Strategies to enter a new market

When entering an international market, it’s more important to be resourceful than to have resources. A company needs to have the right attitude to swim with the sharks.

BY DR. RAJENDRA PRASAD SHARMA

India’s top export markets include the US, 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 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.

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 the following criteria in mind 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 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.

Benefit 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

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

ENTERING A NEW MARKET

The key to making profits, after the right market selection, is identifying the right entry strategies. Before we delve into these strategies, it

A BRAND MUST MAKE THAT PRODUCT APPLICABLE TO THE IMPORTING MARKET. IT CAN TEST THE MARKET THROUGH E-COMMERCE OR EXPORTING THROUGH A TRADING HOUSE.

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.

TOP 10 MARKETS WITH UNTAPPED EXPORT POTENTIAL FOR INDIA

32

22

USA China

12

UAE

11

Hong Kong Vietnam

8.6

Germany 7.3

UK

Malaysia

5.9 5.8

Bangladesh Saudi

Arabia

4.6 4.3

Source: ITC Export Potential Map. All values are in US$ bn

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 crossborder 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 US 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, brand marketers who understand the tastes and preferences of the consumers can go for a greenfield or a brownfield investment in that market.

_____________________________ Dr RP Sharma is currently a Professor at Indian Institute of Foreign Trade, Delhi & Kolkata and is a Member, Committee for Advanced Trade Research, TPCI. Views expressed are personal.