Market research is vital to sustainable export success in international markets. It is a process that can help you avoid costly expansion mistakes and identify outstanding business opportunities, allowing you to minimize risk before entering the foreign market through proactive data collection and analysis.
Our article below will outline the basics of conducting market research internationally to identify a target market. From different research methods to valuable profiling items, this short guide can help your company prepare for market research to solidify potential export opportunities and avoid the risk of entering the wrong market.
'Take time to study the local culture, learn how things are done there, and adapt. Part of the process includes finding the right local partner.'
Benefits of market research
Done right, market research can be a tool for your company's global success and can provide you with a wealth of business acumen in possible target markets. Overall, the process identifies export opportunities, identifies new or emerging markets, and uncovers potential customers' preferences. This process can be beneficial regardless of the size of your company.
Market research involves the collection and analysis of data at successive levels of detail, with the overarching intent of identifying compatible target markets. When carried out on an international scale, the process becomes particularly important due to the increased level of investment required to reach foreign markets.
What is market research?
Market research is the process of collecting, analyzing and interpreting information about a market and the individuals it contains. Internationally, market research is essential to identify potential market compatibility and to make comparisons between markets.
Types of market research:
Some forms of market research are more economical than others and take less time; however, it is always recommended to gather as much relevant information as possible during the process. This ensures you have the resources you need to make the most educated decisions possible. Typically, this is why a combination of different forms of market research is often the most sensible strategy.
Secondary market research: Data collection was previously completed by an external source and gives you the opportunity to reuse this information. Secondary research typically consists of reports, studies, books, and surveys, the vast majority of which can be found online. This means that the process is often very cost-effective in nature and presents little risk in bringing together a significant amount of information relatively quickly. A disadvantage of secondary market research is that it is often customized for the purposes of the original user; this means that you should avoid drawing any firm conclusions from this research due to its subjectivity. As a result, interpretation of secondary data is often used in conjunction with other methods and serves as a solid foundation in the early stages of market research.
Primary market research: It involves a first-hand approach and is a more comprehensive form of collection and analysis than its counterpart. As a result, this type of research takes more time and has a greater financial burden, but in return it provides you with personalized data that can be extensively analyzed to draw conclusions and make decisions. This research refers to the correct completion of some kind of appropriate behavior. This is an important factor to consider when evaluating possible locations to export your goods or services. It is important that you communicate directly with potential customers and participants, which often takes the form of personal interviews, surveys or consultations. Various forms of statistical analysis can also be done on primary research figures.
It's also important to make sure your research goals are well defined for your potential audience. This means that respondents who respond should first become aware of your company's intentions. Clarity in this process leads you to answers that are both relevant and factual, which can be used to guide you to a solution on which markets to enter.
TIP: Attending trade shows can be a great way to discover market trends and gain other valuable market intelligence. You never know where to find your next export opportunity!
Steps in the process
While detailed, the market research process can be simplified with three relatively simple steps. Companies need to scan several markets before doing a more in-depth assessment. In this way, they can reach an informed decision at the end of the process.
1. Scan potential markets:
This step of the market research process involves identifying and collecting statistics about markets that are currently importing products in your product or service category. Once you understand this data, you can select multiple markets that appear to be in steady economic growth with minimal fluctuations. It is also proactive to consider small and emerging markets, as they tend to offer a high degree of potential market share due to limited competition. You can then try to narrow your focus on a few of the most promising market candidates in your first scan.
2. Evaluation of target markets:
Evaluation of markets is a process that includes a more comprehensive approach than the initial screening. But it covers far fewer candidates. The purpose of this step is to gather as much applicable information as possible to make a strong comparison between the remaining markets.
Part of this evaluation process includes identifying evaluation factors to consider wherever appropriate, such as cultural norms and growth rates. Competition in each market is also an important consideration at this stage. Competitors' relative success in markets of mutual interest may predict similar success for your business. Elements like these are extremely helpful when determining how your business can efficiently transform into a potential market.
3. Draw conclusions and decide:
This phase can only begin after the evaluation of potential target markets has been completed and all the data has been analysed. Evaluating this information includes making qualitative sense from your data. This, when done correctly, will lead you to a final decision on which market(s) to enter. After the decision is made, the market research part of your international export process is completed.
