FACT: The world economy grew by an estimated 3.8 percent in 2006 and is expected to continue to grow during the next few years.
INSIGHT: A high rate of economic growth around the world means more opportunities for business. The trick is to pick international markets where growth prospects appear most promising. That’s where a solid marketing strategy comes into play.
Many foreign markets differ greatly from markets in the United States. Some differences include climatic and environmental factors, social and cultural factors, local availability of raw materials or product alternatives, lower wage costs, varying amounts of purchasing power, availability of foreign exchange, and government import controls. Once you’ve decided that your company is able to export and is committed to it, the next step is to develop a marketing plan.
A clear marketing strategy offers six immediate benefits:
1. Written plans readily display strengths and weaknesses.
2. Written plans are not easily forgotten, overlooked, or ignored by those charged with executing them. If deviation from the original plan occurs, it is likely to be the result of a deliberate and thoughtful choice.
3. Written plans are easier to communicate to others and are less likely to be misunderstood.
4. Written plans allocate responsibilities and provide for an evaluation of results.
5. Written plans are helpful when you are seeking financial assistance. They indicate to lenders that you have a serious approach to the export venture.
6. Written plans give management personnel a clear understanding of what will be required of them and help ensure a commitment to exporting.
This last advantage is especially important. Building an international business takes time. It often takes months, sometimes even several years, before an exporting company begins to see a return on its investment of time and money. By committing to the specifics of a written plan, you can make sure that your company will finish what it begins and that the hopes that prompted your export efforts will be fulfilled.
To successfully export your product, you should research foreign markets. The purpose is to identify marketing opportunities and constraints abroad, as well as to identify prospective buyers and customers (Box 3.1). Market research encompasses all methods that your company may use to determine which foreign markets have the best potential for your products. Results of this research tell you the following:
Your firm may begin to export without conducting any market research if it receives unsolicited orders from abroad. A good first step is to review your current customer list; if you are engaged in e-commerce, you probably already have customers in foreign countries or have received queries from foreign buyers. These current and prospective foreign customers can be a good barometer for developing an export marketing plan. Although this type of research is valuable, your company may discover even more promising markets by conducting a systematic search.
You may research a market by using either primary or secondary data resources. When conducting primary market research, you collect 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 your company’s needs and provides answers to specific questions, but the collection of such data on your own is time consuming and expensive and may not be comprehensive. The U.S. Commercial Service can collect primary data for you and help you analyze it. This service costs, on average, several hundred dollars for each market analyzed and does not require you to travel there. The U.S. Commercial Service can also help you find intermediaries with specific market expertise.
When conducting secondary market research, your company collects data from various sources, such as trade statistics for a country or a product. Working with secondary sources is less expensive and helps your company focus its marketing efforts. Although secondary data sources are critical to market research, they do have limitations. The most recent statistics for some countries may be more than a few years old, or the data may be too broad to be of much value to your company.
FACT: Many firms export indirectly, through intermediaries such as export management companies, export trading companies, or other kinds of trading firms.
INSIGHT: If your company does so, it may wish to select markets and conduct market research before selecting the intermediary.
Because of the expense of primary market research, most firms rely on secondary data sources. These three recommendations will help you obtain useful secondary information:
1. Keep abreast of world events that influence the international marketplace, watch for announcements of specific projects, or simply visit likely markets. For example, a thawing of political hostilities often leads to the opening of economic channels between countries. A steep depreciation in the value of the dollar can make your product considerably more competitive.
2. Analyze trade and economic statistics. Trade statistics are generally compiled by product category and by country. Such statistics provide your 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 your company’s products.
3. Obtain advice from experts. There are several ways of gathering this advice:
Gathering and evaluating secondary market research may be complex and tedious. However, several publications are available that may simplify the process. The following approach to market research refers to the publications and resources that are described later in this chapter.
Your company may find the following approach useful. It involves screening potential markets, assessing the targeted markets, and drawing conclusions (see Box 3.2).
