Selecting markets for international expansion: Focusing limited resources
Gather data, conduct analysis, and select 1–2 markets for priority entry
Recently, the ban on the export of Ukrainian grain to five EU countries came into force. It will be in effect until June 5. In its turn, Ukrainian exports of IT services for the first quarter of 2023 decreased by 16%, to $1.68 billion, compared to the same period in 2022. These data indicate that it is not worth stopping, but rather it is necessary to be more demanding in choosing a market for the export of one's own products. The same applies to the import of goods into Ukraine. Dmytro Shvets, Director of Start Global and author of the Start Global Insights podcast, founder of n.cubator, explained to Mind how to select a focus market and how to find all the necessary information for analysis.
Two types of exporters are often distinguished in my educational and consulting practice for entering international markets. Some say that they are ready to export to the whole world (except for outcasts like russia and North Korea). In contrast, others confidently name commonly accepted countries such as the USA or Poland (until the invasion, Kazakhstan was frequently mentioned). At the same time, the choice of the second type is usually not based on 'hard' data, but on rumours that everyone goes there.
Such an approach can be very dangerous, as blindly choosing a market can result in a futile investment in a market with unfavourable conditions for your product or the scattering of resources and efforts in many directions.
Read also: Entering international markets. A checklist for self-diagnosis
Top 10 importers of value-added goods, according to Trademap.org
| $bn | |
| United States of America | 2 522 |
| China | 1 334 |
| Germany | 1 012 |
| Hong Kong, China | 544 |
| Netherlands | 523 |
| United Kingdom | 514 |
| France | 505 |
| Japan | 455 |
| Canada | 415 |
| Italy | 359 |
From this statistic, it becomes evident why many people target the USA, China, or Germany when it comes to Europe.
At the same time, Ukraine's traditional focus markets for these goods somewhat differ.
10 importers of products with the highest added value from Ukraine in 2021
| $mln | |
| Poland | 1973 |
| russian federation | 1515 |
| Germany | 1487 |
| Hungary | 1254 |
| Romania | 833 |
| Belarus | 710 |
| Moldova, Republic of | 585 |
| India | 520 |
| Czech Republic | 465 |
| China | 459 |
The war has adjusted this ranking, and as of the results of 2022, it looks like this:
| $mln | |
| Poland | 1 918 |
| Germany | 1 447 |
| Hungary | 1 187 |
| Romania | 705 |
| Moldova, Republic of | 457 |
| United States | 710 |
| Czech Republic | 454 |
| Lithuania | 331 |
| Slovakia | 306 |
| Türkiye |
281 |
As we can see, even the volume from entire Ukraine is much less than the import opportunities of the selected countries.
Size doesn't always matter
In workshops on selecting focus countries, we always start with creating a list of criteria that will filter markets with the greatest potential for this business with our clients.
To simplify, there are only two criteria:
- Sufficient customers.
- The easiest market entry.
The first criterion does indeed relate to size, but the size that corresponds to the exporter's resources and needs. Thus, the US market is huge – $2.5 trillion in 2022 in imported goods with high added value.
Immediately, the thought arises that this will be enough for everyone. However, firstly, this thought arises in exporters from hundreds of other countries, secondly, high competition and differences between individual states will make this exit one of the most difficult in the world, and thirdly, most exporters do not need such size because their production and resources are sufficient for at best a part of one state.
Therefore, the second generalised criterion becomes extremely important – ease of entry. For each business, it can be broken down into different sub-criteria, from the abundance of competitors to delivery distance or the availability of personal contacts in the country. At the same time, in my opinion, the availability of contacts is somewhat overrated considering the available digital tools and government support.
For example, Nazovni, the recently announced Ministry of Foreign Affairs tool, allows making a request to Ukrainian diplomatic institutions abroad without additional bureaucracy and obtaining contacts and insights regarding the local market. And various cloud programs such as LinkedIn Sales Navigator or Lusha, in two clicks, provide a list of contacts of potential customers.
Collect and filter the data
After you and your team have brainstormed selection criteria, the next step is to collect data based on them and filter it.
To compare many countries, you will need unified data that can be quickly found and consolidated in one table. Finding such data for hundreds of countries would take a huge amount of time and money, and may be beyond the capabilities of even large corporations. However, you don't actually need to search the entire world.
My approach is to divide the criteria into two parts. The first part is macroeconomic data, or data that is available in large quantities across different countries from open sources. For example, population size, household income, English language proficiency in business, import restrictions or the volume of your product's imports.
All this data can be quickly found on statistical and rating portals on the internet, such as Trademap, World Bank, Eurostat, and others. By the way, my experiments with AI chats have yielded good results in finding sources of the necessary information.
Based on this data, you can easily discard those countries that are definitely not suitable for your business and re-rank the rest.
From this ranking, you can take 5–10 countries and check them against an additional set of criteria that require a deeper understanding of the country.
For example, the number of supermarket outlets, competitor prices, packaging requirements, legal peculiarities, etc. In this, local association websites, analytical publications, aggregators, competitor sites, and other open sources will help you.
As a result, you will have 1–2 priority markets to enter and 3–5 in reserve for future expansion.
In this case, it will be much easier to add insights and identify local rules of the game through interviews with local experts. They will provide a complete picture of the market and an understanding of what to do next and what else to investigate in the selected markets. For example, customer needs and problems, sales and communication channels, and so on.
Own Market Entry Strategy
And now, one can move confidently, systematically, and with a focus towards understanding the local rules of the game, identifying the 'landscape' of key players, determining the profile of the ideal customer, proactive selling, and experimenting.
This whole process won't take much time, but it will reduce the number of mistakes and help create a market entry strategy based on data rather than hearsay.
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