable? Check out the FITTskills Feasibility of International Trade online course!

6. Legal restrictions on trade: These restrictions can apply to both the import and export of goods and services.

In 2021, Pacific Gateway Holdings,  a  seafood  importer  in  British  Columbia,  was  fined  CDN  163,776  for  importing  endangered  eel  species  products  from  a  supplier  in  Xiamen,  China.  The  company  had  declared  that  the  shipping  containers  contained  American  eel,  but  five  of  seven  containers  that  were  inspected  were  found  to  also  contain  a  percentage  of  European  eel  meat  (which  is  not  legal for importation). The shipment, which was valued at roughly CDN  400,000,  was  also  seized  by  the  Crown  at  the  border  and  ultimately scheduled for destruction.

7. Legal requirements for business registrations, incorporation, local partnering or other types of  performance: Because a company’s legal structure has an effect on liabilities and taxes, it is important to consult with a tax accountant and legal expert to investigate each form of legal structure before making a decision. Organizations must also ensure that they adhere to all legal requirements and payments.

8. Tax regimes: Tax rates on identical items vary from country to country and sometimes even between regions within the same country. A country’s tax practices might be unusual or complex. If tax treaties between a foreign country and a company’s home country are not established, a foreign company might have to pay tax twice (i.e. they may have to report, and be taxed on, earnings in both countries).

9. Relationships with other countries: It is important that an organization is aware of the relationships the target market has with other countries, including alliances and conflicts. For instance, if an exporter sells a product to a country that is known to then trade that product to a country with international sanctions against trade in that product, the exporter may face legal consequences.

In 2021, Biomin America, a company based in Kansas, U.S., agreed to  pay  a  penalty  of  USD  257,862  to  the  Government  after  being  found  to  be  in  violation  of  the  U.S.  Department  of  the  Treasury’s  Office  of  Foreign  Assets  Control  (OFAC)  regulations.  Although  U.S.-based  companies  can  sell  food  to  importers  in  Cuba,  the  United  States  carefully  regulates  and  monitors  all  shipments  to  the  country  so  a  permit  is  required.  In  this  case,  the  shipments  to  Cuba  were  actually  made  by  subsidiaries  that  Biomin  America  owned  in  other  countries  and  the  goods  were  not  produced  in  the  United  States.  However,  since  the  companies  involved  were  owned  by  the  U.S.  parent  company,  a  permit  was  still  required,  and since it had not been obtained, the company was penalized.

10. Infrastructure failure: It is important to consider the potential of infrastructure failure for government-owned assets such as electric power and transportation.

11. Cultural misunderstanding: Organizations must always be aware of the potential for cultural misunderstanding in business dealings.

This information will have been collected in the research phase. An excellent source for this type of information are country reports, many of which are free or available at low cost.

Organizations, especially larger companies involved in complex trade deals, may also hire specialists in the political risk analysis to complete the research and target market analysis. These specialists provide reports and recommendations that inform business planning decisions.

It is critical that organizations identify the requirements of the target market and their own countries. Misinterpreting these requirements can lead to difficult situations – for example, you could be required to remove a product, such as veterinary products and live animals, from a foreign country that cannot be re-admitted to your own. Once  the  information  is  collected,  you can identify  the  key  areas  of  concern and measure the probability of occurrence of each risk and the potential impact your  business  activities.

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These are the risks attributable to the actions of a country’s government. In its extreme form this can mean confiscation of the firm’s assets without compensation, which is what happened to American businesses in Cuba when Fidel Castro came to power.

A milder form of this tactic is expropriation whereby the government seizes assets but provides some compensation. Both of these forms of asset seizure are less common today, in part because countries need to trade with each other.

However a form of ownership transfer known as “domestication” is still common. Under domestication, foreign investments are transferred to national control and ownership through a series of government decrees. This form of asset seizure is common in countries that are trying to encourage local ownership.

Political risk requires rapid adjustments when changes occur

Firms like to operate in a stable political environment which is business friendly and enables them to make long range plans with a degree of certainty. Many developing nations, and some developed nations, have a history of rapid political change and subsequent shifts in policy and direction, which can often have a major impact on business.

An example of this is India, which has seen frequent changes of government since independence. Earlier governments were not favourable to foreign investment and their policies discouraged businesses from locating there.

Recent governments, however, have reversed course. Many western companies, particularly software companies, have been locating in India, initially to take advantage of lower wage rates, and more recently to tap into a well-educated workforce.

A more extreme form of political instability is caused by civil wars and coup d’états many of which are brought about by the rise of nationalism and accompanying ethnic hatred. Such conflicts can result in physical damage to a company’s property, but more problematic is the danger of being seen to be allied to one side or the other.

A businessperson has no control over these issues but it is often possible for a business to operate during periods of political instability, as long as it is permitted to operate within the country and make a profit.

Can you weather the storm or will you be blown away?

