Global outsourcing, market entry

Step Two: Do the Research

Don’t rely on a blank page. As bizarre as it may sound, we find that lots of companies enter a new international market having done virtually no detailed research on that market. This approach to market entry leads to a number of mistakes which are likely to jeopardise the success of any new market venture.

For example, many companies decide to enter a country on the back of a promising-sounding meeting. Maybe you meet somebody at a trade show, or an approach comes in via the internet, and the opportunity seems too good to turn down. Yes, you could get lucky, and such an opportunistic coming together might deliver the ideal partner. However, this is rarely the case.

The research is essential

Despite the fact that it costs money and may slow you down in the early stages. In-depth, quality research into the market is absolutely essential because, without the right detailed information and strategic advice at the outset, your medium- and long-term growth are going to suffer.

A classic result of failing to do the correct research in advance is that organisations build their business in a new market on the wrong cost base. People often assume that, if it’s an emerging market, everything will be incredibly cheap. Conversely, they think that if costs are 25% lower than at home then they should be OK. In both of these instances, your business might flounder. On the one hand, you won’t be able to attract the right calibre of people. On the other, you’re building a much more expensive infrastructure than your local competitors.

Benchmarking should be an essential element of any local market research. Make sure your cost base is sustainable. It is really difficult to deconstruct a poor cost-base retrospectively so it’s worth getting it right at the outset.

Choose carefully

You need to choose your partners and employees wisely. People often go into new territory and don’t really know what ‘good’ looks like in that country. If you don’t understand its cultural norms, this will be difficult, and you’re in danger of choosing something that only looks good in your own territory and transplanting it into a new market. Don’t be attracted to contacts in emerging markets just because they are a good fit with your folks back at base if what you really need is for them to be a good fit in the local emerging marketplace.

A key part of any research has to be to look at what timeframes are realistic in terms of bringing a return on your investment. All of the emerging markets are massively relationship-oriented. People don’t want to do business with you until they are sure you are the type of people they would feel comfortable doing business with, in the long run. In fact, I’d be wary of people who want to jump into bed with you straight away. The combination of relationship orientation, unfamiliarity with the landscape and bureaucracy probably means that things will take longer to mature than you may have expected. You need to build realistic timescales into your investment and cash-flow plans from the outset.

There are many issues to consider before committing the time, cash and bandwidth to successfully entering a new international market. In this guide, we have only listed a few of them. It costs money to commission good research, but it costs a lot more to enter the wrong market, with the wrong product, in the wrong way.

The next step in our 10-step guide will look at developing cultural fluency.

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