Deciding to enter a new international market is exciting for a brand. Perhaps your product or service has gained enough traction in your existing market that demand is growing organically. You have two options to create additional revenue streams, add more products, or expand into fresh markets.
Having your brand available in multiple overseas markets can also make commercial sense. Your company can benefit from having numerous currency streams and not be beholden to one economy. When the Global Financial Crisis occurred from 2007 to 2009, some economies such as Australia, India, China, and Indonesia were not adversely affected. Brands established in these markets felt fewer shocks from the recession as more robust markets bolstered weaker ones.
Most people would assume that the US dollar is the strongest currency globally. However, nine currencies (in 2022) are valued higher than the US dollar, including the Pound Sterling, the Euro, and Kuwaiti Dinar. Just like economic ups and downs, currencies also fluctuate, and by deriving income from multiple countries, your brand can withstand the ups and downs of money markets.
Population, particularly when it pertains to your target customer, is another reason to consider entering a new international market. Your current market may have a limited number of potential customers or be oversaturated with competitors, so entering a new market makes sense. Some markets like India and China have an abundance of potential buyers for your product or service.
While all these reasons make sense, entering a new market successfully needs careful consideration and research. You should research and evaluate the eight areas before leaping into a new international market, and build a market entry strategy first.
Also read our blog post, “What are the Four Market Entry Strategies?”
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1) Behaviors of your target audience
Even if your product appeals to Gen Xers in your current market, it does not necessarily mean that it will have the same appeal in a foreign market. Even if the target audience is the same, it does not mean the target audience’s behaviors, wants, and needs will be the same. Even the slightest difference can potentially impact marketing messaging and product packaging.
2) Communication / Marketing Channels available
You may have a predictable marketing and sales model, but it may fall flat in other markets. In Japan, as an example, LinkedIn is not widely used because, culturally, Japanese people do not boast openly about their accomplishments, and the LinkedIn platform was built, in part, to promote career accomplishments. In Germany, LinkedIn is second to Xing. In many countries throughout Asia, WhatsApp and Youtube surpass Facebook and Instagram. In China, Facebook is not available, and WeChat is considered the Chinese version of Facebook.
Using existing marketing material may also be a challenge. While many brands take existing marketing campaigns and translate them into the local language, the marketing can often fall short or even come across as rude when the way locals prefer to communicate is not thoroughly researched and tested before launch.
3) Cultural and language differences
We are all influenced by the society in which we live. Even in markets that speak the same language, like USA and Canada, Australia and New Zealand, and England and Ireland, the cultural differences can vary.
Cultural differences can influence every part of local life, behaviors, and even tastes.
Fast-food chain Kentucky Fried Chicken (KFC) got off to a rocky start entering the Chinese market after it translated “finger-lickin’ good” into Chinese characters meaning “eat your fingers off.” It has abandoned the American market model and reflects China’s strong restaurant dining culture. KFC restaurants in China have larger eating areas to accommodate large families and groups. The menus are more prominent with more extensive and localized menu items, such as rice dishes and soy milk drinks. Side dishes like coleslaw and mashed potato proved to be unpopular and replaced with a palatable local fare, such as a salad of shredded carrot, fungus, and bamboo shoots.
Understanding cultural differences, including language and taste profiles, is a critical research phase before entering a market.
4) Regulations
Every country has its regulations, and companies cannot risk non-compliance. An international market may have laws and regulations you have never heard of before and, therefore, might be difficult for you or your team to wrap your head around.
Companies need to know the regulations and laws around shipping, borders, employment laws, taxes, and other business standards in a foreign country. Navigating a new land can be exhausting. An in-house lawyer or an outside consultancy with experience in this area can be beneficial and might be needed.
5) Payment methods
Payment methods can be vastly different overseas. Market research helps you identify what payment methods are used in the country you are entering and how you can support those payment methods in your business to grow your brand. If you are not using the popular modes of payment that people are accustomed to, you will lose massive growth opportunities.
In Indonesia, for example, eWallets are popular, and most people use digital payment methods, with eWallet transactions reaching 18.5 billion in 2021.
The Government of India launched the Digital India program to transform the country into a paperless, cashless society.
Therefore, these are important considerations when entering a foreign market.
6) Costs and Price Parity
In international trade, parity is the exchange rate between the currencies of the countries involved, and the purpose is to make the purchasing power of both currencies as close as possible. Market currency exchange rates allow you to adjust prices across countries.
The Big Mac Index is a measure of purchasing power parity. Invented by the Economist in 1986, its purpose is to show the concept of purchasing power parity and demonstrates how price needs to be adjusted based on currency exchange rates. Global franchises and multinational corporations widely use the Big Mac Index to understand how to compare the cost of essential goods between countries. The Starbucks Index is another index that allows companies to understand price differences using the price of a Starbucks latte.
Additionally, the cost of overheads may be very different in other countries. The real estate and rental market and the cost of utilities are a consideration, among other factors.
Developing a pricing strategy in an international market is a complex project requiring detailed planning. Companies have to deal with currency fluctuations, regulatory issues, and cultural nuances when pricing products and services for international markets. A thorough market research plan is paramount when expanding into an Internationa Market, and it will give a company insights into its pricing strategy.
7) Competitor landscape
It is critical to understand and analyze the competitive landscape when expanding into any market. Market research helps companies comprehend the potential competition in new, unchartered markets. This knowledge helps them make better decisions about how, when, and where to expand. It is a vital part of their business planning strategy. For instance, if a particular part of the country is already saturated with the given product or service, they can move their focus to a different part of the market.
Market research can be daunting in the domestic market and becomes even more difficult in international markets. Therefore, it is essential to work with a knowledgeable and experienced market research company to analyze the competition in-depth. This will inform and guide the future of the company in that market.
8) Market volume and potential growth
A product is as good as its market demand and potential growth. Market research will help you measure the opportunity so companies can understand how many potential customers their product or service will have in any given market.
It becomes more complex to measure the opportunity in an international market, given the differences in economic conditions, for instance, in developed versus developing countries.
These steps and considerations help show companies how to calculate market potential and help guide the process of international expansion. However, there might be many more things to consider when entering a new country. Several factors like the company’s growth stage, offering, industry, and business model will likely have unique considerations.
Entering an international market is not a simple process, and it is essential to do the legwork and thorough market research to inform a well-thought-out market entry framework.
For more in-depth insights, read our blog post, “The Ultimate Guide to Market Entry.”
Senior Marketing Executive
Sales & Marketing
General Manager PR -Internal Communications & Government Affairs
Vital Strategies
Customer Intelligence Director