Decoding the right market selection & entry strategies

Dr. Rajendra Prasad Sharma, Professor of Marketing, Indian Institute of Foreign Trade and a member of the Committee for Advanced Trade Research, TPCI, believes that right market selection and entry strategies are the keys to succeed in international business. 

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India’s top export markets include the USA, the UAE, China, Bangladesh, Singapore, the UK, the Netherlands, and Germany. The choice of these country markets can be attributed to reasons like convenience, similar political ideologies, the presence of the Indian diaspora, and geographical proximity. However, more than 80% of the world’s population resides outside India. Further, the market opportunity is not just confined to developed countries; there is a huge market for Indian exporters to sell their products globally.

Getting to the right market selection

The critical question is listing the other markets with untapped export potential for India and the market entry strategies to be adopted to penetrate them successfully. There are more than 200 countries worldwide, and Indian traders have several export opportunities for market selection. For example, Indian exporters can explore the Asia Pacific (APAC) region or the 54 countries in Africa, or the Latin American countries. However, keeping in mind the following criteria would help:

The demand-supply gap

Identifying the demand-supply gap is an essential criterion for selecting a market. For example, if we look at Africa, it has only 11% of the world’s resources while bearing 25% of the world’s disease burden. Indian pharma & healthcare industry, which has expertise in offering quality medicines and services at competitive prices, can help bridge this demand-supply gap. Thorough research must go into this to identify the markets with the most significant untapped export potential for the product with platforms like ITC Trade Map.

Leveraging recent FTAs

The government has, of late, been negotiating many Free Trade Agreements (FTAs) with countries such as Australia, UAE, and others. The exporter community should avail the benefits of these FTAs. FTAs are clear cut pointers about specific services and product categories which find potential and where India gets preferential treatment. Indian companies stand more competitive in these markets, if not price-wise, then, at least, quality-wise.

Benefiting from cultural proximity

Many Indian IT, telecom & agricultural companies started trading with Latin America during the pandemic. These counties have a culture similar to that of India (even though they are miles apart geographically), and there is also more ease of doing business. At the same time, brands need to understand the pain points of that market and then adapt the product because standardization doesn’t work well in most product categories. For example, Heinz’s, the ketchup brand, did not do well in China because the people there eat soya sauce more. So, it is essential to think globally but act locally.

Risk pays

Indian exporters must also keep in mind that certain countries may not have a shared political vision like a democratic government and have issues like rampant corruption. Still, they may provide the right market for Indian traders. Wherever there are risks, the profit margins are bound to be high. 

Regulatory standards

At the same time, the exporters must ensure that their product meets the importing country’s regulatory requirements. It is tough to do business with developed countries like the USA, Canada, New Zealand, and Australia due to the strict regulatory environment though they are politically stable.

How must an exporter enter a new market?

The key to making a profit, after the right market selection, is identifying the right entry strategies. Before we delve into these strategies, it is essential to note that one of the most important things is developing the right mindset. For example, Japan is a small country with limited resources. Yet, they have contributed to many global brands. It is more important to be resourceful than to have resources. For instance, in the realm of air conditioners, they have Hitachi, Panasonic, and Mitsubishi. So, having the right attitude can be a game changer for any firm. Taking the issue of regulatory compliance, for example, a company should look at the larger picture and think beyond the domestic market. They must meet the international criteria for their product, no matter how long it takes to attain them. Also, as mentioned earlier, a brand must make that product applicable to the importing market. At the same time, it must be available there – using e-commerce or B2B platforms.

While determining a suitable market entry mode, there are different strategies that a brand can leverage to establish its presence. Exporting is the most basic internationalization strategy for a firm. Direct exporting requires some commitment of time, energy, effort, etc. It is a relatively riskier proposition since the exporter may end up making losses. For example, a firm may be a big name in India but still unknown beyond its shores. So, it becomes crucial for the company to evaluate its export readiness. Firms must invest in international marketing and branding efforts to create awareness in other countries. The brand and the value proposition communication should complement the host market culture. Instead of direct exports, a company can test the waters by starting with indirect exports through cross-border e-commerce or exporting through a trading house.

Another strategy is entry licensing. For example, the American apparel brand, Arrow, doesn’t manufacture in America and then ship the shirts to India. Arvind Fashions makes shirts for this premium menswear brand in India and Bangladesh. Arrow sells its shirts in India as an American brand without shipping a single shirt from the USA to India. Further, brands also need a robust distribution network. A licensing franchising contract can also help a firm cultivate a global audience. For example, the Tata group has acquired Tetley, the second largest tea brand globally. Lastly, confident brand marketers who understand the tastes and preferences of the consumers well can go for a greenfield investment or a brownfield.

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Dr RP Sharma is currently a Professor at Indian Institute of Foreign Trade, Delhi & Kolkata and is a committee member CATR, TPCI. Facilitating courses like International Marketing, Sales & Distribution Management, and Services Marketing at the Delhi, Kolkata, and Dar-es-Salaam campuses since Nov. 2007. He has been Program Director of various batches (full-time and executives) and MDPs apart from administrative responsibilitiessuch as Corporate Relations & Placements and Contracts.