Approaching New Markets
To assist exporters entering new markets, trade representatives should take into account the exporter’s viewpoint. How will they be viewing the market? What will they be looking for from a trade representative?
Market Entry: Martin Assists With Making Hard Choices
Martin, Trade Commissioner in the Middle East, scrolled down the emails in his inbox and grimaced. The subject line told the whole story: REQUEST SUPPORT TO FIND A NEW AGENT.
Martin remembered the sender well – this company had been flattered by attention from an agent on the first day of a trade fair. They had signed an exclusive agreement with the agent for the whole territory, without taking time to do proper due diligence. Now, 12 months later, it turned out that this agent did not have resources to cover the whole territory and seemed uninterested in selling the product that had been so optimistically shipped over.
Martin knew the contract would be hard to cancel unless both parties agreed. When he did online research on local language websites, he felt even more pessimistic. This particular agent carried a competing line, with lower quality, but higher volumes and better commissions for the agent. It looked as if the agent’s purpose in offering his services to market entrants was to disable the competition!
Martin took a closer look at the contract with a colleague, and saw a glimmer of hope. The contract didn’t cover e-commerce platform sales, yet this channel was growing fast. It could be the perfect way to maintain momentum, test the product and review pricing, while this problem with the agent was resolved.
Martin suggested a call to discuss the problem, then set about researching the most suitable local e-commerce platforms, and possible logistics partners. Fingers crossed!
Key Points
Understand the range of market entry possibilities available to an exporter.
Help a first-time exporter to think through a set of strategic questions.
Have a broad awareness of local laws relating to agency and distribution arrangements, joint ventures, etc.
Refer exporters to specialists for legal, accounting advice and translation and should avoid being in a position where they might be legally liable if things go wrong.
For exporters of services, advise on any legal or other ‘soft’ barriers to trade.
Trade in services is even more dependent on trusted commercial relationships, credibility, and intellectual property built up over time.
Market entry: The exporter’s perspective
Checklists
Checklist: Market entry strategies
Understand all possible entry strategies.
Understand the exporter’s needs.
Be aware of the culture of the local market: what works and what does not.
Explain pros and cons of various entry strategies. Be ready to suggest alternatives.
Identify suitable potential partners and provide information about them.
Arrange introductions to potential partners and other contacts – government, industry associations, legal, accounting and other advisers.
Suggest possible temporary office facilities.
Follow up with contacts and exporters after initial introductions.
Checklist: Questions for an exporter entering a new market
What are the long-term objectives for this market?
Should market territories be allocated to agents or distributors? Should their rights be exclusive or subject to performance?
How will the company protect its intellectual property?
Can organizational arrangements be changed as the market grows?
How will the company be paid?
How will disputes be settled?
What will be regarded as success?
Is there an exit strategy if needed?
What form of legal entity does the company need to operate?
What form of contract or agency agreement is required?
Could the company to invest in on-the-ground operations in the future?
What would be the market entry strategy, given what competitors are doing?
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