When conducting foreign market research, businesses tend to be overwhelmed with the amount of data they need. There’s good reason for this. Just to answer seemingly basic questions—such as whether or not to expand in a particular market, whether or not the timing is right, or how to expand—a great deal of information needs to be gathered and analyzed.

This, no doubt, is essential in making informed decisions and ultimately improving the bottom line. As a result, for companies new to international trade, the following factors should be evaluated and included in a global business strategy.

The Economic Situation

To determine the potential for growth, it’s important to analyze changes in per capita income, energy consumption, gross domestic product per capita, purchasing power parity, and levels of disposable income. Other factors to consider include inflation and currency exchange trends, strength of domestic industries, and stability of the financial sector.

Social Circumstances

A number of social factors also should be considered and analyzed. These include demographics, literacy rates, soundness of the education system, frequency of epidemics, health care costs, life expectancy, annual population growth, and population distribution in urban and rural areas.

Political Stability

An analysis of political risk, especially in developing countries, can determine if a level of volatility is or may be harmful to your business interests. Sources of instability are typically caused by irresponsible governmental actions, kidnappings, extortion, and terrorism.

Resources and the Technological Base

A country’s resource base, including fertile agricultural acreage, natural resources, and size and educational levels of the labor force, is the foundation of its technological base. Importantly, investment in utilities, as well as in transportation, communication and educational infrastructure significantly impacts levels of future productivity.

The Role of Culture

All facets of an international business operation—from negotiations, production, distribution, marketing and human resource management—are affected by cultural characteristics. Your understanding of social structure, religion, values, needs and preferences can determine success.

Legal Environment Impact

Similarly, all aspects of a legal system and its procedures must be factored in the target market decision-making process. In short, the enforcement of intellectual property rights can play a major role in determining which markets not to pursue.

Trade Barriers

Barriers to trade may take various forms, from tariffs and taxes to non-tariff barriers such as quotas and embargoes. Depending on costs, some barriers make market entry extremely difficult.

There’s More To Consider

Additional information, including local industry associations, government entities and contacts, trade fairs, distributors, and licensing or joint venture partners, should be reviewed and built into your strategy. As such, firms considering expanding internationally must not only perform thorough market research, but understand what the data means and how to assess it.

This article appeared in Impact Analysis, January-February 2009.

Ligia Gante
About The Author Ligia Gante
Ligia Gante, president of Americas Design & Management, Inc., is an international business consultant specializing in Brazil, Portugal and the U.S.

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