Self-screening crucial while selecting export markets

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Bikky Khosla | 23 Aug, 2011
Every time a firm wants to enter a new market, it faces market selection and segmentation issues. For an exporter, it becomes more difficult as he has to cover in-depth the cumbersome process of political, cultural and economic analysis â all of which are essential for answering the question of which market to enter.

But is this enough? While the aforesaid types of analysis are important to find out the target market conditions, it is equally important to achieve the best fit between the market requirements and the company's abilities in meeting these requirements. Put more simply, before deciding to enter a new overseas market, some company factors must be taken into consideration.

Company factors are commonly divided under three heads: firstly, management's risk consciousness or how it will perceive various risks while undertaking country market analysis. Secondly, the goal of the company or what it wants to achieve. And finally, it is the financial and the managerial strength of the company, limitations of which, for example, may force it to choose a mode of entry in spite of its not wanting to do so.

As the market selection process involves an attempt to match the market requirements with the company's abilities, it is also important to have well-defined policies and strategies which allow to keep the focus on both and also helps to answer some basic questions like which market to enter, how to enter and how to market there.

There are three crucial steps while selecting a market â define the market clearly, do market segmentation and determine market entry strategies. When a company defines the market, it must do so in terms of country characteristics, product characteristics, and level of competition. In the next step, segmentation should clearly lay down the niche in terms of measurability, accessibility, profitability and actionability.

As per market entry strategy is concerned, I feel that most of the Indian SME (small and medium enterprise) exporters enter foreign markets on basis of enquiries usually resulting from earlier participation in trade fairs - an approach which clearly reflects absence of a plan. This passive entry mode is, of course, easier but when a firm wants to go for full-fledged and long-term export marketing, it hardly works; a formal process of market selection must be followed.

While selecting an overseas market, a well-planned and cautious approach always helps. Besides market analysis, self-screening is crucial to get a clearer picture and a better direction.