How to research export markets

Market research includes all methods that a company uses to determine which foreign markets have the best potential for its products. Results of this research inform the firm of

• the largest markets for its product,
• the fastest growing markets,
• market trends and outlook,
• market conditions and practices, and
• competitive firms and products.

A firm may begin to export without conducting any market research if it receives unsolicited orders from abroad. Although this type of selling is valuable, the firm may discover even more promising markets by conducting a systematic search. A firm that opts to export indirectly by using an intermediary may wish to select markets to enter before selecting the intermediary, since many intermediaries have strengths in some markets but not in others.

A firm may research a market by using either primary or secondary data resources. In conducting primary market research, a company collects data directly from the foreign marketplace through interviews, surveys, and other direct contact with representatives and potential buyers. Primary market research has the advantage of being tailored to the company's needs and provides answers to specific questions, but the collection of such data is time-consuming and expensive.

Because of the expense of primary market research, most firms rely on secondary data sources. Secondary market research is conducted in three basic ways:

By keeping abreast of world events that influence the international marketplace, watching for announcements of specific projects, or simply visiting likely markets. For example, a thawing of political hostilities often leads to the opening of economic channels between countries.

By analyzing trade and economic statistics. Trade statistics are generally compiled by product category and by country. These statistics provide the firm with information concerning shipments of products over specified periods of time. Demographic and general economic statistics such as population size and makeup, per capita income, and production levels by industry can be important indicators of the market potential for a company's products.

By obtaining the advice of experts. There are several ways of obtaining expert advice:

Contacting experts at government agencies.

Attending seminars, workshops, and international trade shows.

Hiring an international trade and marketing consultant.

Talking with successful exporters of similar products.

Contacting trade and industry association staff.

The exporting company may find the following approach useful.

1. Screen potential markets.

Step 1. Obtain export statistics that indicate product exports to various countries.

Step 2. Identify 5 to 10 large and fast-growing markets for the firm's product. Look at them over the past three to five years. Has market growth been consistent year to year? Did import growth occur even during periods of economic recession? If not, did growth resume with economic recovery?

Step 3. Identify some smaller but fast-emerging markets that may provide ground-floor opportunities. If the market is just beginning to open up, there may be fewer competitors than in established markets. Growth rates should be substantially higher in these countries to qualify as up-and-coming markets, given the lower starting point.

Step 4. Target three to five of the most statistically promising markets for further assessment. Consult with business associates, freight forwarders, and others to help refine targeted markets.

2. Assess targeted markets.

Step 1. Examine trends for company products as well as related products that could influence demand. Calculate overall consumption of the product and the amount accounted for by imports. Demographic information (population, age, etc.) can be obtained from World Population (Census) and Statistical Yearbook (United Nations).

Step 2. Ascertain the sources of competition, including the extent of domestic industry production and the major foreign countries the firm is competing against in each targeted market.

Step 3. Analyze factors affecting marketing and use of the product in each market, such as end user sectors, channels of distribution, cultural idiosyncrasies, and business practices.

Step 4. Identify any foreign barriers (tariff or nontariff) for the product being imported into the country

Step 5. Identify any domestic or foreign government incentives to promote exporting of the product or service.

3. Draw conclusions.

After analyzing the data, the company may conclude that its marketing resources would be applied more effectively to a few countries. In general, efforts should be directed to fewer than 10 markets if the company is new to exporting; one or two countries may be enough to start with. The company's internal resources should help determine its level of effort.

There are many domestic, foreign, and international sources of information concerning foreign markets. Several of these sources are given here. Available information ranges from simple trade statistics to in-depth market surveys.

Trade statistics indicate total exports or imports by country and by product and allow an exporter to compare the size of the market for a product among various countries.

Market surveys provide a narrative description and assessment of particular markets along with relevant statistics. The reports are often based on original research conducted in the countries studied and may include specific information on both buyers and competitors.

GENERAL INFORMATION RESOURCES

One of the best sources of information is personal interviews with private and government officials and experts. A surprisingly large number of people in both the public and private sectors are available to assist exporters interested in any aspect of international market research. Either in face-to-face interviews or by telephone, these individuals can provide a wealth of market research information.

* Business America. This biweekly publication of the US Department of Commerce contains country-by-country marketing reports, incisive economic analyses, worldwide trade leads, advance notice of planned exhibitions of U.S. products worldwide, and success stories of export marketing. Annual subscriptions cost $49 (GPO:703-011-00000-4). Contact Superintendent of Documents, U.S. Government Printing Office, Washington, DC 20402; telephone 202-783-3238.

* Commerce Business Daily (CBD). Published daily, Monday through Friday (except holidays), by the US Department of Commerce, CBD lists government procurement invitations, contract awards, subcontracting leads, sales of surplus property, and foreign business opportunities as well as certain foreign government procurements. It is available by subscription and on line (electronically). A first-class mail subscription is $260 per year or $130 for six months; second-class, $208 per year or $104 for six months (GPO:703-013-00000-7.) Contact Superintendent of Documents, U.S. Government Printing Office, Washington, DC 20402; telephone 202-783-3238.

* International Financial Statistics (IFS). Published by the International Monetary Fund, IFS presents statistics on exchange rates, money and banking, production, government finance, interest rates, and other subjects. It is available by monthly subscription for $188 yearly (yearbook, $50 alone, included in the price); single copy, $20. Contact International Financial Statistics, Publication Services, Room C100, 700 19th Street, N.W., Washington, DC 20431; telephone 202-623-7430.

* UN Statistical Yearbook. Published by the United Nations (UN), this yearbook is one of the most complete statistical reference books available. It provides international trade information on products, including information on importing countries useful in assessing import competition. The yearbook contains data for 220 countries and territories on economic and social subjects including population, agriculture, manufacturing, commodity, export-import trade, and many other areas. The latest edition available is about 900 pages and costs $100. Contact United Nations Publications, Room DC2-0853, New York, NY 10017; telephone 212-963-8302.

* World Bank Atlas. The World Bank Atlas provides demographics, gross domestic product, and average growth rates for every country. Contact World Bank Publications, 1818 H Street, N.W., Washington, DC 20433; telephone 202-473-1154.

* World Factbook. Produced annually by the CIA, this publication provides country-by-country data on demographics, economy, communications, and defense. The cost is $23 (GPO:041-015-00169-8). Contact Superintendent of Documents, U.S. Government Printing Office, Washington, DC 20402; telephone 202-783-3238.

* Worldcasts. This eight-volume annual series presents 60,000 abstracted forecasts for products and markets for 150 countries. Forecasts are arranged by modified standard industrial classification (SIC) codes and are typically one-line entries providing short- and long-range projections for consumption, employment, production, and capacity. A product volume and a regional volume are published each quarter. The complete annual set of four product volumes and four regional volumes costs $1,300; the product set and the regional set, $900 each; single volumes, $450 each. Contact Predicasts, 11001 Cedar Avenue, Cleveland, OH 44106; telephone 800-321-6388 or 216-795-3000.

* Exporters Encyclopedia.