One of the most frequently asked questions we receive from clients is which country they should look at when they are looking at new export markets to target.
This month, we share some thoughts on this issue. The insights we share have been gathered from our own experience of helping companies that grapple with this challenge, and some of the key considerations that companies should include in their planning process. We hope these insights provide some valuable tips and act as a guideline for your own plans.
5 Key Factors To Consider In Market Selection
We often receive inquiries from companies that are seeking our help with finding distributors or wanting to open an office in a particular country in Southeast Asia. But when we ask them why they have selected a particular market as part of their export plans, they struggle to answer the question. Typical answers we hear include population size, the economic growth in the country, or the presence of key industry sectors that the companies want to sell into.
None of these answers are wrong, but in our experience, there are other factors that companies should include in their evaluation process as we believe this can significantly impact the decision-making process.
1. How much export experience do you have?
A key reason why we bring this up as a factor is because some countries in our region are more challenging to do business in, compared to others.
2. Do you need to register your products?
Product registration is an issue many companies need to deal with, and there is no question that it is easier in some countries than in others. Companies will have to deal with the question of how they want to handle this – be it by themselves or by finding a distributor who will do this for them (which then raises the question of whether they can find a distributor).
However, one area that companies neglect to consider in this process is the documentation they need to provide for product registration. In some countries (Indonesia is an example), the documentation that needs to be provided to the local authorities may be more than what the manufacturer of the product is willing to provide because of issues related to trade secrets, or simply due to a lack of document availability, and are not prepared to spend money to obtain this.
This is an important factor to consider, for companies selling retail products, where pricing information is easier to obtain.
When companies look at such pricing, they need to think about this – that is the pricing after the distributor and the retailer have added their own margins. So, if they work backward, the question then becomes – can they sell their products at that lower price in that particular market? Do they need to adjust the product specs, packaging size, etc.?
In some markets, labeling is also an issue. We have seen companies reluctant to change their packaging specific to a market.
4. Industry clusters
One key market selection consideration is of course the industry sector that you want to sell into. But it is also important to understand a bit better how that industry operates.
We get occasional inquiries from companies in North America and Europe who want to sell to the automotive industry, and Thailand is one market that comes first to mind. But here is where they fail to understand a key point about this cluster – most of the manufacturing in Thailand is dominated by Japanese car companies, and the Tier 1 suppliers are very careful about the vendor approval process because of the demands of their Japanese clients. That makes selling to this sector more challenging than they originally expected.
One recommendation we like to provide companies is for them to do a market scan to see if their competitors are selling similar products in-market. Such information can be double-edged: if your competitors are in there, it is a sign of the market’s importance and the ease of market entry. If the competitors are not there, then that could be interpreted in two ways as well – it is an untapped market, or there may be barriers to entry you may not be aware of or have identified. Either way, such a scan can be quite helpful as you evaluate the market potential.