Published statistics that indicate product exports to various countries provide a reliable indicator of where U.S. exports are currently being shipped. The U.S. Census Bureau provides these statistics in a published format at www.census.gov/foreign-trade/www/.
First, you should identify 5 to10 large and fast-growing markets for your firm’s product. Look at trends 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?
Then, take a look at some smaller, 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. To qualify as up-and-coming markets, these countries should have substantially higher growth rates. Libya (which recently opened its economy after years of economic sanctions) and Morocco (which entered into a free trade agreement with the United States in 2005) are good examples of such markets.
Look also at groupings of countries such as those the United States has free trade agreements with in Latin America. Or look at regions within large countries such as western Canada or far eastern Russia. The U.S. Commercial Service has regional services that will help you find buyers in multiple countries in, for example, East Asia. If you’re targeting Hong Kong and the Pearl River Delta area, why not stop in nearby Thailand or Singapore?
Of the markets you have identified, select three to five of the most statistically promising for further assessment. Consult with a U.S. Commercial Service Export Assistance Center (see www.export.gov/eac/), business associates, freight forwarders, and others to further evaluate targeted markets.
Look not only at company products but also at related products that could influence demand. Calculate overall consumption of the product and the amount accounted for by imports. The U.S. Commercial Service (at www.export.gov/mrktresearch/) offers market research reports that provide economic background and market trends by country and industry. Demographic information (such as population and age) can be obtained from t he Census Bureau at www. census.gov/ipc/www/idb and from the United Nations Statistics Division at http://unstats.un.org/unsd/databases.htm.
Sources of competition include the domestic industry in each targeted market and competitors from other foreign countries. Look at each competitor’s U.S. market share as well as its share in the targeted market. U.S. Commercial Service market research reports and other competitive assessments are available at www.export.gov/mrktresearch/.
Analyze factors affecting the marketing and use of your product in each market, such as end-user sectors; channels of distribution; cultural idiosyncrasies (for example, does your product’s name, when translated into the local language, mean something undesirable?); and business practices. Again, the market research reports and customized market research offered by the U.S. Commercial Service are useful.
Foreign barriers to imports can be tariff or non-tariff. U.S. barriers could include export controls. If you make a product that may have dual use (civilian and military), you may be required to have an export license. The U.S. Commercial Service can help you determine whether a license is necessary. Most applications are approved. Call (800) USA-TRADE (800-872-8723) for more information.
The U.S. or foreign government may offer incentives that promote exporting of your particular product or service (see Chapter 10).
After analyzing the data, your company may conclude that your marketing resources would be applied more effectively to a few select countries. In general, if your company is new to exporting, then efforts should be directed to fewer than 10 markets. Exporting to a manageable number of countries allows you to focus your resources without jeopardizing your domestic sales efforts. Your company’s internal resources should determine what choices you make. The U.S. government, though, has export promotion programs that can assist you with exporting to multiple markets in the same region. The U.S. Commercial Service, for example, has regional export promotion programs in Asia, Europe, the Middle East, and the Americas in addition to country- and industry-specific resources.
FACT: Many small companies could sharply boost exports by entering new markets. In 2005, nearly two-thirds of the small firms that exported posted sales to only one foreign market.
INSIGHT: The U.S. Commercial Service’s standardized and customized market research can help you identify additional markets that are appropriate for your products and services.
There are many domestic and international sources of information concerning international markets. This section describes the market research sources that have been mentioned, as well as some additional ones. Because so many research sources exist, your firm may wish to seek advice from your local Export Assistance Center to find the best and most current information (see Chapter 4 or go to www.export.gov/eac/).
Research sources range from simple trade statistics, to in-depth market surveys, to firsthand interviews with public- and private-sector experts. Trade statistics indicate total exports or imports by country and by product. They allow you to compare the size of the market for a product in various countries. Some statistics also reflect the U.S. share of the total market in a country in order to gauge the overall competitiveness of U.S. producers. By looking at statistics over several years, you can determine which markets are growing and which are shrinking for your product.
