Globalization and free trade do spur economic growth, and they lead to lower prices on many goods.
—Robert Reich, Professor of Public Policy at the University of California at Berkeley and Senior Fellow at the Blum Center for Developing Economies
Given the complexity of the global marketplace, solid market research is critical for a host of global market decisions you will make. To avoid offending prospective customers culturally or sending an inaccurate product message, it is necessary to avoid inadequate marketing research or skipping the research phase in the international market decision process altogether. Such steps can often prove to be costly, leading you to reach inaccurate marketing conclusions, ineffective promotion, and even the potential of having to withdraw from the targeted market entirely generating what could be a substantial loss on investment.
Global market research and analysis, if done well, will assist you in identifying competing products and their characteristics—types, variants, potential, profitability—if any, making better decisions that recognize cross-country similarities and differences, and gaining support from the local information sources for proposed market decisions that affect price, promotion, and distribution.
Skipping the research phase in the international market decision process can often prove to be a costly mistake.
To some degree, the procedures and methods that are followed in conducting global market research are nearly the same as those you use in conducting standard market research in your home marketplace. But let’s make sure your understanding is correct. Market researchi is the systematic gathering, recording, processing, and analyzing of market data, which—when interpreted—will help the marketing executive uncover opportunities and reduce risks in decision making. Market research practice in the global marketplace uses most of the market research skills, practice, and knowledge used in researching the domestic market scene (e.g., questionnaire design, hypothesis testing-data analysis, measurement scales,ii and multivariate techniques such as multiple regression,iii cluster,iv and conjoint analysisv). Also, the typical sequence of a multi-country market research process follows the familiar blueprint you follow in conducting domestic market research. Specifically, the steps you take in conducting global market research generally consist of the following:vi
Statement of background or problem/opportunity definition – any research starts with a precise background statement or definition of the research problem or opportunity to be addressed. Is the research exploratory, descriptive, or causative? Exploratory researchvii is analysis conducted for a problem that has not been clearly defined. It is conducted when the researcher does not know the structure of the market and the data alone in the form of household purchases or consumer judgments provides the basis for structure of the market as when, for example, the customer evaluates the quality of a bank or a hotel or an airline. Descriptive research describes data and characteristics about the population or phenomenon being studied, answering the questions who, what, where, when, why, and how. For example, a study to understand buyer behavior and describe characteristics of the target market is a descriptive research. Causative researchviii is done to establish a cause-and-effect relationship where a change in one variable produces a change, influences, or determines another like the influence of income and lifestyle on the customer’s purchase decision or testing the effect of a 10% raise in its product’s prices. In a causative research, unlike exploratory or descriptive, hypotheses, such as what consumers would be willing to pay a premium price for the product, are tested.
Once the nature of the research problem becomes clear, the research problem needs to be translated into specific research questions. Try to view the research problem from the cultural perspective of the foreign customer, eliminating your own personal cultural bias. Doing so may require selecting and retaining an in-country marketing research firm for every step of the research process. A local firm may be essential in understanding the local culture, offering feasible survey methods, helping with questionnaire design, and interpreting results. In defining the research problem assessing the strengths and weaknesses of competing products, analyze the customer demographics, socioeconomic factors, and current marketing mix factors—positioning, segments, price, promotion (advertising), and distribution. For example, a positioning study conducted for BMW in the European market addressed the following issues:
What does the motorist, in the country concerned, demand of his/her car?
What does s/he believe s/he is getting from various brands?
What does that imply with regard to positioning the BMW brand across borders?
or
From the perspective of a consumer products company interested in knowing what percentage of Brazilian consumers use sunscreen products for face and body, the researcher might ask:
Do you use sunscreen products? (2 answers possible – Yes/No).
If not, have you ever investigated or seriously considered purchasing sunscreen products for your face and body? (2 answers possible – Yes/No).
You identify the background, objective, and develop a research design, the plan, and structure required to obtain answers to research questions.
Background – This would include considering the product – product types/product variants, size of the market, its growth rate, the competitive environment – share of the market, cumulative sales volume, and vulnerability of competition, and profitability – margin size – unit contribution to profit and rate of return on investment.