The manner of changing government is an important indicator of political stability, whether through free and fair elections or by military takeovers. From a business standpoint, even the latter need not necessarily be alarming. For example, until recently Thailand had a long history of coups, which were usually bloodless and allowed business to go on as usual.

There is very little that the international manager can do to influence the course of political events in foreign countries. The best that can be hoped for is to understand the situation, determine what the attitude of the current government is toward foreign business, and assess the likelihood of the current attitude persisting, either because the government stays in power or because any replacement would follow the same general line toward business.

A good strategy is to study the recent history of the country, talk to local experts and use up-to-date country risk assessment guides published by export credit agencies to get some sense of the most likely future scenarios.

Once all factors are evaluated, the manager can decide on the degree of exposure he or she is willing to accept.

Want to learn more about analyzing and planning to mitigate risks caused by currency/foreign exchange, economic, social or political circumstances? Check out the FITTskills Risk Analysis and Management online workshop!

5 tips for managing your political risk

1. Effective research and planning

Action to limit political risk starts by researching the target country and developing a strategy to monitor changes there. This initial research should also include an analysis of the country’s past actions and attitudes toward foreign businesses so that these can be used as predictors of the future.

Once the research is done and a process put in place to gather intelligence on an ongoing basis, the firm should develop a contingency plan of possible reactions to potentially unfavourable future developments. This advance planning is critical as adverse foreign developments can move faster than the firm’s ability to react.

2. Foreign financial involvement

One strategy to mitigate foreign risk is to get the financial sector in the foreign country involved with the firm’s project. Once foreign financial intermediaries have a financial stake, they will act as champions for the firm in the event of a threat from the government.

3. Risk sharing

Potential risk sharing techniques include all of the partnership options discussed in the chapter on strategic alliances. Partners are able to provide local intelligence, share the financial risk, and offer advice on how to respond to events as they unfold.

Licensing is another form of risk sharing, whereby the firm risks the appropriation of its technology but does not risk any of its other capital or financial assets.

4. Planned domestication

If the firm feels that expropriation is a possibility, it is possible to take preemptive action by pursuing a strategy of planned domestication. This provides the firm with the possibility of recovering at least some of its investment prior to expropriation.

5. Good corporate citizenship

A firm will win many friends in its foreign markets if it acts as a good corporate citizen.

This starts with the realization that it is a guest in the target country and acts accordingly.

It is followed by setting out to achieve a win-win situation for the firm, the foreign country and its foreign employees. It can do this by remitting its share of country taxes, by paying local employees fairly and by investing in the country’s social fabric.

It is enhanced by making sure that its expatriate employees are culturally sensitive to local conditions and do not behave in a superior manner. By involving the local governments and populace and developing goodwill, it is possible to survive even violent political change.

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To identify new markets and potential opportunities, or eliminate unsuitable markets, researchers should first examine macroeconomic data. Macroeconomics refers to research into the overall aspects of a country’s economy, including income, national output and the interrelationship between economic sectors.

The economic characteristics of an international market are conditions that organizations cannot control. If an organization cannot contend with these characteristics, or if the characteristics mean that a product or service is unlikely to be suitable for that country, then the market can be discounted as an opportunity or the organization can investigate methods of adapting to the market.

The macroeconomic features of a potential host country can be divided into several areas for research:

1. Gross national product (GNP)

The market value of all final goods and services produced by the nationals of a country in an annual time frame. GNP is often used as a measure of the size of a country’s economy, and incorporates income derived from overseas activity.

2. Gross domestic product (GDP)

The market value of all final goods and services produced in a country or region in an annual timeframe. GDP per capita is often used as a measure of the standard of living in a country.

3. Purchasing power parity (PPP)

Compares the purchasing power of different currencies in their domestic countries and is often used as an alternative to GDP figures for measuring the standard of living in a country. PPP is calculated using the amount of domestic currency needed to purchase a similar collection of goods in different countries.

4. Household disposable income

This is the average amount a household in a country has to spend after taxes and payment of essential items, such as housing costs and utilities.

Looking to determine if your new trade opportunities are viable? Check out the FITTskills Feasibility of International Trade online course!

5. Market size

The market’s total number of buyers. The larger a country’s population, the larger the potential customer base.

6. Market potential

Describes how many people or businesses in a country could realistically be expected to purchase a product or service.

7. Market resources

The presence of natural resources in a country will have an impact on international business success. The presence of resources such as oil, soil, timber and minerals increases a country’s wealth and leads to increased development of infrastructure.

It is also important for exporters to consider the geography and climate of a potential market country, because both have an impact on the transportation of goods and dictate which products or services are likely to be purchased.

For organizations considering sourcing goods from an international market or setting up a production site in a foreign county, the presence of resources needed for production processes will be essential for success.

8. Market activity

In some cases, organizations will need to investigate the major economic industries present in a specific country. For example, an organization wishing to sell building machinery might need to check whether a potential market has its industry centered on agriculture rather than industry.

