New market entry – beating the odds and the value of getting outside help.
The last time I checked, for every successful business that entered a new market there were about four who failed or struggled. For those wishing to enter a market in a new country it’s probably an even bigger failure rate.
Short, medium or long term, whichever time-frame you look at, the economic future of our country depends on exports and the amount of our goods and services we convince other countries to buy. So the more companies that succeed internationally the better the Country’s trade deficit, and it certainly needs improvement.
The government is certainly keen to encourage you, given the fact UKTI reports that only 17% of medium sized companies export and, according to some estimates, as few as 2% of all businesses do. For a small island nation with a long tradition for taking our ideas to the world that’s not good, and does not compare well with our current competitors.
But with the odds apparently stacked against you, why should you even try and how can you improve your chances of success if you do?
Macro-economics aside (since we’re all naturally more interested in our own wealth than that of the nation) the answer to the first question, why, is simple – growth. The world’s economy, and most likely yours too, is driven by demand and the more potential customers you have the more demand you have, so it follows that the more markets you sell in the more sales you will achieve. The answer to the second point, how, is somewhat trickier.
Not all businesses are suited to international trade of course and that’s why the overall percentage of exporting companies is so low, but many who are in a position to export still don’t and to them I would like to offer the following advice.
It’s no surprise to me (as a market entry professional) that the majority of those failures mentioned above have attempted their market entry themselves. As a result they’ve most probably fallen foul of two common mistakes in international management: assumption and miscalculation.
All too often UK’s business owners and managers assume that what works at home will work overseas, and that the rest of the business world operates on the same basis they do – or if not the same then very similar. However they don’t, and the difference in a country’s business culture can be as great as the difference in their popular culture, which we more easily understand and more readily accept.
Language is the obvious example but the difference doesn’t stop there, and besides, most of the business world speaks English anyway so why do we need to worry about it, right? Wrong. The fact that foreigners so often speak English is useful yes, but much more to their advantage than ours in my experience.
Communicating in the local language is a must and if you want to sell to them you need to really understand them and that means understanding their business culture; its nuances, protocols and the market conditions effecting it at any given time. This ‘understanding’, or the lack of it, lays at the heart of miscalculation. Not understanding the market you are trying to enter and the biases created by your own, such as over-confidence in your company’s abilities or in the demand for its products, can lead executives to believe that the challenges and solutions of a new market entry are more predictable than they actually are. Whatever the reason, the cost of miscalculating market entry can be enormous so how can it be avoided?
The answer to these potential pitfalls, assumption and miscalculation, is professional help. Never was the value of outside help more pronounced than with international market entry and the evidence is everywhere, most notably amongst those 4 out of 5 businesses who tried to ‘go it alone’ and failed.
So how do you make sure you are the 1 that succeeds, reaps the rewards and avoids costly mistakes i.e. how do you improve the odds in your favour?
Outside help (from UKTI or private sector consultancy like Conquest) brings with it the experience of previous market entry projects for other companies. Having gone through the process many times in many countries, they will know the dangers in advance and the safest routes to market for you – why risk failure and all the additional costs that go with it if someone who has ‘been there, done it and got the t-shirt’ can help ensure success at a fraction of the cost?
Then there is the benefit of objectivity and an outside view of what you are doing internally. Most managers for most issues rely on their inside view and in most circumstances, where the issue is internal, that’s fine. But entry into another geographical market is about as external as you can get and an objective view is essential.
In my experience, it’s the combination of a robust outside view and an improved internal view that results in a better assessment of value propositions being exported and the strategy needed to export them; the outside view provides a reality check for the external factors like market size, market potential, competitors and costs etc., dramatically improving the odds of making good market entry decisions.
The fact is, companies have no reason to repeat the mistakes of others and yet they do, failing to learn from the experience of others. With outside help (particularly from the private sector who work in the ‘real world’ environment you do) the learnings of other companies – good and bad – can be brought into your own and so the mistakes they made can be avoided by you.
However, beware of falling into the “confirmation trap” and choosing outside help that simply confirms your own assumptions or validates your own hypothesis – for there be dragons!
Philip Bell. Managing partner of Conquest Market Entry Associates. firstname.lastname@example.org www.conquestmea.com