Upon deciding to export, the following step is to determine, where to? Sometimes the process is simple due to a clear demand from a specific market or because a businessman has certain connections that help create the proper conditions for selling there. But if none of these situations exist, how to choose an export market? 

A document from the Inter-American Investment Corporation (IIC) explains that it is important for businessmen to obtain prior market intelligence and to consider several factors before deciding where to sell their products. It also underscores that not only is it necessary to select a target market but an alternative one as well in the event that the first choice fails for any given reason.

Market research is important for several reasons. In the first place, this process helps in the selection of markets and products by evaluating their potential before making the final decision. In second place, it enables to concentrate the company’s resources and avoids selection mistakes. In third place, the information constitutes a business asset, an added value to the company for producing more and better. And finally, research is useful for evaluating how to raise interest for the product, how to attract customers, and in general, how to move the firm closer to the target market.

Macro and micro information

The first thing that a company seeking to export should consider is the macroeconomic information of the target market. It is advisable to study market size indicators (population, distribution, GDP per capita, unemployment rate, inflation, etc.) and tariff and non-tariff barriers (import system, permits, licenses and formalities, exchange controls and other payment difficulties). It must also consider political stability indicators in the country (government regime, social and political maturity, etc.) and the operating indicators in the market (such as distribution channels and costs, concentration level, promotion methods and services, main competitors). Finally, there is other macroeconomic information of interest, such as information on banks, transportation, weights and measures with respect to the exportable product.

After analyzing the macroeconomic indicators, businessmen must study the microeconomic market information in order to adapt the product to these features. First, they must find out what the demand for the product is, i.e., purchase motivation, where it is located and whether interest in the product is seasonal. Second, businessmen should analyze what is the ideal product for this demand: what features it should have (components, design, wrapping or packaging), the required authorizations and technical standards and what the manufacturing process would be like. In third place, businessmen must look at the local supply: who are the competitors? Where are they located? What are the products? What motivated them to set up operations there? Finally, it would be advisable to analyze the foreign supply, who the wholesalers or distributors are, what products they offer, among other aspects. 

Once this information has been collected, the businessman must evaluate these four questions:

• Does the market have sufficient potential to justify concentrating efforts there?
• Is it a market where the price does not erode the company’s margins?
• Is the product valued in that market due to a competitive advantage?
• Is there any indication that demand for the product is growing?

If the answers to these questions are affirmative, then the businessman will have found an interesting market for his export plan.