9. Infrastructure

A country’s infrastructure, such as the transportation network, the distribution of cities and major centers, and the extent of the national power supply, will have an impact on the distribution of goods or services and the costs involved with distribution.

In some cases, this information will also indicate a need to adapt a product or service (because the supply of electricity is intermittent, for example), or will indicate the unsuitability of exporting to that market.

Information about a country’s infrastructure will also give an idea of how effective business communications might be (for instance, the availability of telephone, Internet and mail services) and how easy it will be to travel to the country for meetings and to monitor business activities.

10. Urbanization

The amount of urbanization in a country is a measure of that country’s demand for certain goods and services and its income levels. In general, workers in urban areas are paid higher wages than workers in rural areas.

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The first level of differentiation between customers is whether the potential buyer is another business, a consumer or both.

For business (or B2B) customers, research on the economic development level of a country will indicate some of the challenges these customers face, such as availability of technology, labour force skills and costs, energy costs and availability of supplies.

A study of local competitors can reveal the features of competitors’ products and services (including pre-sale, post-sale and repairs) and the challenges for which they have not yet provided solutions to the target market.

Research about a business audience can be used to create a business profile that summarizes its key characteristics. A business profile typically includes information such as demographics, location, estimated demand, purchasing decision makers, industry status and players, and unresolved problems or challenges.

Information included in a customer profile focused on consumers (or B2C) is described below.

Want to learn more about planning and implementing marketing strategies? Check out the FITTskills Marketing Products & Services online workshop!

Understanding your customers through customer profiles

Customer profiles are used for product and service adaptations and other marketing decisions. Profiles are also often created for specific segments for the market. Customer profiles are almost certain to be diverse within every foreign market, taking into account income levels, culture, living standards, fashion, religion, politics and general attitudes toward imported products. Important aspects of the customer profile are summarized below:

Demographic Portrait

This part of the profile demonstrates a detailed understanding of the organization’s customers and typically includes demographic characteristics such as age, gender, career or job, income, level of educational attainment, geographic location and language(s) spoken.

Estimated Demand

Marketers estimate demand for products and services, and the rate at which the demand is expected to grow.

Purchase Motivation

It is important to understand what motivates customers to buy. Are they looking for savings or a way to simplify their lives? Perhaps they are seeking attention or safety. Why will customers choose the company’s product or service over the competition? Are they too inexpensive or too costly? Do they offer something unique? What cultural factors influence the values, preferences and behaviours in this target market?

In the digital age, the profile may also include a description of the customer journey from when they were first introduced to the brand or a product/service through them becoming a loyal customer.

Identifying the needs and preferences of customers

Information about customers is collected and analyzed on an ongoing basis to make decisions about developing, adapting or eliminating products.

The prevalence of online activity has created a need and an opportunity for marketers to capture or harvest information about the target market and customers using digital monitoring. This involves capturing mentions of an organization’s brand or other related topics such as products, services, promotions and even competitors. Social media can be tracked, along with other digital media such as blogs, news sites and forums.

Once all data has been captured, it must then be analyzed, and insights about market segments must be identified from it.

Feedback about products and services can come from sources other than the Internet. For example, foreign agents and other local representatives may ask for product modifications to please their customers. An organization can also routinely ask customers for their opinions through online surveys and customer advisory boards. The organization’s sales team should provide feedback from current and potential customers that is obtained through sales calls. Finally, organizations consider data from behavioural research when developing or adapting products and services.

When conducting customer preference research, a three-stage process can be used:

• Find out what problems or challenges customers are dealing with.
• Design or adapt a product or service so that it will solve the problem and address the challenges.
• Test the product or service with customers and ask for their feedback.

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When it comes to global trade we are currently experiencing a period of profound changes. We have reached a level of volatility that, arguably, seems unprecedented and brings with it some broad implications.

A stormy sea of changing rules, regulations, legal requirements, tariff schedules, and free trade agreements is certainly adding a whole new level of complexity to bringing your business to the global marketplace.

Getting your market entry strategy right may never have been more important. Moving into new markets can be a risky and expensive undertaking. The organizations that succeed in new global trade ventures carefully plan their market entry strategies.

Market entry strategies vary, and what will work for one industry or market may not be suitable for others. To find the best market to enter, and the best strategy to be successful in that market, you need to work through a strategic planning process that includes detailed research.

7 Steps to international target market research

Research will give your business an important understanding of the opportunities and risks in a target market. You will need to acquire knowledge of appropriate markets and potential suppliers or customers, including who they are, what they need, what they value and what they are prepared to produce or buy.

Target market research could include cultural and lifestyle information, political and legal information, product or service potential, competitors, technological environment, and physical infrastructure.

Do your own research or hire someone?

International market research can be costly. Hiring a professional firm may not be in the budget of every business. The decision may depend on whether the level of risk exposure and the level of experience in international trade warrants the cost.

