3 steps to select the right market for your expansion
Where should you focus your efforts when expanding abroad? Picking the best foreign market is a vital first step, but it can be tricky and daunting.
Many entrepreneurs find the task so discouraging they put off the idea of exporting. Some wrongly think that to get started, they have to do extensive market research about multiple potential target countries, consumer trends, sales growth, cultural differences and more just to select the market.
Other business owners start exporting opportunistically—say, after a chance encounter at a trade show or on a trip—without looking at which foreign market is best to grow their business strategically.
That’s unfortunate because a few simple steps can help you do a manageable search and zero in quickly on markets with the greatest potential, says Igor Chigrin, a Senior Business Advisor with BDC Advisory Services and Certified International Trade Professional (CITP), who coaches entrepreneurs on exporting.
“The question of which market to target is one of the major barriers to start exporting,” he says. “Many business owners don’t know where to start, and this paralyzes them. But a few basic shortcuts can make it much easier.”
Chigrin offers three simple steps to select the right market for your expansion.
1. Check trade data
A good first step is to consult free online tools for trade data. The easy-to-use tools let you do customizable searches of data on trade between Canada and other countries based on products or industry.
You can use the tools to find plenty of useful information, including:
- countries where Canadian products like yours are already valued and competitive
- the size of the market and sales trends in different countries
- where your Canadian and foreign competitors are active
Chigrin recommends starting with these two online trade data tools:
Trade Data Online: This tool allows users to generate customized reports on Canadian and U.S. trade with over 200 other countries. You can search by product code or industry category over different timeframes.
The tool is made available by Innovation, Science and Economic Development Canada (ISED) and is updated monthly with data from Statistics Canada and the U.S. Census Bureau.
United Nations Comtrade Database: The UN’s Commodity Trade Statistics (Comtrade) Database is another free, user-friendly tool for trade data. You can do custom searches by product for monthly or annual data on trade among nearly 200 countries going back over 50 years.
This tool is helpful for finding out what other countries are exporting to a target market. It can show you where your main foreign competitors are from, for example. The database also offers tools to calculate average product price, visualize top destinations for a product, export trends and comparable data for several products.
“I make exciting discoveries every time I use these databases,” Chigrin says. “They can open your eyes to markets outside the U.S.”
For example, a search on Trade Data Online may tell you that the U.S. is the number-one export market for products like yours, but Mexico and Brazil are second and third in the list.
You can then search Comtrade to find which other foreign countries sell a lot of similar products in all three markets. This can help you decide where your products could be most competitive.
“There is a lot of value in seeing not only the top export market, but also the markets that come next in the list and who is else is exporting there,” Chigrin says.
2. Assess your personal connections
Think about connections that you and your team have in foreign markets. Success in exporting often depends a lot on personal relationships and good knowledge of the target market’s language, customs and consumer trends.
“Many people in your team may have contacts outside their country,” Chigrin says. “You can call those contacts to get an idea of local opinions about your product. Chance connections lead to opportunities more often than you might think.”
Chigrin cautions to evaluate such opportunities with additional research to ensure they have good potential. “Spontaneous or one-off deals in a market that is wrong for your business can lead to wasted time and effort,” Chigrin says. “But personal connections can get you started and out of the paralysis. They can give you ideas about other countries to export to.”
3. Compare potential markets using measurable criteria
Use online data and any personal contacts to identify a short list of potential markets where you could be the most competitive. Try to use measurable, comparable and relevant opportunity and risk criteria, and assess which markets provide your company with the greatest, risk-adjusted potential to grow.
This same process can be used whether you are selecting a new country, a new state or region in very large markets such as the U.S. or China, or even if you are considering growth across Canada.
Next, do more in-depth research to help you decide which one best fits your expansion strategy.
Here is a list of additional information useful to know about each market:
- your customer profile in the target market
- consumer trends, needs and perceptions of products like yours
- local and foreign competition in the market
- your unique value proposition there
- regulatory, certification, trade and other barriers and opportunities, such as free trade agreements and government incentives
Several free online tools can help you with this research, such as:
- The Canada Tariff Finder. This free searchable tool allows businesses to quickly find up-to-date tariff information for specific products and countries.
- Market analysis tools available from the International Trade Center that allow custom searches, including:
- Trade Map, which shows export performance, international demand and competitive and alternative markets as well as a directory of importing and exporting companies
- Market Access Map, which shows tariffs, trade remedies, regulatory requirements and preferential regimes
- Investment Map, which combines a variety of investment and trade statistics
- Standards Map, which shows standards on environmental protection, food safety, business ethics and more
With details in hand about each market on your short list, you can compare them and pick the optimal one for your business goals. You can validate your choice by reaching out to outside advisors, business contacts, industry and trade associations, and bilateral chambers of commerce and business councils.
“It’s usually best to pick one target market to focus on at a time, unless you have enough organizational and production capacity to handle more,” Chigrin says.
“The best candidate is often the biggest market where you can be competitive and find the fewest barriers.”