Exports are increasingly becoming more important to the success of our local economy and individual companies. And if you're responsible for any international activity, chances are your company's success at exporting will impact your personal job performance — and your value to 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, frustration and even your job.

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. For example, if your company is small and new to international trade, your staff and level of resources allocated to pursuing exports may be limited. As a result, it may be wise to focus on fewer foreign markets — one to three — rather than many. This will prevent the spreading of your resources too thin.

Determining a criteria to use when assessing what foreign markets to pursue can be an arduous task — and expensive if pursued in a non-effective manner. To make your job easier, you may wish to consider the following factors:

Study Economic Indicators and Avoid Jumping to Conclusions

Rank the potential country markets by the value of your product they import from the United States. Then rank each by their total demand (domestic production plus world imports) for the previous three years. This will determine market size and its rate of growth, and it will give you U.S. market share and show if it is increasing or decreasing.

If total demand for your product is increasing, look at the country 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, its likely that the growth in demand for your product will slow.

Can You Be Competitive and Adapt Your Product to Suit Country-Specific Needs?

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

Know your competitors, their products, prices, distribution methods, consumers and their ability to provide after-sale service. If intense competition exists, look to smaller markets which may be unattractive for multinationals, but big enough for you.

Sensitivity to foreign cultures is not only polite, it’s good business. Study their tastes. If your designs don’t suit them, make changes or go elsewhere.

Know the Currency and Political 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 their currency, guard against wide fluctuations. Keep abreast of political risk. Should a government collapse, disruptive activities may result in your not getting paid.

Investigate Infrastructure

If your product requires a skilled support staff (human infrastructure) make sure it’s available in your target market. If not, you may be forced to provide costly support from your home office. The lack of physical infrastructure may also curtail exports. 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.

Investigate Intellectual Property Protection and Legal Issues

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

In some countries the accused is presumed guilty until proven innocent, and judges may unfairly favor domestic sales agents or consumers. Carefully assess each country’s legal practices and investigate safety and environmental regulations.

Should a military coup take place, a succeeding government may reverse policy; should social turmoil envelop a nation, the disruption of activities can effectively put you out of business. New governments have been know 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 can have the opposite effect.

Be Familiar with the Culture

Understanding your buyer's culture and tastes is very important. Product design not adapted to suit cultural preferences may not be accepted. For example, Mexican women prefer bright, splashy prints on their swimsuit that don't sell well in the United States.

Additionally, behavior considered friendly in one country may be considered offensive in another. And be aware that many foreigners believe that to be polite is to agree, not considering the ramifications or their ability to perform.

Understand the Legal System and How It Works

One of the most pressing issues in doing business in some developing countries is the lack of commercial legislation. The absence of civil, commercial and criminal codes can be a major constraint. And confusing and burdensome bureaucratic requirements can tie up valuable time.

Environmental standards greatly differ from country to country. Certain machinery may not meet stringent foreign environmental pollution standards that 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, creating a serious health risk and legal problems.

This article appeared in the Central New York Business Journal, March 1998.
Share

John Manzella
About The Author John Manzella [Full Bio]
John Manzella, founder of the ManzellaReport.com, is a world-recognized speaker, author of several books, and a nationally syndicated columnist on global business, trade policy, and economic trends. His latest book is Global America: Understanding Global and Economic Trends and How To Ensure Competitiveness.




More Articles | Speaker Programs | Speaker Demo | Videos | Latest Book


You don't have permission to view or post comments.

Quick Search

Stock Watch

FREE Impact Analysis

Get an inside perspective and stay on top of the most important issues in today's Global Economic Arena. Subscribe to The Manzella Report's FREE Impact Analysis Newsletter today!