Most small and medium-sized organizations with limited budgets and a low risk threshold will conduct market research online to reduce costs. If possible, it can be useful to gather more information in the target market with a visit, as part of a trade mission or by attending a trade show.

Canadian small and medium sized business can get assistance with research, according to Elise Racicot, the CanExport Program Manager with the Canadian Trade Commissioner Service;

When a SME has done its own preliminary research to define their strategy for a new market, CanExport can support some costs to help refine it further, including consulting services for market analysis with local experts.

Want to learn more about conducting proper research, selecting the most effective entry strategy and implementing it efficiently? Check out the FITTskills International Market Entries Strategy online course!

Questions that your research should answer

What are the current market trends that will impact your global business?

Trends in international markets can indicate what products are being phased out or what new products are entering the market. Armed with this information, you can decide if you need to make any changes to marketing strategies. Pay attention to any trends in the economic and political environments within the target markets.

What kind of competition will you face?

Knowing who the competition is and what it is doing is as important in a foreign market as it is in a domestic one. What is the level of competition in the market? What entry strategy are your competitors using? Which strategy will give you the best competitive edge?

How will you price your products or services competitively?

One of the most important aspects of your market research is a sense of what the foreign customer is willing to pay for the product. Another related factor is the price of competitors’ products

What kinds of logistics challenges will you face?

Logistics research can supply valuable information on the availability and nature of the various channels of distribution and storage capabilities in the target market.

A solid logistics plan will include how to deliver effectively to customers as well as a strategy for managing cost, risk and cycle time. Given the complexities of logistics and global shipping, consider whether you may need to engage a global trade agent or a customs broker?

Use research to identify barriers to market entry

Whenever organizations try to enter a market, they will encounter some obstacles or conditions that make entry more challenging, more expensive or even impossible. For example:

• Trade and economic sanctions
• Export and import controls
• Customs tariffs and taxes
• Import and tariff quotas

Without a full understanding of the different types of market entry barriers, organizations may choose an ineffective market entry strategy.

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 the impact of the barriers.

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 common strategic approach is to use partnering to help overcome 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.

Where there are risks there can be opportunities

While there are challenges in global trade there are also opportunities, and looking to new global markets can make a lot of sense, as discussed in a Trade Elite Twitter chat, How to decide if it’s feasible for your company to diversify into new global markets. According to Elise Racicot, CanExport Program Manager;

Companies that are prepared and who make the move out of their comfort zone to tackle a new market tend to obtain strong export results

The promising opportunities of new international business come with risks and costs. Taking all the necessary steps to understand your state of readiness and conduct thorough research, analysis and planning will be the keys to your success.

The post How to seize global business opportunities with a successful go-to-market strategy appeared first on Trade Ready.

As a new company dipping your toes outside your domestic market can be very daunting.

There comes a time when you have to bite-the-bullet and scale-up.

As we commonly say, “go big or stay home.”

I have seen many companies struggle to make this move, and entrepreneurs have every right to be concerned, because your first move internationally can make or break your firm. But, don’t let this deter you.

With the right preparation and informed export plan these fears can be alleviated. Here are six early market entry set-backs entrepreneurs commonly encounter and how you can overcome them to succeed.

1. Choosing a foreign market without the proper market research

Have a sound knowledge of the market, including a clear picture of:

• demographics
• business culture
• buying practices
• lifestyle trends

This will provide you with deep customer insights, as well as ideas on how to adapt your product and/or service offerings to get the right fit and meet your new customers’ expectations.

2. Lackluster elevator pitch without a kick-ass unique selling proposition

It is super critical that your three minute elevator pitch is ready to be given at any given moment. As an entrepreneur you have to be able to properly articulate what you do and how you can add value to your customers. This is a key element of your success in any new market.

You should be able to clearly and concisely articulate a compelling unique selling proposition which solves your customers’ pain. The ability to demonstrate how you differ from the competition will be essential to landing follow-up meetings. Usually your first meeting is a teaser, so give it your best shot from the get-go.

3. Poor or non-existent web presence

Your website and social media channels are your first impressions to the outside world.  Create a stellar website that describes your company story, product offerings and unique selling proposition. Be sure to include high quality photos, videos and customer testimonials that tell a positive visual story about who you are, your company values and how you provide top-notch service.

Also, include a direct call to action to the customers and/or strategic partners to create a continuous feedback loop. Maintain your social media channels such as Facebook, LinkedIn, Twitter and Instagram – wherever your customers are. Don’t overlook social media as a valuable tool to communicate directly with your customers and receive immediate feedback.

4. Lack of attention to target market’s regulations

This is a mistake I see often. Start-ups making their first foray into an international market frequently make the mistake of not having the right labels, certifications and documentation for their products and shipments. It is critical to have a clear understanding of your new market’s regulatory requirements before entering in order to avoid the major setbacks, delays and unplanned costs you’ll face making last-minute changes to get your product into market legally.