Objective – Your objective is to clearly explain your study objective – why the study is being undertaken, what the study is designed to measure, and how the information will be used. The research should help answer key marketing questions such as:
What are the purchase and usage dynamics with the product market?
What is the attitudinal framework for the product?
What demographic and attitudinal factors are best associated with usage of the product?
Research Method. You select:
The sample – who and how many respondents to include.ix
Data collection method – whether you use secondary data, a mail or telephone survey, or personal interview.
Design element, that is, what are the respondents going to be exposed to. Is a survey or experimental design most appropriate?
You determine your information needs relating to:
Measuring content, that is, what should be measured?
Measurement technique, that is, how should it be measured?
You collect the data (primary and secondary) – Primary data (information) are data collected specifically for the purpose of the research need. This data is customized and unique to your research, thus, not collected from research sources, such as books, magazines, and government reports. Examples would include observation, experimentation, interviews, surveys, and expert estimation. Secondary data (information) are data or information that was either gathered by someone else (e.g., researchers, institutions, other Non-Government Organizations, etc.) or for some other purpose than the one currently being considered, or often a combination of the two.x Sources of these data can be country or technical reports, scholarly journals, trade journals, in-house or external publications, articles in business newspapers, and reference books.xi
As a researcher, your first step is determining which organizations—government or private, conduct research on the topic or product in question. Government documents and official statistics are great for starters, but beware of their quality as they will vary, depending on the country of study and resources dedicated to data collection.
There are a number of survey methods to choose from (mail, telephone, etc.), and you may choose to use a survey followed by developing a sampling plan to collect the data, that is, a plan to determine the sources of the information needed, and who you will approach. After making these decisions, you will collect the information and distribute the questionnaire or telephone respondents, etc. To minimize the cost of collecting primary data, explore the prospect of using an omnibus survey,xii a quick, low-cost useful tool for preliminary research that contains consumer-related questions administered by a research company on a regular basis to a very large sample of consumers. The research company asks the right number of questions that get to the essence of needed data and standard demographic information, profiling the sample with the expense shared by another company in need of the same information.
You analyze the data and interpret the results – describe how the data collected will be analyzed and interpreted. The data you collect may require analysis possibly requiring the use of statistical tools that reduce the data, summarizing it, and making the most important facts and relationships apparent. In researching your market, you or a qualified marketing researcher, must be able to select the correct statistical tool to generate the information required based on the source data.
You report and present research findings and act on the conclusions. It’s time to take action by producing market forecasts, delivering insights on the market, and developing marketing campaigns that put your findings to the test. Although your research is complete, it is not over. You should be collecting and analyzing data regularly to see what has changed over time and where you can improve. The more you know about the target market, industry, and companies involved, the more successful your marketing efforts will be.
A typical example of a multi-country market research projectxiii is that which Plethico Pharmaceuticals Limited, an Indian Company, conducted in estimating the market potential for a ladies’ facial acne removing cream:
Research Problem: Estimating the dollar potential for a ladies’ facial acne removing cream in Sri Lanka, Thailand, Singapore, and Bangladesh.
Research Hypothesis: Customers must be willing to purchase this premium product at a premium price over and above the best of local products.
Research Coordinators: The research project will be headed by a lady executive and the field surveyors will also be female executives. (Preferably)
Primary Data Research :
500 beauty and skin clinics from Sri Lanka, Thailand, Singapore, and Bangladesh.
200 female clients to be interviewed, both through individual contact and focus group discussions.
Secondary Data Research:
Total sales of premium facial acne removing creams in countries of research.
Percentage share catered to by local manufacturers.
The percentage share of international brands.
The incidence of acne growth in the country of research.
The incidence of facial acne cream being used among ladies.
Price variant between the premium segment and second-line products.
Sampling Procedure: a random selection from among the most frequented and popular clinics. Data to be collected:
Data of customers from beauty and skin clinics.
A questionnaire distributed through the clinics.
Telephone interviews.
Focus group discussions.
Analysis: Data collected will be analyzed using standard cross-tabulation analyses plus a number of multivariate statistical techniques in order to answer the key research questions.
What is the underlying need structure with the ladies’ facial acne removing cream market?
How is the market segmented in terms of usage dynamics?
What are the strengths and weaknesses of the Plethico ladies’ facial acne removing cream?
