There are 196 countries in the world. How many is your company selling to ? International expansion to new countries is a strategic imperative for most exporters. The challenge is to determine which countries will deliver the greatest financial return for your investment of time and resources. Listed below are “Ten Tips” to facilitate new country prioritization for your international expansion program.
1. Determine Category Size: Data exists to allow you to capture the size of your category in target countries. Syndicated data suppliers such as A.C. Nielsen and IRI sell category sales information and trends. Government agencies track sales for core categories impacting their local producers. Category size may be estimated by sourcing the information from a friendly retailer and projecting country level sales based upon that retailer’s market share. Distributors are often resourceful and may find success at locating category sales data. Remember, category sales often grow as a result of a major new entrant.
2. Population: Just One Factor: Virtually all people maintain a fundamental need for food products, personal care products, and household items. A logical conclusion would translate that large countries like China and India would represent the greatest opportunity. Population levels are relevant, but not the only factor. A classic case study is the story of Brazil and Puerto Rico. Most USA based consumer goods manufacturers sell more product to Puerto Rico, a commonwealth of 4 million people than to Brazil, a country of 200 million people.
3. GDP: Follow the Money: Per capita, gross domestic product (GDP) is an important consideration. International exporters are known for marketing premium, value-added brands. The higher the countries purchasing power, the more likely that middle income citizen’s can afford our brands. This appears as one reason that European markets such as Germany, France, Italy, & the United Kingdom may create a larger opportunity than countries such as Pakistan, Indonesia, or Bangladesh that have far more people.
4. Growth Rates: Think to the Future: Export development often represents an investment for the long term. Your country prioritization analysis should look at population and GDP growth rates. This is indicative on future potential for the market. I worked in Saudi Arabia in the early 90’s when the population was around 14 million , but growing at 8 %. Today, Saudi Arabia’s population is more than 28 million. Which countries will be the largest in 2022 versus 2012 ?
5. Proximity to Manufacturing Plants: Transportation costs contribute one of the largest line items in your pricing calculation. Logically, shipping to a neighboring country is likely to cost less than shipping half way across to the world to Brazil or India. Citizens of adjacent countries have probably visited your country and may have seen your brand or a commercial for it. Canada occupies the northern border of the USA and is the single largest export market for USA consumer goods manufacturers ( and vice versa).
6. Extend Current Retailer/Distributor Partnerships: Global retailers such as Carrefour, Metro, Walmart, and Tesco operate in many countries ( and continents.) Asian and Europe feature regional distributors. Your brand has established a track record with these leading players. Your company is already proficient at working with their operating models. Leverage these relationships to enter new markets. Warning: this can be a risky strategy when you base your plan on a large global retailer that happens to have a small presence in your target market. Examples: Tesco- USA, Whole- Foods UK, or Walmart-Argentina.
7. Cost to Enter: There is a cost of doing business in each market. Markets such as Italy and Hong Kong maintain notoriously high cost of entry into the supermarket channel. Latin American/Asian markets require investment, but at more modest levels relative to Europe or the USA.
8. Market Complexity: How difficult will it be to enter the market? Certain markets are consolidated with a few major retailers and many qualified distributors. Other markets are complicated, with multiple trade channels, fragmented retail environment, and a disparity in usage profiles for your category. Larger markets are challenging to enter. However, a 5 % market share in a large country may deliver greater long term dividends than a 50 % market share in a small country.
9. Competitive Environment- Get Ready for Battle: Evaluation of the competitive landscape in your target market is critical. Does the market represent virgin territory ? Or will you face 2-3 major, multinational competitors? In competitive markets, existing market combatants will typically spend heavily to defend their brand position to blunt a competitive introduction. It is likely that you face competition in every market. However, it is important to calibrate the existing competitive environment.
10. Availability of Enthusiastic Local Partner: Selection of a qualified, local partner is another key factor. Strong distributors and importers exist in every market. Pro-active contact from a leading distributor indicates that this market expert sees potential in your product. This is favorable and may encourage you to prioritize this type of market. However, you must conduct due diligence to insure that this enthusiastic distributor ( that you meet at a trade fair) maintains the critical mass and skill set required to succeed in building your brand.
These factors all play an important role in determining the “Size of the Prize” in new markets. Veteran exporters will weigh each factor to establish the right path forward for their export development plan.