5. A weak distribution plan

Getting your product from point A to B is so critical to your success! It can be very exhilarating getting your first deal. However, not having a solid distribution plan with an efficient means to get your product to market will most definitely erode your bottom line and is a sure way to lose your shirt! Be sure to consider cultural, demographic and infrastructural issues in your new market and make a plan that doesn’t eat away at your profits.

6. No ready export price list

Imagine you are at a buyer meeting and it’s going better than you’d ever hoped. You reach a point where the buyer wants to know your export price and you say: “Umm…let me get back to you with a follow-up email”. This is one sure way of not getting a second meeting. Before you take that first meeting, have a clear pricing strategy ready and make sure you’ve looked into all factors, such as competitor pricing, average income, and perceived value.

Ultimately, preparation meets opportunity.

The best way to ensure success in a foreign market is having a solid elevator pitch, a strong understanding of your customers, the market and its regulatory requirements, and an efficient means of getting your product to market.

With these things covered you’ll be ahead of the game and can turn an excellent opportunity into a business success.

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Decoding ASEAN markets from Canada can be a daunting task.

I remember my first trip travelling from Vancouver, BC over the Pacific Ocean and reading a stack of “culture shock” novels to prepare myself for my new overseas selling adventure. I remember reading and thinking “My goodness, it can’t be that different from our Canadian culture,” but how accurate these novels turned out to be.

Globalization has made our world smaller and more accessible from all points, but ASEAN markets have many differences. Understanding them and recognizing the need to adapt to overseas markets is vital to gaining access and developing a successful and sustainable ASEAN business.

1. ASEAN is not a homogenous marketplace, your strategy must be market specific

Market analytics should be the driving force of your strategy to ensure that it is driven by a comprehensive understanding of market complexities. Exporting companies must scrutinize relevant social and cultural, legal, economic, political and technological data, along with customer, channel prospect and competitor data, to harvest meaningful information. The information harvested must define the best growth opportunities by economic value and likelihood of success, based on facts and logic rather than assumptions and emotions.

Strategy then becomes about choice, deciding where to compete, how to compete and most importantly, how to win. A correctly executed strategy must connect all the functional and fragmented parts of the business into a coherent and unified approach. Moreover, the strategy must accurately align business resources, capabilities and capacity with target markets, verticals and customers.

If the business decision is to enter and develop multiple ASEAN markets concurrently, then the right analytics for each market must be collected.

ASEAN markets may share the single market concept and motto of “One Vision, One Identity, One Community”, but the markets are diverse. Both value perceptions and buying behaviors differ significantly throughout the region.

As an example, Singapore and Malaysia are bordering nations but must be seen in very different social, cultural, legal, economic, political and technological contexts. Companies entering ASEAN markets need to be cognizant of these intraregional differences and distinctions, as well as how they influence perceptions and shape behaviors about exporting companies, their products and partnerships.

2. Correct product and price positioning

A multi-national corporation (MNC) which manufactures batteries in the FMCG (fast moving consumer goods) segment launched into the ASEAN market, proclaiming that “our batteries last five times longer and are only three times more expensive compared to our local competitors’- we will gain millions of new customers”.

The launch failed because of misaligned product and price positioning. The company misinterpreted value perceptions, and failed to recognize that being three times more expensive was beyond the threshold of customer affordability.

Analyzing, understanding and targeting addressable market segments and customer categories is crucial to product and price positioning. Most ASEAN markets have three-tier customer categories:

1. Premium buyers – Discerning buyers who accept only top-tier brands, offering the highest quality in products with the most features, along with priority services. They are willing to pay the highest level price premium, for example Emirates Airlines first class travel.
2. Value-added buyers – Buyers who expect high quality products and services that meet specific needs. They normally accept products with less features and are willing to pay a price premium based on relevant perceived value, for example business class or economy-plus air travel.
3. Price buyers – Buyers who seek products that are of adequate quality at the best possible price, and have less concern about quality, service levels and consistency, for example economy-class or budget airlines no frills travel.

The best growth and profit opportunity may be to offer existing products or customize and differentiate products or services in the value-added buyer category. Customers in the price-buyer category are burrowing up because of globalization and better choices being made available. Conversely, customers in the premium-buyer category are beginning to seek alternatives that still meet overall needs but offer less features at a lower price-point.

Companies entering ASEAN markets must align features that matter with customers that matter. With respect to price positioning, is it about profit percentage or contributing profit dollars? This is a subjective question and depends on the exporting company’s business culture, growth objectives and longer-term ambitions. As an example, is 50% profit on a $2M business more appealing than 41% profit on a $5M business?

Exporting is normally a first step, to test the waters and begin the business building and market development process. Once a market is developed sufficiently, investment in manufacturing assets often follows. As such, companies frequently accept lower profitability during the entry and development stage with the endgame of optimizing profitability and customer service post-localized manufacturing investment.

