Biltchik shares afive-step approach to creating a winning market entry strategy to expand into a new market.
1. Set clear goals
The first step is to decide on what you want to achieve with your exporting project and some basics about how you’ll do so. Details to spell out include:
- business goals for the expansion
- your targeted level of sales
- the specific product or service you’ll export
- the target market
- major action items and a timeline for achieving them
- budget and other available resources
2. Research your market
Now it’s time to do a first round of research on the target market. Information to collect includes:
- size of the market
- consumer trends, needs and perceptions of products like yours
- domestic and international competition
- your unique value proposition in the market
- regulatory, certification, trade and other barriers and opportunities
- potential support from Canadian and foreign governments for your exports
This information should give you a good sense of whether a target market is suitable or not for your business.
“One of your purposes is to figure out why buyers should buy your product or service, versus from someone local or a competing exporter,” Biltchik says. “Businesses often underestimate the degree of competition in new markets. If you don’t see how you would be different, it’s better not to go to the target market.”
3. Choose your mode of entry
Next, choose how you will enter the market.
You may need to rethink how you get your products or services to market. Do you sell directly to the end-user, or do you work with intermediaries such as wholesalers or distributors? And even if you sell directly to a target clientele, do you require the assistance of an in-country sales agent to “open the doors” and facilitate sales.
You can consider choosing from or combining a number of options.
- Using the services of an in-country distributor or agent.
- Acquiring an existing local business.
- Partnering with a local business. This can take various forms, such as franchising, licensing, a joint venture, co-production and cross-manufacturing.
- Opening a physical presence. This can be anything from buying or renting an office to hiring a local representative.
- Selling through online marketplaces.
- Offering direct sales through your e-commerce site.
- Selling indirectly to a target market through another company that exports your products or uses them as components.
4. Consider financing and insurance needs
To determine the amount and type of financing needed to support your export venture, it’s important to do calculate how the initial investment in production, shipping, hiring and other costs will affect working capital. Keep in mind that foreign buyers may want longer payment terms.
See your banker about any financing needs to cover shortfalls. Better to arrange a line of credit or loan ahead of time than risk a cash crunch while you wait for sales to ramp up.
You may also want to consider getting insurance to protect your company from the unexpected. Export Development Canada offers various products, including:
- credit insurance in case a customer doesn’t pay or a contract is cancelled
- performance security insurance in case a customer wrongfully calls a letter of guarantee or in the event of political risks
5. Develop the strategy document
Be sure to write down the details of your market entry strategy. Don’t keep it all in your head. This document will be handy for arranging any needed financing and as a framework for your export marketing plan. You can ask your accountant, lawyer, banker or an outside expert to give you comments for improvements.
“You should regularly revisit your market entry strategy to monitor how you’re doing and make updates,” Biltchik says. “It’s an important blueprint to keep you on track, ensure buy-in from your team and have everyone in the business pulling in the same direction.”
