Exports are increasingly becoming more important to the success of both our economy and individual companies. And, if you’re responsible for any international activity, chances are your company’s success at exporting will impact your job performance and value in your organization.

Consequently, identifying, assessing and choosing the right foreign markets to pursue can result in your company exceeding its profit expectations. However, selecting the wrong markets can result in great expense and frustration. To make your job easier, consider the following factors.

Study Economic Indicators

Rank the potential countries’ markets by the dollar value of your product they import from the United States. (Data needed is available from the U.S. Department of Commerce). Then rank each market by its total demand (domestic production plus world imports) for the previous three years. This will determine each country’s market size, its rate of growth, U.S. market share, and whether that is increasing or decreasing.

If total demand for your type of product is increasing, look at the country’s rate of growth and per capita income. If indicators are positive, it’s likely that your product demand will continue to rise. However, if these indicators are stagnant or down, it’s likely that the growth in demand for your product will slow and may not provide the market potential you’re looking for.

Can You Be Competitive?

Identify each selected market’s trade barriers (tariffs, standards, regulations, quotas, labeling requirements, etc.). If excessive, these barriers may make your product too expensive and limit your exports. If manageable, investigate whether any vested interests can bar your product from the market.

Importantly, know your competitors’ products, prices, distribution methods, commitments to after-sale service, and target customers. If intense competition exists, look to smaller markets which may be unattractive for multinationals, but big enough for you.

Consider Currency Strengths and Risks

Importers from countries with soft currencies or insufficient reserves may find it difficult to pay you. Understand the risks, buy insurance or choose other markets. Should you accept the importer’s currency, guard against wide fluctuations. And keep abreast of political risks.

Should a military coup take place, a succeeding government may reverse policy; should social turmoil envelop a nation, the disruption of activities could put you out of business. New governments have been known to reverse policy with regard to a whole range of investment and trade issues. Additionally, follow the political relationship between the United States and your target countries. Warmer political relations may allow U.S. businesses greater access to the foreign marketplace. Cooler relations obviously can have the opposite effect.

Determine Infrastructure Needs

If your product requires a skilled support staff (human infrastructure) make sure it’s available in your target markets. If not, you may be forced to provide costly support from your home office.

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 can be a deterrent. The shipping costs of heavy merchandise to distant locations may also prove too expensive. In this case, you may wish to consider licensing your technology.

Understand the Culture and Adapt

Sensitivity to foreign cultures is not only polite, it’s good business. Become familiar with your customers’ cultures and study their tastes. If your products and designs don’t suit them, make changes or consider going elsewhere.

Products not adapted to suit cultural preferences may not be accepted. For example, Mexican women prefer bright, splashy prints on swimsuits that may not sell well in the U.S.

Furthermore, behavior considered friendly in one country may be considered offensive in another. And be aware that many foreigners believe that to be polite means having to agree with you, not always considering the ramifications of doing so.

Investigate Intellectual Property Protection and Environmental Laws

Many countries claim to enforce intellectual property laws, but have a poor track record. If you sell software, investigate how piracy is handled. If protection isn’t a priority, you may want to avoid this market.

Environmental standards greatly differ from country to country. Certain machinery may not meet stringent foreign environmental pollution standards, which could prevent product importation.

On the other hand, some developing countries may not provide adequate facilities to treat or store toxic by-products generated by a manufacturing process, which could create a serious health risk and legal problems.

Understand the Legal System

In some countries, the accused is presumed guilty until proven innocent, and judges may unfairly favor domestic sales agents terminated over poor performance or consumers who are injured by the inappropriate use of a product.

One of the most pressing issues in doing business abroad is the lack of civil, commercial and criminal codes. And confusing and burdensome bureaucratic requirements can tie up valuable time. That’s why you must carefully assess each country’s laws and practices and determine if you wish to expose your company to them.

How Many Markets Should I Pursue?

Depending on your company’s level of resources, objectives and product competitiveness, the number of foreign markets to target simultaneously and the selection process used to determine what markets to pursue will differ considerably.

If your company is new to international trade and your staff and level of resources allocated to pursuing exports are limited, it may be wise to focus on fewer foreign markets (i.e., one to three). This will prevent spreading your resources too thin.

Determine the Criteria Right for You

Based on your product or service, export market considerations will differ. Understanding these differences will help you to pursue the markets with the highest returns and the least risk.

This article appeared in Impact Analysis, July 2002.

John Manzella
About The Author John Manzella [Full Bio]
John Manzella is a world-recognized author and speaker on global business, emerging risks, competitive strategies and the latest economic trends. He also is founder of the ManzellaReport.com and Chief Strategy Officer of Ignition Life Solutions. His latest book is Global America: Understanding Global and Economic Trends and How To Ensure Competitiveness.

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