HOW TO CHOOSE THE WINNING MARKET TO SELL ABROAD
Before mobilizing the necessary resources to settle in a new market, each company must gather useful information to understand whether the sale in a particular country can be a choice of strategic interest and therefore prove to be fruitful.
How to select the market of interest
In order to do this, it is appropriate to analyze the characteristics that distinguish the market of interest. In these cases, we proceed with an analysis of the macro-environment (i.e. the collection of salient information relating to the country’s economy, regulations, etc.) and the micro-environment (competitors and possible customers). However, what’s still too little taken into consideration is the importance of comparing multiple countries – before carrying out an in-depth analysis on a specific foreign market – to identify the most strategic one for the sales of the individual product. There are about 200 markets in the world (this number is indicative, it varies according to whether the recognized states are considered or not). We know that doing an in-depth analysis of a large number of markets may appear uneconomical because it would take too long, but at the same time we must consider that choosing a market on the basis of “hearsay” would mean for the company to take risks without a solid analytical basis.
How Double Screening Process allows you to sell with strategy
To overcome this problem, thus identifying the best markets for the sale of the product without investing excessive time and money in research, there are some specific methodologies. One of the most important is called the Double Screening Process, a type of analysis that uses secondary data and open ones, the latter available for free and easily online, focusing on:
- information on the product category of interest in the target markets. The entrepreneur should therefore start from the question “Which countries are particularly strategic for the product category I deal with?”
- characteristics of the company and their compatibility in the target market. In this case, the starting question will be “Are my company, my brand and my products compatible with the lifestyle of the people and the preferences of consumers in that country?”
We therefore work by choosing some interesting markets and looking for general information that allows us to immediately highlight whether they are countries in which to invest or not with respect to the product category dealt with.
Double Screening Process: the different variables to consider
To proceed methodically in the strategy mentioned in the previous paragraph, different variables can be considered, which allow a quick comparison of several markets. It therefore operates in two phases, carrying out a double screening (hence the name Double Screening Process). Each phase requires the selection of variables that give useful information on the markets, that we describe in the following paragraphs.
The attractiveness of the target market
In particular, it is advisable to deepen the possible presence of barriers to entry into the market. In the case of consumer goods, for example, it might be useful to investigate import-export information on the product category concerned and gross national contribution of the category or product. Furthermore, it would be necessary to investigate whether the characteristics of the distribution are more fragmented or more concentrated.
Contrary to what one might think, a fragmented distribution (i.e. given by the presence of numerous players) is to be considered as a favourable factor to market entry. It is true that a high fragmentation implies greater initial difficulties for a company, which in order to increase sales volumes will have to turn to more distributors, however when distribution is concentrated (with few competitors sharing large percentages of market shares) the bargaining power of salt distribution and suppliers may be asked for inexpensive sales conditions.
What are the actual sales for the product category in that market? Is there any potential – still unexpressed – that would allow for an increase in sales? What is the consumer sentiment in that market with respect to the product category?
Financial risk and risk assessment
To quantify a financial risk, it is necessary to pay more attention to cases in which the currency of the country of sale is different from that of the country of origin, and if it is subject to strong fluctuations or if it is not fully convertible.Finally, to adequately assess the commercial risk, however, it is necessary to find data on customer reliability, for example by researching the balance sheet of any customers in the market.
The Double Screening Process is just the beginning: the other elements to consider
The market analysis phase with the Double Screening Process is only the initial phase and consists of the moment in which a range of possible markets is selected in which to evaluate the settlement. Once some potentially interesting countries have been identified, further in-depth analysis are required on the individual selected markets:
- external analysis: to evaluate the business in the target market and the competitors already present in a more in-depth manner
- the analysis of the most effective sales channels: to understand how to reach the final consumer in the most effective way
- the analysis of your brand and its Unique Selling Proposition compared to the reference market: in fact, selling abroad could mean making adjustments to your product, to adapt it to the needs of the selected country. This operation involves costs and it is therefore important to evaluate the costs and benefits in advance.
Relying on experts in the food import export sector to identify the most appropriate strategic outlets for the characteristics and sales needs of your business and your brand is important to invest on the basis of concrete data. Touchpoint acts as a meeting point between small and medium-sized Italian producers and the world of foreign distribution, to guide producers on a path of growth beyond their own borders.