Market profiling considerations
What is profiling?
Profiling is applying a set of features to potential markets for comparison or segmentation purposes.
A common strategy in the market research process is profiling, which can help you narrow down the amount of potential markets using a comparison of consistent aspects. Any factor you choose to evaluate can also be personally evaluated based on your company's priorities, emphasizing the adaptability of the profiling approach. When profiling markets, it is wise to consider aspects that can be compared uniformly across multiple regions, with examples such as:
Progress: This factor indicates the level of economic progress in the market and the extent to which the market offers a mature infrastructure and customer base. This may also include the rate at which the market moves economically.
Political stability: This element refers to the degree of structure and predictability of the current government within potential markets and any major current political themes.
Trade relations: The relationship between foreign and domestic parties involved in any potential situation of bilateral trade is crucial, given that long-term trading partners will likely offer smoother shipping and shipping arrangements than non-business countries. Significant imports and exports and existing tariffs between the two countries should also be taken into account.
Economic conditions: Any major trends currently affecting the market economy and the consistency and duration of these fluctuations are significant. Ideally, you will want to export to a country with a solid economic situation and low financial risks.
Business practices: Understanding the typical business customs followed in a market will help you tailor your business model to meet foreign standards. Attributes included in this analysis may include local currency, typical working hours, multinational firm regulations, and common workplace relationships and structures.
Cultural norms: When conducting international business, understanding the ins and outs of foreign culture involves understanding and making the adjustments necessary for your company to run business smoothly for the differences between local and foreign cultures. Examples of relevant cultural norms may include speech qualities, perception of strangers, and principles present in everyday life.
Ease of access: What is sometimes overlooked in the international market research process is the geographic proximity of potential destinations and how this will affect the shipping and handling costs required to exchange goods. This will also affect your ability to efficiently conduct primary research, including travel costs and accommodation for researchers. This variable may also cover the availability of existing foreign storage and customer-facing infrastructure.
Many of these factors can be combined to determine a market's degree of risk, which is an effective way to filter out less desirable markets. For example, a place with political unrest, a high probability of conflict, and a depreciating currency indicates a high-risk destination that you should probably avoid.
Market research can be a relatively complex procedure, especially when done on an international scale. This means that there are a number of challenges many companies face along the way. Some of these challenges are:
Methodology - A common mistake among market research companies lies in their ability, or lack of it, to choose the right data collection techniques. Depending on the personal needs of your company and the size of your market research project, it is crucial to use methods that will generate data on which you can base your decisions.
Communication - Difficulties with communication and interpretation are common in international market research, as foreign markets tend to speak different languages. It is important that you hire people who are familiar with the foreign culture so that your data collection and transformation efforts are not lost in translation.
Funding - Conducting effective international market research is probably not going to be a cheap endeavor and it is therefore recommended that companies only engage in research coverage that realistically fits their budget. Doing so will prevent research from being abandoned before completion and will result in cost effectiveness. An example of this scenario might involve a firm choosing too many markets to research at once, leaving them with the dilemma of spreading their resources too thin to cover every market they are planning. Appropriate budgeting is an effective way to ensure that there are no costly surprises in the market research process.
Scaling - Some companies try to replicate successful market research strategies used by large multinational firms; however, this approach does not reflect well on small and medium enterprises (SMEs). If you try to copy a larger company's market research, you'll end up with an overwhelming amount of irrelevant data, which will be nearly impossible to interpret correctly and can ultimately lead to skewed decisions. Every international export situation is unique and should be treated as such when it comes time to conduct market research.
Sampling - When performing quantitative research, there is always the possibility that aggregation errors will occur. In international market research, it's especially important to make sure you're evaluating individuals who truly represent the population in a market. Failure to do this correctly can result in a skewed perception of the demographics of the market and consumer demand, which can ultimately lead to poor decision making. On the other hand, a properly taken sample can provide a great picture of what an entire market has to offer your company, so enlisting the help of experienced researchers is often a sensible strategy.
Estimate - Be realistic about how much market share you can gain in a foreign location. It's a common mistake to be overly optimistic when imagining your potential market share for the hypothetically accessible portion of the market. Instead, consider taking a more refined approach and consider the current market for your goods or services. This is the amount of target market that can realistically be achieved by your business, rather than the total market available.
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