At each of these six steps, special problems may arise when you research foreign markets. The major challenges that you might confront are these:
The complexity of research design due to environmental differences. In developing your research design, you need a thorough understanding of the target country’s culture to ensure you obtain satisfactory response rates, for example, e-mail surveys to replace mail and phone surveys where the Internet is unavailable.xiv
Technical issues (e.g., the Internet, e-mail surveys, etc., should they be used) may intimidate respondents resulting in non-response biasxv making factors as overall response rate and non-response important.
Lack and quality of secondary data.
Time and cost requirements for collecting primary data are considerations for keeping the research project on schedule and at an affordable cost.
Coordination of multi-country research efforts, if you are contemplating entering more than one market.
Don’t let these research steps and special problems overwhelm your research effort! Should the expertise not reside in house, it pays to retain an in-country marketing research firm. The effort is doable and worth the investment of time, manpower, and dollars. Market research, if done well, dispels any illusion about the target country market and can be the key that unlocks the profit potential of the foreign market you are targeting for entry.
Emerging Markets
Experts in global exporting are convinced that emerging countries offer many opportunities for lucrative exporting deals. From Thailand and Malaysia to Brazil and Colombia, exporters are targeting some of the most promising markets in the world, thanks to domestically driven growth, favorable demographics, and supportive government policies. What are the regions that hold the most potential for exporting at the moment? Here’s a brief review of regions to focus your global business development efforts and outreach strategies along with the 2016 list of product/service markets offering the greatest exporting potential.xvi
Aircraft Parts Automotive Parts Building Products and Sustainable Construction Civil Nuclear Cloud Computing Cold Chain Construction Equipment Education Financial Technologies | Franchising Industrial Automation Manufacturing Technology Medical Devices Oil and Gas Equipment Pharmaceuticals Recreational Transportation Renewable Energy Smart Grid Technical Textiles |
Africa
With the focus placed on Morocco, Kenya, Côte d’Ivoire (Ivory Coast), and South Africa, Africa emerges as the next big thing in exporting. African economic development organizations and regular companies are on the lookout for resources that would help them to build infrastructure, apply upgrades to their agriculture, improve their services, and boost their manufacturing potential. A sample of projects includes transportation and trade logistics, Internet data center development, geothermal energy, refinery modernization, gas-fired power plant development, smart grid modernization, disaster preparedness and recovery, imported food and beverages.
Most African countries experience a widespread use of smartphones and related technologies that range from online shopping, mobile applications, online banking, alternative paying systems, and many others. There are many software companies that aim at this growing market by building mobile applications (apps) and online products to help those societies connect with new products and services.
Technologies are sought after by African companies for building better infrastructures, as well as applying improved agricultural and service solutions. All this makes Africa one of the places with the most export potential.
Brazil
In 2016, Brazil, with the largest population in South America, hosted the Olympic Games reaching out to acquire various solutions for areas like engineering or manufacturing. A world power in agriculture, the country is a vibrant marketplace and one of the largest information technology (IT) markets in the world. Strategic sectors include clean energy, transportation, and telecommunications. Other sectors of interest include agribusiness, water, and the environment.
It’s important to remember that understanding Portuguese is crucial in dealing with Brazilian companies. If you plan to reach out to this market, start looking for experienced translators and interpreters to help you orient yourself to this new market. Leila A. Afais, director of export promotion at the U.S. Trade Development Agency, advises companies to double-check with local officials to make sure their imports are assigned to the proper category because restrictions vary by classification. Promising markets include agricultural processing equipment, consumer products, computers and information technology products and services.
In Brazil, as in other Latin American markets, U.S. e-retailers must plan and execute well to overcome poor road conditions, extremely high import taxes, fluctuation in currency exchange rates, the threat of economic recession, political unrest, and an abundance of bureaucratic red tape in entering the region as did the 41 U.S. retailers ranked in the 2015 Latin America 500.xvii These grew their combined sales over 18% to just over $2.41 billion in 2014. Despite regional deceleration in e-commerce growth in 2016, challenges, and Brazil’s rural shoppers having to find American brands they demand, American e-retailers can anticipate the total number of Brazil’s on-line buyers to grow to 61.8 million prompting total online retail spending to reach $40.8 billion by 2019, according to Forrester Research Inc . The Brazilian e-commerce research firm eBit anticipates the coming years will present opportunities for e-retailers in fashion and apparel, sporting goods, health and beauty, despite strong competition from well-known retail chains in Brazil—like Lojas TA Qixviii and FastShopxix and Chinese sites like AliExpress.xx Key to competing will be price, offering multiple payment and delivery options, and localizing Portuguese on websites. Even with local retail competition and variation in growth potential, now could be the perfect time for American e-retailers to expand their operations globally to include Brazil.
