Foreign Market Entry, or Internationalization, represents a strategic driver for business growth and expansion for those SMEs and Mid-Market companies capable of eyeing across the border to optimize market opportunities and business potential (especially in those markets in Asia that today drive global business growth, like the ASEAN marketplace in South-East Asia, and the Greater China region), whether in the form of a structured Joint-Venture or FDI or M&A (US companies in 2017 increased investments made abroad to US$6,017 billion from US$5,586 billion in 2016), for searching a local investor to partner with, or just for a more simplified plan like Direct Export.



Yet, whether it’s JV, Direct Investment, M&A, or Export, there are still lots of companies who simply ignore the importance of collecting market intelligence in target market. Market intelligence that is strategic and essential to understand the where, why, when and how of stepping into a foreign market in order to optimize company resources (financial, team, production), align company functions on this venture (of which Marketing plays a role of strategic importance for the success of the operation), design the most effective market-entry strategy according to company’s business goals and market opportunities. And on top of everything put the strategy into action and execute it in full, as very often the most brilliant strategy plan remains ineffective because not properly executed. Quite often companies prefer to sail across uncharted waters confident that their successful business model in their domestic home market may be replicated, and their product or service may be exported as-is, in a sort of copy-and-paste solution that can be applied to any market and independently from studying, analyzing and considering the specific features of the target market. And aside from defining a business model and a product offering that has to be fine-tuned to the demand and preferences of local consumers in target market. This happens more frequently than you can imagine, and company size is not an indicator of being more prone to success.



1. UNDERSTANDING THE MARKET BEFORE MARKET-ENTRY



Most companies are simply missing a fundamental step in business planning: it’s what I call the “pre|start”: studying and understanding the target market prior to start market-entry. And only once collected the market intelligence overview and business outlook of this pre|start, combined with company’s business goals and genuine support for the new operation (team, resources, marketing) and then acknowledged the real feasibility of the operation, the next step is designing an effective market-entry strategy that blends “global thinking with local acting” in order to execute the most effective market-entry strategy and optimize time-to-market, business results and returns on marketing investment. If a company wants to target, say, Chinese consumers, first of all they need to understand that China is not a single market, that there’s a tiered city system that classify cities in 1st, 2nd, 3rd and 4th-tier levels based on a bunch of metrics, what are the preferences of Chinese consumers, what type of marketing communication (adv, magazines, social media) and in what language and format. And on top of that if the product is a fit for that target market, if it is ok as-is, or it requires to be modified or innovated based on consumers’ preferences in order to be successful. And although this may seem too simple and too logical, indeed this is where most companies and brands fall abruptly because they simply assume that targeting a different culture is irrelevant in terms of understanding the local market and applying the correct market-entry and marketing strategy.



2. UNDERSTANDING TARGET MARKET AT A SNAPSHOT



As an international business advisor I always highlight that in order to succeed in a foreign market a product needs to command some sort on uniqueness, call it a competitive advantage, some elements of innovation or differentiation, a recognized brand awareness, a specific patent, something that makes it to stand out of competition and sends a vibe that allures, and attracts as something desirable, the interest of a consumer in a market some 8,000 miles away who is not in need of this product but he/she’s willing to consider it providing it is perceived as a new need or the right new product.

Therefore to see if this product is a “fit”, if not the next blockbuster, in a new foreign market it all starts by understanding the target market, and collecting valuable market intelligence favors the conditions for designing a market-tuned and product-bespoke market-entry strategy which turns to be more effective with the implementation of a calibrated marketing plan displaying the correct set of actions for presenting, promoting and positioning this product. Of course there’s no one single one-size-fits-all framework for running a pre|start market intelligence analysis that requires to be designed bespoke specifically on company’s goals and expectations, and on product potential, for enabling the company to make the final decision for a yes-go, or a no-go.

Company’s goals for entering a new foreign market can range from simply expanding more sales to accelerate revenue growth (via export solutions, searching for a local distributor to team up with, start with a store-in-store corner) to a more strategic aim (opening a representative office to be upgraded later to branch/regional office status, searching for a local partner to team up with for a JV or M&A, directly investing abroad for opening a retail/flagship store or for delocalizing manufacturing capability). So it all starts by selecting a target market which can be a single country (for instance, Malaysia) or a target of 2-3 markets within an enlarged marketplace (for instance, the ASEAN marketplace in South-East Asia that comprises the 10 economies of Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, and Vietnam) or a specific target within a larger single market (for instance, one or more of the 4 1st-tier cities in China, namely Beijing, Shanghai, Guangzhou, and Shenzhen).

But if China is the target market for export and the company has no experience in that market, which is huge and complex, it is probably easier to consider Hong Kong which is definitely much less complicated than mainland China and after developing some experience verify the conditions for scaling up the geographic scope right across.

While if China is the target market for a JV or M&A, the company will need to familiarize with the legal practices for doing business in China, IP protections, IP licensing, tariffs, negotiations, potential frauds and scams, and all business-related aspects to protect the foreign investment component of the operation. Next step is assessing how easy it is to do business in target market, if target market is a developed or developing or emerging economy, what are the local regulations that affect business, the local legal system, procedures for incorporating a local company, if there are trade barriers, if there are tax incentive to operate in the market as a foreign entity, the quality of infrastructures (airports, logistics, roads, transportation), how easy it is to travel from home country to target market and within the market, any language barrier or if English is widely spoken (for instance in Singapore and Hong Kong, English is fluently and widely spoken, in Malaysia is business language in most urban areas, in Vietnam the younger generation learns English, in Thailand and China can be a challenge), transparency in doing business.


Next step is the market environment in terms of a) competition, who are the key players in target market, how the competitors are positioned and how they communicate their product proposition.

And in terms of understanding b) customers’ behavior and all the differences that influence the purchasing decision process, in brief language, ethnicity, race, religion, diet, spending power and lifestyle as it will be mandatory for the company eyeing that target market to bridge the cultural gap because getting customer knowledge facilitates building market share overseas (note: there’s not only a cultural gap when doing business between the US and markets in Asia but also between the US and markets in Europe). And also in terms of prospect c) local partners to deal with for export operations, selecting potential distributors and conduct some due diligence to understand whether they can be a reliable partner to structure a business relationship with. A part of this pre|start analysis will then focus on the company’s capabilities to understand a) product’s competitive advantage and where this advantage can be used as leverage to compete in target market as-is, or if the product requires being partially redesigned or innovated to accommodate customers’ preferences and win their demand, and to understand b) how the company can source capital, time and team for the market-entry plan based on the type of market-entry strategy that will result more functional in line with business goals, and what marketing plan will need to be activated and implemented to support product and brand positioning.