Why choosing a market is one of the most important decisions you will make.
It’s not uncommon for people to choose their market before any other decisions have been made. Often it’s on a whim or a hunch. ‘We are going to export to France.’ There is nothing wrong with hunches. They can be very sound, but is important to do a reality check.
It’s also important to be clear on the reasons behind your choice. You may find your choice is driven by external factors – sometimes even chance factors. One of the most common issues affecting choice of market is a rogue enquiry from overseas.
We are all excited to receive an email out of the blue - and any business is welcome. But just because you receive an order from, say, Germany, it doesn’t mean that’s necessarily the best market for you. Long term, another country may prove more profitable. You want to devote your resource to building on the best market for you.That’s why you need your reality check.
It’s easy to make snap decisions about markets which appear to be very attractive, on the surface. For example the biggest importer of UK exports is the United States. Nearly 50% of total UK exports go there. Exporters are also often attracted by the fact that English is the principal language.
However the truth is the US is one of the most difficult and competitive markets. Firstly, we need to understand that the US is not just one market. So decisions have to be made on exactly what we mean by our market choice. East coast, west coast, individual states and even cities can be considered as lucrative targets. Distances are great, logistics will always be a major consideration. Taxes, tariffs and legislation only present obstacles to smooth business.
This is not to say the US will not be the ideal market for you, just that you need to make a careful, informed decision.
By comparison, the UK’s second biggest export market is Germany. Over 10% of our total exports go to Germany. It’s a little over an hour away, with very little time difference, operates under a similar legal framework, and currently there are few problems or barriers to trade.
Every business is different – every market is different.
There is a no one-size-fits-all solution. Each company must make choices based on what is best for their business. There are two key factors to consider.
- Market potential. What are the opportunities for your product or service in your target market? Consider the size, value and volume. Look at the competition.
- Ease of doing business. Our object should be to maximize the potential of the market whilst employing and the least resource.
There can be real benefits from picking the low-hanging fruit.
People talk of the high-potential and high-growth markets - China, Russia, Brazil, India etc. however, all of these are quite difficult markets to trade in. The reality is that only one of these targets features in the top 15 trading partners for the UK. That is China which is number seven on the list attracting 4.4% of our total exports - that’s less than Ireland or the Netherlands.
So, do your research. Don’t be dazzled by hype. If possible visit your target markets - there is no substitute for experiencing the business environment and meeting the people.
You're going to be investing a lot of resource, time and