5 Key Points To Consider Before Entering New Markets

You have successfully settled in your own country with your products or services and growing rapidly. One day, for some reason, you put options on your table to expand your business into new markets. You heard very successful stories and, of course, unsuccessful ones. So, questions came out from your mind. Is it that easy? Will you be able to re-accomplish what you have achieved in your country or region? Surely, no one wants to spend money, energy and end up in failure.

A great article by Alper A, a new market entry strategist, formerly with Royal Dutch Shell and now consultant with Consult 2050.

Fortunately, it is possible to find an answer with the right methodology. I had a chance to see and implement business plans in different countries and I witnessed both failures and successes even with the same approach model. I also saw that the same product produced very different financial results because of the market related dynamics such as supply price, market price, return on investment etc. Even within the borders of European Union, there are dozens of different regulations and legislations that affect the overall business setup in two neighbour countries or even in two neighbour cities. So, how can you give confident decision to enter target market?

Here is the 5 key points for you to check before you invest into any market;

  1. Customer Demand: Understanding possible demand and try to calculate demand assumptions from every angle will produce your sales volume and revenue forecasting. Ask yourself these questions; To whom will I sell, how well do I know those prospects, what are their behavioral characteristics? What are their cultures? How should I identify my pilot customers? Who will cooperate with me?
  2. Supply Chain: This point has two tails. First, product or service supply, how can I bring the product or know how into the target market. What will be the cost? Second, Product or service supply to customers, where can I sell it? How can I deliver the product to point of sales? Can I provide supply guarantee to customers?
  3. Laws and Regulations: You wouldn’t want to get in trouble with government so compliance will be key to sustain your business. Key questions are; Are there sufficient legal regulations for the sale of my product in the relevant market? How is the tax infrastructure? Are there incentives or subsidies? Are there any regulations that might pose a risk for you?
  4. Equipment / Services: That is key to understand your dependency to others. Do I need additional services or products to sell? Are there any third-party companies that can provide the necessary equipment and / or services to support sales?
  5. Networking: Business contacts surely will help you to build relationship in the beginning. Making internal and external stakeholder matrix will support your communication with the market and provide you guidance and information about the market dynamics. Key questions are; Which institutions should I have close relationship with? Are there any associations that I can contact with? Do I have customer that operates in the target market?

When these 5 points come together nicely, then I suggest commencing financial calculations such as ROI, NPV, IRR or VIR required to make entry into the new market.

During my work in Netherlands, Germany, Turkey and UK, I experienced totally different barriers, risks and issues even I used same financial model and pretty much same data for calculations. As a summary, every market has its own dynamics. Numbers matters, but numbers are meaningless when social, environmental or regulatory factors create barriers for your survival. Make sure that you put all together on the table and create long term success for your business expansions.