My view? It’s about immediately being competitive and quickly gaining market-share while maximizing profitability for both company and channel partners.

I believe price premiums are achievable and sustainable in highly competitive markets. However, value-added features or services must be relevant, meaningful, and priced within the threshold of affordability.

Rather than using a simple cost-plus pricing strategy, consider a market or value-based pricing strategy. Market-based pricing factors in similar competitors, product features, services and value propositions, while value-based pricing factors in relevant product and services features that differentiate and enable price premiums.

Either pricing model must provide sufficient profitability for channel partners considering logistics and import duties. This price becomes the Ex-Works or FOB export-price or channel partner cost-price for a specific market.

3. ASEAN markets are made up of people and relationships, not just products and price

The importance and value of relationships cannot be understated or underestimated. Relationships in ASEAN markets are founded on trust and confidence. Canadian companies are considered to be highly trustworthy within the ASEAN region and this established trust equity can often translate into brand, product and services preference and price premiums.

Building trust with partners or suppliers through customer-centric business conduct and ethical behavior is something that must be experienced and this takes time. Exporting companies must understand the ASEAN culture is to establish intimate affinitive relationships that build the business. Companies that try to take shortcuts and build their businesses on opportunistic sales before establishing relationships often fail to develop a strong, profitable and sustainable ASEAN business.

ASEAN markets offer significant growth opportunities, and with the right strategy that is correctly aligned with markets, channels and customers, Canadian companies can thrive in the ASEAN region. The core ASEAN markets – Philippines, Vietnam, Thailand, Malaysia, Indonesia and Singapore – are rapidly emerging as the global growth engine of the next decade. Emerging markets and globalization is here to stay.

A number of key ASEAN markets, such as Vietnam and the Philippines, are rapidly evolving as lower-cost manufacturing alternatives to China. These evolving markets offer significant new interregional customer opportunities due to rising incomes and urbanization. The ASEAN region’s total population is approximately 45.7% of China’s, but when comparing the top 10 cities of the ASEAN region and China, that number rises to approximately 62.1% of that of China.

Vietnam reported record FDI for 2015 and the country’s General Statistics Office reports 95% year over year (YOY) growth in the first half (H1) of 2016 ($3.839b to $7.5b). By comparison, this is second-place in the ASEAN region to the Philippines in attracting FDI, who reported 103% YOY growth in H1 2016 ($19.76b to $40.15b).

The post Three key considerations to help build your ASEAN entry and growth strategy appeared first on Trade Ready.

You will need to know a great deal about the competitors, the consumers, the government, and how to connect your supply chain to this market. In other words, there is a lot of research that must be conducted before any further steps can be taken.

When it comes to market research, some sources are of much higher quality than others. Here are five of the best sources to use for your initial market research.

1. BBC News Country Profiles

This site provides in-depth reports and profiles on every country in the world. These profiles outline the political, economic, geographical, social, and historical aspects of each country. They also provide important information such as population, life expectancy, currency, and the major languages spoken in each nation.

All of this information can be imperative for a company considering a future expansion market.

BBC News provides a brief report on each country, as well as full overviews that go into greater detail. Reading these profiles can quickly catch any international trade professional up to speed on important facts about the country. This can lead to a much better understanding of the business environment, as well as the consumers in the region.

2. International Trade Center

The International Trade Center is an organization whose goal is to support the internationalization of small and medium sized businesses. The site for this organization, intracen.org, is a fantastic resource for international market research, providing a wide variety of incredible research tools.

For example, you can find trade statistics, tariff and market requirement information, foreign direct investment data, voluntary standards, market analysis studies, and lots of other market information for various countries.

Given the depth of information and the importance of this type of market data, the website will be indispensable for companies looking to expand into new international markets.

3. The CIA World Factbook

The World Factbook provides detailed reports about countries all around the world. Like the BBC News Country Profiles site, it explains each country’s government, economy, languages, military power, communications, and transnational issues.

Because this information comes from one of the most powerful intelligence agencies in the world, it is likely to be highly accurate and up to date.

Those who wish to use the World Factbook to gain information on new markets can search through an alphabetical list of countries to find the one they are looking for, then simply peruse all the useful information provided.

4. The International Trade Administration – Trade.gov

The International Trade Administration is an agency of the U.S. Department of Commerce, and their website designed to promote competitiveness for American global trade. Fortunately, anyone can access it and benefit from it.

This site is incredibly useful for market research because it provides a large volume of trade statistics and information, such as the top imports and exports by country. It also provides trade leads, licensing information, industry analyses, competitiveness information, and much more.

In addition to this information, the ITA allows you to conduct a search by industry. The industry specific searches are a particularly useful feature for companies working in niche or very competitive industries, with many companies already fighting over the same market share.

