Having decided you are ready to expand internationally, how do you decide where to target? Which country or countries is the best fit for your business? According to the UN there are 195 countries in the world. That’s a lot of potential countries. Some will not be open to you, if you are a US based company, you will not be allowed to do business in some countries, such as Iran and North Korea for example. Some countries prohibit foreign companies for operating in certain sectors, military and essential infrastructure are common areas for restrictions. There can be religious restrictions, if you market alcohol you will not be welcome in Brunei. But even with these legal, governmental, and religious restrictions there will still be many to choose from. So how do you select the countries that are right for you?
One criterion I feel is important and one that is often overlooked is proximity. There is a huge difference operating in a country that is a two hour plane ride away to one that is 24 hours away. And I am not just talking about jet lag which can be brutal. If you live in London you can visit most European countries on a day trip, you cannot do that if you are travelling to Asia, Africa or Latin America. Time and cost means it is less likely that you visit visit the potential market on a regular basis. This has implications regarding the quality of the staff required in the target country. If you can be at a customer the next day to manage any issues that arise you may be able to use sales reps in country, with you acting as the sales manager. If you cannot respond quickly you need more experienced and therefore more expensive in country staff. The same goes for all functions across the company. Having said that if you are entering a low-cost market such as Vietnam, an experienced Vietnamese sales manager may cost you less than a junior sales rep in your home country. It is simpler to enter a market that is close by. But they may not be the most attractive markets. Again using my London analogy, close by markets in Europe are moribund compared to the potential of markets in Asia. If you look at the IMF October 2022 forecasts for GDP growth in 2023 the Euro area is expected to grow by 0.5%, the UK by only 0.3%, whether this will be lowered considering the political turmoil in that country remains to be seen. The ASEAN 5, Indonesia, Malaysia, Philippines, Singapore and Thailand are expected to grow 4.9% and Vietnam by 6.7%. There are countries in Latin America and Africa that also have attractive growth rates.
A balance between proximity and potential should be part of your considerations when selecting your target market. A link to the IMF report will be included in the notes to this podcast on my Business-in-Asia.org website.
Another criteria not often discussed is Market Receptiveness, how receptive are the consumers in the target country to products from your home country?
One way to look at this is to review the top 10 or 20 export countries from your home. This confirms that there is an acceptance of your countries products in your target markets. Of course this also means that there is established competition in place. If you can access more detailed information about the type of exports you might find that your industry/service is not well represented and this could mean an opportunity.
How are products from your home country perceived? When consumers think about products from your home country, what are their initial thoughts? As an example British Education is well regarded in Vietnam, and indeed across much of ASEAN. Not too surprisingly Scotch Whisky has a high approval rating in much of Asia. Although whiskies from other countries are making great strides in entering the market both at the entry level and premium level. I was a little staggered to see a bottle of Taiwan whiskey being sold for about US$2000 in my local liquor store in Singapore. British foods are also well regarded in Asia, American baby formula and vitamin supplements are among the leading sellers on online retail stores. It’s quite likely that your government can provide information about which products have high export potential. And if your government does provide not this type of detail then you can, thanks to the internet, grab information from other governments. It may not be quite as specific to your situation, but it can still be invaluable. In notes to this podcast I add a link to information provided by the Department of Trade and Industry in the UK.
Ensure you like your target country
My next selection criteria may surprise you, the entrepreneur the focused businessman but I believe it is important. Do you like the country where you hope to operate? I have worked in most Asian countries, and I enjoyed some more than others. I will not tell you which were my least favourites, although none of them were unpleasant. But I was much more willing to jump of a plane to visit some countries than others. But there is more to this than how happy you are to travel; your perception of the country will affect how you react to setbacks. Setbacks are inevitable when entering new markets, abroad or at home, if you dislike the country, you will react badly to setbacks, blaming the people, the government, the culture etc. This type of negative reaction will not help. On the other hand, if you like the country you are much more likely to be forgiving as problems arise which will put you in a position to handle the situation well. Another consideration is that most people love their country, they are proud of it and if they sense you do not feel similarly about their homeland they will not go out of their way to help you. As entry into a country requires building up a network and this is much easier if you genuinely like the country where you plan to set up. Note this also extends to your employees, not everyone is going to feel the same about your target market, avoid sending someone who is not comfortable in the country, they will not develop the rapport needed.
IMF GDP Forecast October 2022
UK Government support for doing business in Vietnam