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.
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 you 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.
Other sources of market research expertise include local chambers of commerce, world trade centers, or clubs and trade associations. Many state governments maintain active export promotion offices. In the federal government, industry and commodity experts are available through the U.S. Departments of Commerce, State, and Agriculture and through the Small Business Administration (SBA).
The following sources are divided into several categories: (a) general information about exporting, (b) statistical and demographic information, (c) export opportunities at development agencies, (d) industry information, and (e) regional and country information.
The following resources are an excellent starting point for obtaining general information.
TRADE INFORMATION CENTER
The Trade Information Center (TIC) of the U.S. Commercial Service is the first stop for companies seeking export assistance from the federal government. TIC trade specialists can:
Extensive market and regulatory information by region and country is available, including assistance with the North American Free Trade Agreement (NAFTA) certificate of origin and other free trade agreement processes. Call (800) USA-TRADE (800-872-8723) to speak to a TIC specialist.
SMALL BUSINESS ADMINISTRATION EXPORTING TOOLS AND RESOURCES
SBA provides tools and resources to assist small businesses that are considering exporting or those looking to expand into foreign markets. Publications, training, podcasts, videos, and success stories are available at www.sba.gov.
Current statistical and demographic information is easy to find and available from many sources.
USA TRADE ONLINE
. For a small subscription fee, you can access This service, offered by STAT-USA in conjunction with the U. S. Census Bureau and available at www.usatradeonline.gov, offers specific, up-to-date export information on more than 18,000 commodities worldwide the latest official statistics on U.S. foreign trade.
TRADE STATS EXPRESS
This Web site is a comprehensive source for U.S. export and import data, both current and historical. Maintained by the U.S. Commerce Department’s Office of Trade and Industry Information, it contains U.S. trade statistics by country and commodity classifications, state and metropolitan area export data, and trade and industry statistics. Much of the data are downloadable at http://tse.export.gov.
Published by the United Nations, this yearbook is one of the most complete statistical reference books available. It provides international trade information on products, including information on importing countries, which can be useful in assessing import competition. The yearbook contains data on more than 550 commodities for more than 200 countries and territories on economic and social subjects, including population, agriculture, manufacturing, commodity, export-import trade, and many other areas. The book is available only in hard copy; however, the data in the book can be found online in the United Nations Common Database. Visit the database at http://unstats.un.org/unsd/default.htm. You can order the book from United Nations Publications, Room DC2-0853, New York, NY 10017 or by telephone at (212) 963-3489.
WORLD BANK ATLAS AS AND WORLD DEVELOPMENT INDICATORS
Published every two years, the World Bank Atlas provides demographics, gross domestic products, and average growth rates for every country. World Development Indicators is an annual publication containing more than 800 economic, social, and other indicators for 159 economies, plus basic indicators for another 55 economies.
You can order World Bank publications by mail from The World Bank, P.O. Box 960, Herndon, VA 20172-0960. Purchase World Bank publications by telephone at (800) 645-7247 or on the Web at http://publications.worldbank.org/howtoorder.
WORLD FACT BOOK
Produced annually by the U.S. Central Intelligence Agency (CIA), this publication provides country-by-country data on demographics, the economy, communications, and defense. To purchase the latest print edition, contact the U.S. Government Printing Office Order Desk at http://bookstore.gpo.gov or telephone (202) 512-1800. You may also visit the CIA’s World Fact book Web site at https://www.cia.gov/library/publications/the-world-factbook/index.html.
INTERNATIONAL FINANCIAL STATISTICS
Published by the International Monetary Fund (IMF), International Financial Statistics presents statistics on exchange rates, money and banking, production, government finance, interest rates, and other subjects. It is available in hard copy as a monthly subscription, on CD-ROM, or as an online service. Contact the International Monetary Fund, Publication Services, 700 19th St., N.W., Room 12-607, Washington, DC 20431, or telephone (202) 623-7430. Information on International Financial Statistics as well as many other IMF resources can be found at www.imf.org.
