5 Stages of international market development

06/02/2015

international market development

international market developmentMarketing is the process of building understanding and communication between the supplier and the customer.

Sales takes this process one step further, and can be characterized as the process of fulfilling the needs of customers with a satisfactory product or service, consummated by the exchange of money.

One hasn’t truly entered a market until a customer has paid money for the product or service being offered.

Commercial transactions are the ultimate goal of international trade and, indeed, trade of any kind. The pattern of international market development often follows a series of stages:

Stage 1: Domestic-market establishment

The domestic market is often an appropriate place to test products and fine-tune performance before tackling the complexities of international trade. It can also give a good indication of performance. However, in some instances, this stage of the export process doesn’t serve any purpose at all. This may be the case for a Canadian software company, for example, that has developed a product specifically for a foreign market.

Because international-market development requires resources of time and money on the part of the exporter, it’s important to ensure that a strong foundation has been built in the domestic market upon which to base future export-market-expansion activities, so that international activities do not compromise the company’s core business.

Stage 2: Export research and planning

When companies begin trading abroad, they often target a country similar to their own in language, financial structures, legal and economic systems or culture. For example, Canadians entering the international marketplace usually address the U.S. market first.

Before venturing into an unfamiliar market, companies should prepare themselves properly. By analyzing how successful the proposed product or service may be in a potential market, the exporter can narrow the target markets down to three or four.

A well-researched marketing plan can give the potential exporter the confidence to commit to exporting.

Such concentrated effort is preferable to the common and costly mistake of ‘chasing orders around the world’.

Another advantage to undertaking appropriate international-market-research and planning activities is that by creating a written document, potential problems and weaknesses can be identified more easily. This enables exporters to foresee potential challenges prior to making the investment of time and money that will be required for successful export-market development.

Stage 3: Initial export sales

When implementing an export plan, it’s advisable to begin modestly by testing the market. A graduated strategy enables the novice exporter to acquire practical experience in a market without incurring unnecessary or unmanageable risk.

Developing markets in phases enables the exporter to monitor their progress and make any necessary changes as they progress along the path to export success.

During this stage, the exporter should use initial shipments to become familiar with the mechanics of exporting (documentation, distribution channels, transportation and collections), to get to know the customer target group, to determine what product modifications may be necessary and to learn about regulations that might affect the business. This is also the stage at which to revise the initial plan.

Stage 4: Expansion of international sales

If initial sales have been good, planning for larger orders and expanded activity should follow. This stage is usually accompanied by intensified market research, more aggressive participation in international trade shows and other marketing activities and greater emphasis on strengthening networks and contacts in the target market.

The firm may enter negotiations with potential local partners to strengthen its position in the market in win-win business relationships.

By the time exporters have reached this stage, they ‘ll have already learned a great deal about the export market through prior experience, which will assist them in making appropriate adjustments to their strategy as they proceed with strengthening their position in the market.

Stage 5: Investment abroad

If sales are brisk, profits encouraging and opportunities promising, the company may choose to expand its presence in the target market. It can, for example, open a local office, tighten relations with local partners, buy an existing local company, form a joint venture or invest in R&D or production facilities.

The target market may serve as a stepping stone to adjacent markets and become a focal point for a larger trade strategy.

This final stage carries additional ramifications and responsibilities, beyond those of a company that is based elsewhere simply operating remotely in a foreign market. New issues come into play because the scope of a company’s presence broadens when it takes on a permanent physical presence in the market.

For instance, the investing company must take into account the impact on and interaction with the community and all other stakeholders—employees, local government, the environment, legal and tax compliance, transparency, public image and sustainability. All of these impacts must be managed seriously and carefully as a corporate citizen, with strong corporate social responsibility as a policy that should be demonstrated at every opportunity.

This content is an excerpt from the FITTskills International Market Entry Strategies textbook. Enhance your knowledge and credibility with the leading international trade training and certification experts.

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About the author

Jacob Varghese

Author: Jacob Varghese

Jacob is the VP of Marketing and Technology at the Forum for International Trade Training. Focused on improving the customer experience. A Content chef; words, images, some code and a healthy serving of web analytics.

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