Is Your Business Ready for New Markets?
How often do you think “this market is just too small for my business to realize its potential”? Probably more times than you care to count, and chances are, you are correct. Exporting to more lucrative markets is a goal for many businesses across the Caribbean, and with good reason. New markets can provide significant opportunities for growth, diversify your customer base, create new revenue streams, boost profitability and mitigate against harsh external challenges such economic decline, currency devaluation and small markets.
As exciting as those advantages may be, expanding to new markets is tough. It’s actually one of the most costly, complex and risky growth strategies a company can pursue. Successfully exporting your goods or services requires meticulous due diligence and planning to ensure you are market ready.
So how do you assess market readiness? Here are 10 helpful indicators:
1. You’ve validated the market opportunity.
It’s important to identify several potential markets and narrow down your choice using key social, economic and business indicators. For example you may want to look at ease of access and doing business, sustainability, the political and social landscape, consumer tastes and preferences, cultural factors, inflation, exchange rate stability, crime and competition. A useful resource is the World Bank’s annual Doing Business Reports, which measures and ranks countries based on friendliness to businesses.
2. You revamped your product.
Your business will have a better chance of penetrating a new market if it understands the people, their history, the culture and particular needs of the target market, then aim to exceed them. For example, the American fast food chain KFC has tweaked its menu and formulations for the Caribbean market to make the food more spicy to satisfy our preference.
3. You have the internal capacity.
This starts with having strong processes and procedures that have been detailed in a manual and taking steps to implement any applicable standards for the industry. You never want to enter a new market and run out of product or lack the capability to deliver the service you promised, as this will not only damage your brand but diminish your investment.
4. You hired local talent.
Hiring local talent is essential for establishing credibility, building strong roots in the community and helping your company understand and manage the nuances of the market.
5. You have long-term capital.
How you finance your expansion plan is important. One big mistake businesses tend to make is underestimating the time it will take to adapt to a new environment. The return on investment in a new market is rarely short term, thus the reason “patient money” is typically required.
6. You’ve mastered logistics.
Logistics are especially relevant for product-based businesses. Effectively managing the movement of your products from the point of origin to the hands of your final customer is no easy feat. Developing relationships with co-packers or distribution partners are among the ways companies often reduce the cost, resources and time involved in shipping products to new markets and getting them to the trade. Even if you choose to use a distributor you must be prepared to support your product, particularly with marketing and promotions.
7. You completed a risk assessment.
Managing the risk of failure in a new market will be much easier if you do a risk assessment in the very early planning stages. One way to do this is to list your critical success factors, brainstorm the risks (anything that could go wrong and derail your plans), rank those risks from high to low based on their potential impact and outline measures to mitigate these risks. The measures can then be included in your strategic planning process.
8. You have a 5- to 10-year strategic plan.
Medium to long term planning is a good indicator of market readiness. A carefully crafted strategic plan will necessitate due diligence and give your team a clear blueprint to follow. Ideally the plan should be updated annually based on changing environment or lessons learned.
9. You’re willing to create a second home.
You won’t maximize your potential in a new market as an absentee CEO. Be willing to make your prospective market your home at least until you’ve gotten the business off the ground and achieve short to medium term targets. If not you, then identify a strong leader who is equally versed in your strategy and operations.
10. You’re well connected. Embassies, consular offices and ministries of industry can be very helpful in making strategic business connections that can advance your objectives. It is also good to join business associations and relevant civil society groups.