GLOBAL POPULATION PROFILE
This resource is produced by the Census Bureau of the U.S. Department of Commerce. The bureau collects and analyzes worldwide demographic data that can help exporters identify potential markets for their products. Information on each country—total population, fertility, and mortality rates; urban population; growth rate; and life expectancy—is updated every two years. The document also contains detailed demographic profiles of individual countries, including analyses of labor force structure and infant mortality. To purchase the latest print edition, contact the U.S. Government Printing Office Order Desk at telephone (202) 512-1800. The information is also available on the Census Bureau’s Web site at www.census.gov/ipc/www/idb.
International development agencies offer many opportunities for exporters. Here are a few sources to explore.
MULTILATERAL DEVELOPMENT BANKS
Multilateral development banks (MDBs) are institutions that provide financial support and professional advice for economic and social development activities in developing countries. The term multilateral development bank typically refers to the World Bank Group or four regional development banks: the African Development Bank, the Asian Development Bank, the European Bank for Reconstruction and Development, and the Inter-American Development Bank. Development projects funded by these banks often offer export opportunities. The U.S. Department of Commerce maintains liaison offices with each of the MDBs in an effort to provide information to U.S. companies on procurements for these projects. To learn more about a particular MDB, visit http://export.gov/advocacy/eg_main_022753.asp.
BUDGET JUSTIFICATION TO THE CONGRESS OF THE U.S. AGENCY FOR INTERNATIONAL DEVELOPMENT
Published by the Office of Small and Disadvantaged Business, U.S. Agency for International Development (USAID), the annual Budget Justification to the Congress contains individual reports on countries that USAID will provide funds to in the coming year, as well as detailed information on past funding activities in each country. Because the initiatives require U.S. goods and services, these reports give U.S. exporters an early look at upcoming projects. (See Chapter 6 for more details on USAID’s programs.) Budget justifications for the current and previous years are available online at http://transition.usaid.gov/performance/budget-spending/.
Industry-specific information is important in any exporting venture. Here are a few research avenues.
U.S. DEPARTMENT OF AGRICULTURE, FOREIGN AGRICULTURAL SERVICE
The Foreign Agricultural Service (FAS) serves as the first point of contact for those needing information on foreign markets for agricultural products. The Office of Outreach and Exporter Assistance of the FAS can provide basic export counseling and direct you to the appropriate Department of Agriculture office to answer specific questions on exporting. The staff can provide country- and commodity-specific foreign market information reports, which focus on the best market prospects and contain contact information on distributors and importers. Extensive information on the FAS is also available through the Web at www.fas.usda.gov. For additional information, contact the Office of Outreach and Exporter Assistance by telephone at (202) 720-7420 or by fax at (202) 690-4374.
TEXTILE AND APPAREL DATABASE
Prepared by the U.S. Department of Commerce’s Office of Textiles and Apparel, this database provides information on overseas markets and the rules and regulations affecting U.S. exports. The database provides specific country profiles, which include information on marketing and distribution, market-entry requirements, shipment and entry procedures, and trade policy. More general information, such as export procedures, potential buyers and suppliers, current trade issues, and background on textile and apparel trade policy agreements, is also available. The Web site is www.otexa.ita.doc.gov.
PRIVATE-SECTOR PRODUCT AND INDUSTRY RESOURCES
The U.S. and foreign private sectors publish numerous guides and directories that provide valuable information for your company. For specific references, consult your local Export Assistance Center at http://www.export.gov or the Trade Information Center at (800) USA-TRADE (800-872-8723).
Information on individual countries and regions is widely available. Here are some places you can explore individual markets.
FACT: China is our third-largest export market. U.S. exports to China were up more than 30 percent for 2006, compared with 2005.
