6 factors to consider before entering an international market

Strategic advice

Evaluate the opportunities, challenges, and risks your product or service will face.

Advances in technology make it much easier for companies to explore global markets. Developments like broadband internet availability, simple language translation algorithms, and the ubiquity of smartphones and computers offer businesses fast and affordable ways to transfer information, goods, and money. Information exchange with foreign buyers also provides access to export markets that were once out of reach.

What’s more, the growth of e-commerce since the beginning of the pandemic continues, with an expected 10.4% growth in 2023 alone. Researchers expect more than 20% of all global retail purchases to take place online in 2023, totaling more than $6.3 trillion.Disclosure 1

Meanwhile, the exchange of services—construction, business-to-business (B2B) services, and information and communication technology—reached a record $7 trillion in value in 2022. However, this growth may slow in 2023 due to high energy prices, rising interest rates, sustained inflation, and political unrest. Trading in goods is expected to see a similar slowdown.Disclosure 2

Despite the forecasts, expanding into developed and emerging economies could still be a good long-term prospect for your company’s growth. Transitioning to different political and trading environments can be tricky, but you can access the most profitable emerging market for your products or services through careful assessment and collaboration with experienced trading partners.

Why export?

Companies looking for diversification of cash flow and expansion should consider entering high-growth foreign markets. Developed markets in the Americas, Europe, and Asia continue to offer opportunities. With a recently developed and vibrant middle class, emerging markets like Africa, India, and East Asia may hold additional promise for market expansion.

Demographics show most consumers in emerging markets are younger on average, which means they’ll have more life events to look forward to, like marrying, having children, buying homes, and starting businesses. This represents a substantial opportunity for companies to gain a foothold in these markets and enjoy the benefits of continued growth and development.

Companies looking for diversification of cash flow and expansion should consider expanding into high-growth foreign markets.

What you need to know before getting involved in exports

1. Will there be demand abroad for your product or service?

Demand for consumer or B2B products and services may differ by country and market. Study the economic conditions of each foreign market and focus your attention on those that represent the highest growth potential for your business.

  • Understand market demand. How many of your contacts—calls, emails, social media likes—have come from potential customers or investors in global markets? Where are your competitors selling overseas? Is there an apparent need for your product or service? Can your company meet that demand? Answering questions like these through market research can give you an idea of your product’s marketability abroad.
  • Assess market potential. What conditions create demand for your product or service? Which regions or countries have similar buying patterns? Market entry and selling costs increase exponentially when you need to create demand.
  • Determine market attractiveness. Identify duties, tariffs, and market restrictions. Target countries with significant import growth rates, like Ethiopia, Egypt, India, Vietnam, and the Philippines.Disclosure 3  These emerging markets offer a less structured and more dynamic competitive environment.

2. How will your product or service translate to a foreign market?

  • Research your targeted market thoroughly. Your product might be a top seller at home, but that doesn’t mean it’ll be an international bestseller. Ask yourself: What are the market’s buying behaviors? Just because a market demonstrates increasing discretionary income doesn’t mean that money will be spent freely. Are consumers in your targeted market accustomed to making choices about which products to buy? Or will they be overwhelmed by too many options?
  • Is your product or service right for that market? You wouldn’t try to sell heavy construction equipment in a country where developing infrastructure makes it impossible to navigate. Selling consumer goods internationally can have similar constraints. While Americans might choose to supersize, some consumers in foreign markets view larger sizes—or quantities bundled together—as wasteful.
  • Does your product or service fit into the country’s culture? Some product translations—from name and usage guidelines to advertising slogans—can create issues in certain markets if not addressed. Colors and numbers may also hold a different significance in other cultures. While red is associated with danger in the United States, red represents good luck in China. In some East Asian countries, the number four is considered unlucky because it’s pronounced very similarly to the word for death.

3. Can customers access your product or service?

You may have to wait to expand into a new market if your intended customers can’t view, purchase, or experience what you have to offer. Your export strategy should take into account:

  • Infrastructure requirements: Are the market area’s cellular and data networks robust enough to enable reliable internet access? Can products be shipped to customers in a timely and affordable manner? How does shipping affect the price of your product or service in foreign markets?
  • Platform restrictions: Are customers in your target market able to use the platforms on which your products and services operate? If not, does it make financial sense to adapt?
  • Time zone challenges: Will your current staff be able to support your products and services during business hours in another time zone? If not, will you be able to open a local office or call center?
  • Affordability: How does your current pricing structure translate to a different currency and economy? Can your target customers afford what you have to offer? If not, can you adjust your pricing structure? How do local and import taxes affect your pricing model?

4. What are your expected labor costs?

  • Do you plan to hire staff in the new market? The labor cost advantage in emerging markets is smaller than it once was but may still be significant to your company. Be sure to consider the indirect costs of supporting labor overseas, like benefits, training, commercial real estate, and technology.

5. How will your product or service be used?

  • Analyze how your competitor’s products are used abroad while considering the unique characteristics of each foreign market. Does your product or service need to be modified to meet government regulations? What about its buyer preferences or cultural practices? Or how about its geographic or climate conditions? If the market potential is large enough, costs associated with product adaptation can be justified.
  • Some products might require small adjustments to make them ready for international markets. Your manufacturers may need to use metric measurements for components and equipment. Some power and electrical standards require different cycles, voltages, or phases than products designed for U.S. customers.
  • Consider buying behaviors and patterns. In many emerging markets, consumers don’t allocate much spending for personal use, but they do spend a lot on gifts. Be sure to consider important life events and occasion-based buying patterns when determining your product’s appeal overseas and create an appropriate cross-cultural marketing strategy.

6. Do you understand the business environment in the new market?

  • Conduct a thorough foreign market analysis. Emerging markets are nothing like domestic ones. Be mindful of cultural differences, unfamiliar business practices, varying international trade regulations, import/export tariffs, and political unrest. And don’t forget to assess how the new market will affect your company’s access to credit, investor protection, contract enforcement, and trade across borders.

Take advantage of available resources.

The resources below will help you assess your product’s marketability within specific markets and target the most promising ones for your company’s export initiatives.

Move forward with confidence.

Is it time to turn your business into a multinational corporation? Take these factors into consideration to ensure your global marketing efforts are profitable. Work alongside qualified partners with years of experience in foreign trade who can help you simplify the complexities of entering an international market.

Ready to explore exports?

Talk to your Truist relationship manager about expanding your business to enter international markets.