Choosing the best export markets to enter can result in large profits. However, don't make the common mistake of spreading your resources too thin. Smaller companies new to exporting get better results by pursuing fewer markets rather than many at once.

In conducting your analysis, consider the factors below. Just about all the information you need is available from the U.S. Commercial Service. Consult the U.S. Government section of your phone book for the office nearest you.

Rank Foreign Markets in Terms of Demand and Country Performance

Rank the top foreign markets by the value of your product they import from the United States. Then re-rank them by their total demand (domestic production plus world imports) for the previous three years.

This will determine their market size, its rate of growth, U.S. market share, and whether it's increasing or decreasing. If demand for your product is increasing, this will be one good reason to pursue a given market. Now look at each country's rate of growth and per capita gross domestic product. If the indicators have decreased, it's likely that your product demand will also decrease.

Examine Competition, Cultural Tastes and Trade Barriers

Learn about your competition, their product price points, quality, distribution methods, consumer loyalty and their ability to provide after-sales service. If intense competition exists, stay away for now. Smaller developing markets may be unprofitable for multinationals, but big enough for you.

If your product designs do not suit cultural tastes, make the changes if future sales warrant it. Identify tariff (duties) and non-tariff barriers (standards, regulations, quotas, labeling requirements, etc.). If excessive, they may prevent sales. If manageable, see if any vested interests can bar your product from shelves.

Understand Political Risk and Currency Convertibility

Keep abreast of political risk, especially in developing nations. Should a government collapse, disruptive activities may put you out of business.

Countries with non-convertible currencies or insufficient reserves may not be able to pay you in U.S. dollars or on a timely basis. Should you accept a foreign currency, wide fluctuations could cause a loss.

Investigate Infrastructure and Location

High-tech products often require a skilled support staff (human infrastructure). If not available, you may be forced to provide support from the home office, which may be too expensive. The lack of physical infrastructure may also curtail exports. For example, the inability to quickly deliver perishables due to inoperable roads or inaccessibility to refrigerated storage may be a deterrent.

The shipping costs of heavy merchandise to distant locations may eliminate your profits. In this case, you may wish to consider licensing your technology.

Explore Environmental and Legal Concerns

Determine if your product meets environmental standards. If so, investigate if your selected countries' governments provide facilities to treat or store your toxic by-products. If not, this can create serious health and legal problems.

In some countries the accused is presumed guilty until proven innocent, and judges may unfairly favor domestic agents or consumers. Carefully assess each country's environmental practices and legal environment, and importantly, its ability to enforce intellectual property laws.

This article appeared in FedEx Global, a publication of Federal Express, April-May 1997.
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John Manzella
About The Author John Manzella [Full Bio]
John Manzella is a world-recognized author and speaker on global business, emerging risks, and the latest economic trends. He's also founder of both the ManzellaReport.com and Manzella Trade Communications, Inc. His latest book is Global America: Understanding Global and Economic Trends and How To Ensure Competitiveness.




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Talkback (1)

  • Guest (UdyRegan)

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    If I had the money to invest in anything other than my own business right now… Call me back in a few years when my business has made me millions! Haha!

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