5. Internet World Stats

This website provides data about internet usage by country. It can be very helpful for any company that makes electronic equipment designed for internet use, such as computers, smartphones, tablets, wearable electronic devices, and others.

It is also vital for any company planning to enter a market via e-commerce to get a better sense of the size of their potential market.

In addition, this website also gives details about national populations, and provides other market statistics. There are also a number of informative articles, including pieces detailing Facebook growth by country, the top ten languages used on the internet, countries with the highest mobile internet usage, and more.

Get ready to start searching and reading

Effective research can be pivotal for understanding new markets. Failing to do effective research means the chances of successful expansion into a new market will be much lower.

In other words, it is oftentimes not enough to have a great product, an efficient supply chain, and a profitable business in order to succeed in market expansion.

You also have to understand the culture, the people, the government, the tariffs, the regulations, the competition, and other factors involved with this new market.

In order to gain this critical information, trade professionals can use the five websites already listed to get high quality market research.

If you have any others you have used for initial market research and would recommend to others, please mention them in the comments below.

The post 5 of the best sources to use for your initial market research appeared first on Trade Ready.

Another factor is variation in foreign exchange rates, as G7 Nations have seen a steady increase in the value of their currencies vis-à-vis new developed economies. Developing economies invited Foreign Direct Investment (FDI), Vertical and Horizontal, as it brought in major FOREX flows. For example, this was important to India, as it reduced India’s foreign debt, and increased the foreign exchange reserves in the Balance of Payment Account.

In the midst of this shift, the vast majority of global exporters are still small-and medium-sized enterprises.

Trade gives these businesses access to larger markets for their products and services and more varied sources for cost-effective inputs, technology and investment.

This, in turn, delivers increased efficiency, productivity and competitiveness, all of which translates into jobs and higher incomes for all citizens.

However, the increase in opportunities may be accompanied by an increase in obstacles as domestic commercial interests seek to protect their markets from new entrants. These obstacles are commonly referred to as trade barriers.

What are international trade barriers and how can I overcome them?

Barriers to market entry and access may be anything that prevents entry into a market or makes a company substantially less competitive in a new market. It is worth noting that barriers are not always or only bad. The greater the barriers to entry, the greater the reward for those who overcome them.

Barriers may be physical, arising from distance and geography. They may be cultural, religious and linguistic. Barriers may be erected because of political or economic factors, such as domestic demand for protection of local industries (e.g. Canadian marketing board products, Japanese rice).

Based on the nature of the barriers that the company perceives in the target market, it has to decide whether it can manage, reduce or overcome those barriers.

If not, perhaps the best move for the company is to put the opportunity on hold until either the nature of the barrier changes or the company’s ability to overcome the barrier improves.

Another possibility would be transplanting production to a more favourable nation, and selling the final product to the country imposing the barrier, as regional value content would allow the final product to enter at terms that are more favorable.

You can’t overcome barriers if you don’t know about them

Although the world of commerce is trending in the direction of decreased barriers through such mechanisms as the North American Free Trade Agreement (NAFTA) and the Trans Pacific Partnership (TPP, under negotiation), it remains essential to conduct careful research into potential obstacles ranging from prohibitive tariffs to changing environmental standards, which could drastically affect the financial viability of an initiative.

If these barriers are not identified and mitigated during the planning stage of an export, the consequences could range from lowered margins (tariffs incorrectly calculated) to complete failure of the initiative if a quota cap, domestic content limit or lack of correct standardization/certification should be encountered.

The post Identify and overcome international trade barriers early in your market entry plan appeared first on Trade Ready.

More often than not though, small and medium-sized enterprises don’t have extra funding to spend on costly foreign market research, which significantly limits their expansion opportunities and makes growth more risky.

However, delayed decision-making can force businesses out of the market entirely, and there are effective cost-efficient ways to do the market research you’ll need to make good business growth decisions.

1. Do your research before you start your market research

Before you even start gathering information, it’s necessary to understand how the market works, where products come from, and how customers are buying them.

In many countries such as Canada, businesses that consider establishing their presence in certain areas can benefit from various government incentives, such as free target market research.

Together with Marilia Brasil, my peer from Fanshawe College’s FITT-accredited International Business Management program, I was offered the opportunity to assist the London Economic Development Corporation (LEDC) with such research back in 2014. We were invited to conduct a market feasibility study for a European manufacturer of medical disposables seeking expansion opportunities abroad.

The European medical device market is highly saturated; the competition is fierce and companies have to look for new opportunities globally. For this reason, LEDC’s client was assessing their chances to reach North America.

For the European client, quality of information and thoroughness of research were supposed to determine the viability of their investments into the new venture. The reliability of data and precision in estimates were crucial for the company’s economic well-being and global reputation.

As a newcomer to Canada who has been lucky enough not to need any medical help in the past, I was not familiar with the specifics of the Canadian health care system, not to mention the system in the U.S. For this reason, I had to do the research for my personal understanding before I could start discussing the project with stakeholders.