Chile
With a narrow strip of land between North Pacific Ocean in the west and the Andes in the east, the Republic of Chile is located in the southern part of South America. The Global Business Policy Council of A.T. Kearney, Inc., a global consulting firm, included Chile in its list of key emerging countries driving the next wave of global growth between 2014 and 2020.xxi The country, a stable, democratic nation, has a market-oriented economy characterized by a high level of foreign trade and a reputation for strong financial institutions. Sound economic policies have contributed to steady growth and helped secure the country’s commitment to democratic and representative government.
Chile continues to be very open to foreign investment and trade as evidenced by its 22 trade agreements covering 60 countries, including agreements with the European Union, Mercosur, China, India, South Korea, and Mexico. Chile is also known for having the most transparent governance and best rule of law in the region.xxii Trade opportunity exists for exporters in certain categories, especially those that include crude and refined oil, coal, gas and lubricants, machinery and parts, cars, computers, mobile phones and house equipment, trucks, buses, and other transport vehicles, chemicals, and metal products.xxiii
Peru
Located in western South America, bordering the South Pacific Ocean, between Chile and Ecuador, is a country whose economic fortunes are on the rise following recent structural reforms and continued economic liberalization. Its economy grew by an average of 5.6% from 2009–13 with a stable exchange rate and low inflation. Economic growth of late has been driven in part by Peru’s endowment of minerals—silver and copper, and natural gas. The country’s dependence on minerals, metals exports, and imported foodstuffs does make the economy vulnerable to fluctuations in world prices.xxiv After decades of populist or authoritarian politics, Peru’s government has become part of Latin America’s new, more pragmatic left, combining liberalization with social spending. As a result of this orthodox policy mix, the Economist Intelligence Unit (EIU) predicts that Peru’s productivity growth of real Gross Domestic Product (GDP) will average 4.0% annually between 2015 and 2030.xxv Poverty and unemployment levels have fallen dramatically in the last decade enabling Peru to become one of the best performing economies in Latin America. Peru’s membership in the Pacific Alliance highlights the country’s outward-looking policies, as well as its higher growth potential. Trade opportunity in Peru exists for exporters of agriculture and food products, crude and refined oil, trucks, buses, light trucks, industrial machinery, and equipment.xxvi
Canada and Mexico
These two countries, parties to the North American Free Trade Agreement, have long been trading partners of the United States and represent the first and second largest export markets for American products according to the U.S. Census Bureau’s April 2017 report.xxvii Companies interested in exporting to these countries will find many helpful resources, easy shipping, and a need for similar products that serve their expanding wealthy middle class populations.xxviii xxix
Considering the absence of legal precedent that exists in U.S. legal tradition, differences in the laws governing contracts and differences between U.S. and the Mexican Civil Procedures and Rules of Evidence, it is prudent to retain a lawyer before making agreements with Mexican partners. Promising markets in these regions are consumer products, packaging and plastics, tourism, and tourism-related services, housing, and construction.