INSIGHT: Your company can benefit from this growing market. Visit the China Business Information Center at www.export.gov/china.
CHINA BUSINESS INFORMATION CENTER
The China Business Information Center (BIC) is a comprehensive source of information on China published by federal and state government agencies, associations, and private-sector entities. Companies that are new to the market or are current market participants can use the China BIC to
To access the China BIC, go to www.export.gov/china.
MIDDLE EAST AND NORTH AFRICA BUSINESS INFORMATION CENTER
The Middle East and North Africa Business Information Center (MENABIC) covers information on markets throughout the region: Algeria, Bahrain, Egypt, Iraq, Israel, Jordan, Kuwait, Lebanon, Morocco, Oman, Qatar, Saudi Arabia, Tunisia, the United Arab Emirates, and the West Bank and Gaza. The Web site includes detailed country and industry information, trade leads, lists of trade events both domestically and in MENABIC countries, and information on regulations, licensing, documents, financing, and anything else your company needs to do business in the Middle East and North Africa. To access the MENABIC, go to www.export.gov/middleeast.
This program provides U.S. companies easy access to European export markets. The U.S. Commercial Service at U.S. embassies and consulates works with companies to increase exports of U.S. products and services to Europe. You will find trade opportunities, new business partners, market research, and one-on-one assistance for eight key industry sectors, including medical equipment, information technology, and aerospace equipment. The advantages for your company include the following:
To learn more about Showcase Europe, visit www.buyusa.gov/europe/.
The Trade Americas program offers U.S. companies the opportunity to find out more about business opportunities in more than 20 countries throughout the Western Hemisphere. By combining resources across the region, the U.S. Commercial Service helps exporters find sales opportunities in several countries, saving time and money and generating more profits. Trade Americas has a Web site that provides information on existing and proposed free trade agreements throughout the region, market research, best prospects in the region, trade event lists, industry-specific information, business service providers, useful links, and key contacts. For more information about Trade Americas, visit www.buyusa.gov/tradeamericas/.
The chartered mission of the Organization for Economic Cooperation and Development (OECD) is to promote its member countries’ policies. These policies have been designed to support economic growth, employment, and a high standard of living and to contribute to sound economic expansion in development and trade. OECD publications focus on a broad range of social and economic issues, concerns, and developments. Country-by-country reports on international market information contain import data useful in assessing import competition.
The OECD also publishes economic development surveys that cover each of the 30 member countries of the OECD, plus some additional countries. Each survey presents a detailed analysis of recent developments in market demand, production, employment, prices, wages, and more. Short-term forecasts and analyses of medium-term problems relevant to economic policies are also provided.
Print copies of OECD publications are available from the OECD Publications and Information Center, 2001 L St., NW, Suite 650, Washington, DC 20036-4922, or telephone (202) 785-6323. You can also order the books on the Web or purchase an online subscription. Visit the OECD at www.oecdbookshop.org.
MARKET RESEARCH LIBRARY
The U.S. Commercial Service’s Market Research Library contains more than 100,000 industry- and country-specific market reports, Web sites, events, and trade directory listings, and it covers more than 120 countries and 110 industry sectors. Reports include Country Commercial Guides, Industry Sector Analyses, Marketing Insights, Multilateral Development Bank Reports, Best Markets, other industry or regional reports, and more. Reports are available at www.export.gov/mrktresearch/.
CUSTOMIZED MARKET RESEARCH
These reports make use of the worldwide network of the U.S. Commercial Service to help U.S. exporters evaluate their sales potential in a market; choose the best new markets for their products and services, establish effective marketing and distribution strategies in their target markets, identify the competition, determine which factors are most important to overseas buyers, pinpoint impediments to exporting, and understand many other pieces of critical market intelligence. The reports are customized to your specifications. Contact your local Export Assistance Center at http://www.export.gov/eac/ for more information.