2. Know the product, know the company and know the industry

First, it was important to understand the current state of the industry and the main factors that could influence the business. Second, advisors who’re educated on a subject matter convey confidence to the client and are able to deliver sound consultation advice. Finally, the first stage of research teaches you how to ask the right questions in order to discover vital information and focus on the most relevant business problems.

Ask your client for as many details about their business as you can.

[Tweet “No one understands your client’s industry better than your client does.”]

This will help you identify solutions to your client’s pain-points.

At the initial meeting with LEDC, my partner and I tried to learn as much as possible about the company and objectives of both parties. The main goal of the company was to validate the potential of the North American market, and to identify which of the two countries—Canada or the U.S.—is more suitable for their new venture in terms of risks and benefits.

Predictably, there were many questions at the early stage, and the European enterprise was very responsive to all inquiries. But because the client was still in Europe, all of our communication was virtual. Luckily, once you adjust to the time difference, there are now technologies which allow you to exchange information almost instantly.

Once we had everything clarified, it was time to plan the project.

3. Just as you segment a market, segment your market research into manageable pieces

Marilia and I developed a detailed project scope to cover all aspects important to the client’s business and to inform both LEDC and the company about anticipated milestones of the research.

We broke down the project into several general sections grouped by country, product category and specific area of study. In that way, it was easy to divide responsibilities, organize the data, and present it in a logical way that would be convenient for the client to read.

After receiving the client’s approval, we started gathering data.

4. Most of the time, you need several sources of information to confirm the reliability of your data

Due to time and money constraints, we collected information from publicly available secondary sources. We were very sensitive about the reliability and relevance of the data, and we tried to verify everything we collected through several sources.

In today’s information economy, most industry data can be easily accessed by the general public via the Internet, printed media, periodic publications, yearbooks, etc. Because the main goal of European manufacturer at that point was to test the viability of new market entry, it was acceptable to rely on secondary sources.

Nevertheless, existing data is often outdated, generic or not able to answer all questions that interest organizations. When companies need to make complex business decisions, develop a detailed action plan or launch innovative products in new markets, the cost and time needed to conduct quality primary research is justified, and moreover, required for the success of a venture.

5. Choose visuals over text to present your foreign market research

It’s much easier for the majority of readers to understand charts, diagrams, infographics and tables rather than countless paragraphs.

Therefore, our final report was well-structured and supported by various visuals to represent the data. It contained relevant information about political, economic, social and technological environments, as well as market size, customer segments, distribution channels and the competition in both Canada and the U.S.

The client was particularly impressed with recent market trend lines and promising projections presented in coloured bar charts. Without visual demonstration, the significance of this information would have been lost among words.

6. There is no single approach to international market research that fits all

Research for each industry is different; each company within the same industry is different; and each project for the same company is different.

Based on our research, we concluded that the Canadian market seemed to be a more suitable option for the company’s medical device products.

While the Canadian market is about ten times smaller, the business environment in the U.S. is characterized with extremely high levels of competition coming from large multinational corporations that have a broad range of products and established control over existing distribution channels. Additionally, imperfect health care, complicated reimbursement systems and slower market-growth in the U.S. create significant barriers for new market participants to enter.

Canada, on the other hand, has one of the most developed heath care systems among peer countries. Competition here isn’t as intense, and there are many distributors open to cooperation with new manufacturers. Sadly, the number of ill people in Canada is growing very quickly, resulting in a growing demand for medical products.

Furthermore, geographic and cultural proximity permits businesses to operate in the U.S. market from Canadian business locations.

7. Follow up your market research with actionable plans

After the client was given time to review our research, we connected for a video conference call and delivered a short summary of our findings with some practical recommendations and a list of potential business contacts.

Our presentation was well received and was followed by an active discussion. Subsequently, a representative from the European firm expressed their intention to discuss possible cooperation with LEDC.

The outcomes of our joint work were beneficial to everyone:

• The European client received access to inside information necessary for making important business decisions;
• LEDC was able to show and grow London’s economic potential, and to connect qualified graduates with a foreign business;
• My colleague and I received a unique opportunity to get our feet wet and to add some Canadian work to our set of achievements.

Finally, it’s important to remember that market research is not a one-time event—it’s an ongoing process. Companies that adopt such mindset are able to anticipate future industry trends and satisfy their customers’ needs before they can even realize they have those needs.

Continuing market research also helps to identify potential business problems and new opportunities, set achievable goals, and generally make well-informed decisions that align with market demand and provide competitive advantage.

As a result, these organizations become the most innovative and successful in their field.

Businesses should decide whether to have an internal department dedicated to market monitoring, to outsource such services to reputable consulting firms, or to have a combination of both. This decision is usually affected by an industry type, company size, existing needs, and resources available.

How do you approach market research in your organization?

The post 7 important tips for the success of every foreign market research project appeared first on Trade Ready.