How to Select an Export Market


In order to maximize your profit, it is important to start your analysis from a logically sound starting point.  Your evaluation should begin with YOU.  You should first evaluate what your/your company’s strength are.  When a company or individual focuses on maximizing their strengths, the ability to maximize your profits grows exponentially.

Take inventory

What are your strengths? What do you do better than your competition?  Some products are better, some are more cost effective, some have a longer life, etc.  Some companies and individuals provide exceptional service (key factor for global growth).  Where are your competitors exporting?

 Who/What is your domestic Market

This is important so that you have a good grasp of any potential opportunities in the same or even parallel market.   It is very important that you understand that all market do not work the same way.

 Considering your target country

Prior to starting your market research, you should have classified the products(s) that you are considering for export.  Knowing the Harmonized Tariff Schedule (HTS) number will not only facilitate your analysis but also, provide you with considerably more market detail.

Speed to Market is a Business Factor that must be considered

 Geographic proximity

Simply assuming that because a country is close to the US, it would make a good export market is incorrect.  There are logistical benefits to proximity, but transportation methods have improved to the point of making the world a 48-hour destination. You can practically reach approximately 93% of the world’s GDP (Gross Domestic Product) within 48 hours, therefore you would benefit from considering multiple other factor.  This is not to discount proximity; the Caribbean is served by the US.  The great majority of products entering the Caribbean market are shipped from the US.

Free Trade Agreement

When free trade agreements exist between nations, you benefit by having your market extended to those countries. You have the benefit of the North America Free Trade Agreement (NAFTA). There is $1.9 billion in daily trilateral trade.

The US has a Free Trade Agreement with the following nations:

  • Australia
  • Bahrain
  • CAFTA-DR – (Central America Free Trade Agreement and the Dominican Republic)
    • Dominican Republic
    • Costa Rica
    • El Salvador
    • Guatemala
    • Nicaragua
    • Honduras
  • Chile
  • Colombia
  • Israel
  • Jordan
  • Korea
  • Morocco
  • NAFTA – North America Free Trade agreement
    • Canada
    • Mexico
  • Oman
  • Panama (Oct 2012)
  • Peru
  • Singapore
  • Panama (in progress)

Product restrictions, regulations and requirements

There may be specific restrictions (limit are in place) or requirements (labeling must be in local language) affecting your product in country “A” and none in Country “B.”  Knowing your product as you do your research will allow you to narrow your global focus and maximize your profits.

Country Infrastructure Accessibility

How easy is it to get your product to your customer.  Are you cognoscente of the country’s infrastructure? i.e. When shipping to Bogota (Colombia) from Miami, it is best practice to ship by air.  There are two key components: 1 – the ocean port is a bit distant, the terrain is mountainous and dangerous and there have been know to be an unusually higher amounts of container thefts along the route. 2- the cost for airfreight is so low (in comparison to the region) due to the very heavy traffic of cut flowers coming to the US from Colombia that air carriers lower their rates in order to ensure that the aircrafts do not fly back empty.  In this case, it is faster, safer and more cost effective to fly shipments to Bogota as opposed to sending them by vessel.  Many shippers choose to consolidate in Miami for Colombia bound exports.

 Major distributors, importers, suppliers in the market

Learning the market, who are your competitors, what is the current distribution, what are their strengths and where are your opportunities will greatly help you prior to expanding in that specific market.  Perhaps you will target a more direct distribution point?

What other Opportunities are available

Are there markets that your product may serve that you may not be currently considering because of a US mindset, rather than a global mindset?  There is a small exporter that sells older model cell phones.  He buys them at a very low cost and exports the phones to S. America where they are just beginning to enter the market.  His focus is small retail stores who do not have the buying power to buy large lots from the distributors.  It is important to understand what the markup is at the different distribution levels.  The longer the distribution chain the more cost is added to the product because every company that touches the product makes a commission, even if it is small, it add to the final and landed cost of the product, therefore increasing the cost at the point of final sale to the end consumer.

 What is the price point in each target market

This will help you determine where you are maximizing your profit.  Always take into account your total cost at destination, also known as your landed cost.

 Entering the Market

Consider your plan on entering the market.  Who will you sell to?

  • Distributor – Higher volume lower profit
  • Importer – lower volume (in most cases) higher profit than Distributor
  • Retailer  – lowest volume but higher profit
  • End user (web sales) – lowers volume per transaction but highest profit. This model has other inherent challenges.

Marketing

How will you advertise/market your company? Each of the above “customers” will require a different form of marketing.  Most exporters chose one distribution model and market to support that model.

Consider:

  • If you will need printed marketing material
  • Does it need to be in a different language
  • Will you need web-based marketing
  • Participate in trade shows
  • How will you position your product (in your marketing program) to differentiate yourself from the competition
  • Consider using the metric system for measurements.  The global market is metric base with the (large market) exception of the US and the UK.
  • Packing – will you need to translate labels, ingredients, descriptions, etc.?   Are the packaging, color, type, and count in accordance with the country’s culture? There was a kiwi exporter into China that did all the market study, and found that their product was not selling when it should have.   After further review/analysis, they learned that the fruits were being offered in a four-pack tray.   Although the fruits were great, fresh and tasty, the number “4” signifies Death and bad luck.  Much like in the US, where many building do not have floor 13, in Asia building do not have a 4th floor.  When a company is offering something to eat and it does so with “death,” it stands to not make many sales.   Consider your product with culturally acceptable norms when preparing your marketing campaign.

Once you have completed your target study, you should be able to narrow the market to at least one country.  You are now ready to take the next step, and that will depend on the results of your study.

 

 

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