Germany
Located in the heart of Europe, Germany has made a name for itself as the largest buying power for robotics, hi-tech solutions, and manufactured products as evidenced by Germany’s annual Hannover Messexxx (Fair), Hannover, Germany, “the world’s premier industrial fair.” Leading industry associations choose this event as a launch pad for global initiatives. The commercial relations between the United States and Germany are quite close—many German companies are based in the United States and present on the American market, all of which guarantee a certain ease of entrance in introducing new industrial products to this dynamic marketplace. In addition to industrial machinery and equipment trade, opportunity in Germany exists for exporters of electrical products, vehicles, and mineral fuels. Other export opportunities include pharmaceutical products, plastics, optical, and photographic products.xxxi
Poland
Located in Eastern Europe next to Germany, is an attractive location in the region for business, given its access to the Baltic Sea, diversified economy, and business-friendly regulations.xxxii As a result, the country, with a population of about 38 million, has the sixth largest economy in the EU. The government, with largely sound macroeconomic policies, has invested in infrastructure, education, and plans for other expansionary policies to spur long-term growth of 2.3%, progressive by EU standards. Since 2015, however, the government’s spending on social welfare programs has prompted a decrease in economic growth projections in the short term. GDP is projected to pick up in 2017 to 3.3% and stabilize around 3.2% over the medium term, driven by robust private consumption, a strong labor market, and an industrial structure dominated by low- and medium-tech manufacturing. Promising import markets to Poland include capital goods needed for industrial retooling and for manufacturing inputs, more specifically, machinery and transport equipment, intermediate manufactured goods, chemicals and chemical products, minerals, fuels, and lubricants.xxxiii
Asia
The last region crucial for global export covered here is Asia. Despite the predicted lower GDP growth this year, China is still a large global presence and will be a great market for many companies able to propose and deliver projects in the transportation, energy, information technology, and health care sectors.
Asia-Pacific leads the way in buying and the United States in selling. Cross-border online consumer purchasing is increasing 28% a year and will reach $1 trillion by 2020, according to a June 2015 report released from consulting firm Accenture and AliResearch, the research arm of Chinese e-commerce giant Alibaba Group Holding Ltd.xxxiv Much of the purchasing will come from web shoppers in the Asia-Pacific region, which will account for 48% of cross-border online purchases in 2020, the report says. The report indicates there will more than 200 million cross-border online consumers in China in 2020, the most of any country. The strong demand from China’s growing middle class will boost cross-border online purchases to about $245 billion in five years.
As reported by Frank Tong in the June 2015 issue of Internet Retailer magazine,xxxv China-based e-retailer JD.com is adding products from foreign brands and retailers to widen its selection of international brands—Gap, Forever 21, Nine West, and Steve Madden, which Chinese consumers are extremely excited about getting. JD.com is handling its own logistics, including owning its own warehouses and delivery vehicles rather than relying on other companies.
Chinese shoppers are spending a growing portion of money with online retailers. The 500 largest e-commerce players in China increased their sales 59.1% last year, well above the country’s roughly 50% e-commerce growth rate, according to the China 500. That means the big are getting bigger. JD.com and several other large Chinese e-retailers more than doubled their online sales last year.
That type of growth curve is unique; there aren’t any other large e-retailers around the world that have experienced as fast of growth as these Chinese companies, including Amazon.com Inc. That growth is being propelled by Chinese merchants’ heavy investments in mobile shopping technology, logistics, and connecting their websites and physical stores. U.S. small- to medium-sized companies can still benefit by entering the Chinese marketplace even if they are not big e-retailers.
Another important country is India, an emerging market located in South Asia with a big appetite for goods and services where the increase of a multilingual and multiethnic population is a factor powering the outreach for help in building the local economy. Indian public and private sectors will be on the lookout for innovative health care and infrastructure solutions, for example, renewal power generation and demand response projects. Challenges in this market include high tariffs, multiple languages and cultures, and poor transportation infrastructure. Promising markets in India include education services, industrial textiles, food processing and cold storage equipment, electronics, consumer goods, clean energy, and pollution control equipment. The country also imports crude petroleum, gold, and silver, machinery, chemicals, electronic goods and pearls, precious and semi-precious stones.xxxvi
Other important countries in South Asia—Indonesia, Malaysia, Thailand, Taiwan, and the Philippines—are all interested in purchasing medical devices, software solutions, and automation technologies for their manufacturing. Regulatory environments remain formidable and infrastructure inadequacies (e.g., toll roads, bridges, airports, and harbors) can make doing business expensive, but worthwhile. Strategic sectors that offer the greatest opportunity for developmental and commercial impacts include clean energy, energy security, transportation, construction materials, and telecommunications.
After considering these global market prospects for 2017 and beyond, take the time to translate your firm’s promotional materials to the languages of these markets, ensuring the translation accuracy, and that cultural nuances convey your message completely and accurately, leaving no room for misinterpretation. This may entail employing the services of a bilingual, native speaker. It is imperative your message is clearly communicated.