Many companies, from young startups to established companies, struggle with the dilemma of which geographical target market to enter. Should it be a large developed market or a smaller developing one? Should they focus first on just one market or should they spread their efforts on few potential markets? It is possible to start where an opportunity arises, with an interested customer or distributor, to target a market you already know or to follow your gut feeling to where the best potential lays. And… it might even work at times. But for such an important decision, a more methodical approach would be a smarter choice.
1. Make a quick Internal analysis & set Goals
So where do we start? The first stage would be a quick internal analysis, to understand our product, company, customer base and goals. We summaries our product’s strengths and weaknesses in terms of factors like pricing, technology, positioning. Then summaries the company’s capabilities, especially in terms of international marketing, distribution, operations and existing sales channels. Seek to understand the customer base in terms of characteristics and needs. Now we define our goals for entering the new market, is it selling as much as possible, is it selling as soon as possible, or are there other considerations defined by stake holders.
2. Shorten the list
As there are so many potential markets and so many considerations to look at, it would be helpful to first shorten the list. We choose the most essential parameter in our considerations for choosing a market, one that without it, there is no justification to enter the market. Let’s say our goal is to sell as much as possible, this means we will need to choose only from the largest relevant markets, like the US, Germany or Japan. If you sell home water purification devices, we can probably eliminate all markets where people drink only tap water, as educating the market would be too costly. We should aim for a short list of up to 5 markets to choose from. If we have more, we can go over the process again with another essential parameter.
3. Choose criteria for rating markets
Now that we have our short list of relevant markets, we can move on to deeper analysis. We start by choosing market criteria that are important for our success in a market, organized by type and sub categories. These criteria are mainly company specific and are based on the main insights we collected about our product, company and customers, and on our specific goals. We can usually categories these criteria by type, including:
- Market potential – market size, market growth, forecasted demand, purchasing power
- Market characteristics - price sensitivity, technological advancement, regulation, pain intensity, geographies, potential barriers to entry, culture fit
- Market trends – we can use the DPEST model to analyze trends of: Demographics, Political, Economic, Sociological, Technological
- Competitors and competitive advantage – list of direct and indirect competitors in the market, intensity of competition, gaps in the market that we can fill better than our competitors
- Accessibility to market – How easy it is for us to enter specific market, existing contacts or activity in a market, fit of our business model to market (e.g. if we sell online – do customers in this market buy our type of product online?), the speed this market adopts new offerings.
- Other company specific criteria
Add measurable indicators to the criteria where relevant. Indicators that can be measured and have a concreate figure or estimation that can be compared to other markets can help. For example, market size can be measured by country population, or size of relevant customer base. Purchasing power can be measured be GDP per capita, etc.
4. Analyze & Priories the markets by the chosen criteria
Now that we decided which criteria are important for us in a market, we need to find data on each market for each criterion. Data can be found through many sources. Basic secondary data on market (e.g. population, GDP per capita, growth, etc.) can be found on international economic websites (e.g. world bank, IMF). Secondary data on specific sectors can be found for free in published research and articles, while more recent data might require payment. Primary field data on specific market issues can be produced through interviews with experts, distributors or customers in the specific market, etc.
Now that we have all the data in place, we can grade and Priorities markets. We can give each criteria a grade from 1 to 5. Measurable indicators according to their numeric size and qualitative criteria according to our preferences. If a specific indicator is more important, we can give it a higher weight in the overall grade average, or even define it as a go no go criteria that if low, disqualifies a specific market. For example, if supportive regulation is crucial, it can have a higher weight or disqualify the market altogether if absent.
Confirm chosen market in the field: after finding the market with the best fit, it is important to confirm our conclusions with real distributors and customers in the chosen market. If our conclusions are not confirmed, we have to go back to the process and analyze the markets with the new information.
Final words: Once we decide on our target market, our next task would be to build a marketing plan for entering that market. To increase impact in the market, it is usually advised to focus most of our efforts on one chosen market, and move on to other markets, only after the first market is secured, but this is a topic for another article.