The financial logic of doing international market research
Nothing is worse for the profitability of your market entry than searching a partner, concluding an agreement, adapting your product, training the partner and then to find out that the market is practically non-existent or that your partner doesn’t know how to open it.
This article shows the value of market research for your company, even if the result is disappointing.
Start with getting to know the country
First of all you can reduce risks by knowing the country better than just the airport and the capital’s central business district. Or having a trusted person who knows the market and can help you to define the right entry strategy.
Market research will increase your chances for success
Second of all by researching the market. Extensive (and expensive) quantitative reports mostly do not provide the information that can turn your decision one way or the other. More qualitative research, such as distributor opinions or a pilot with end customers can help to provide that information. This research may lead to a decision not to enter the market: which will save you from a failure.
Questions for market research
Typically your market research will answer the following questions:
- What is the local market size and market growth?
- What are trends in the market?
- How is the value chain structured? What are the main distribution channels and market segments?
- What are your competitors and their market position
- What is a competitive price for your products and services on the market?
- What segments of the markets are currently underserved?
- What would be recommendations for entering the market?
The financial value of market research
Even if you decide to proceed with your market entry, research will enhance you likelihood for success. As the calculation example indicates, the weighted statistical outcome will be higher.
In the example I have calculated two scenarios, one with market research, the other without. The outcome of the market research could be not to enter the market, but if you still enter after the research, chances for success are higher.
