Key Indicator #1: Public Source Data

Public source data is not always available and not always reliable, but it’s a start on your journey. Sources might include information from trade magazines, business publications in the country, and trade websites from the country of interest. The benefits to you of these sources are that they are relatively inexpensive and sometimes free, can be researched from your office or home, and a lot of information can be collected, compared, and contrasted quickly. The obvious downside is lack of reliability.

Key Indicator # 2: End-user Polling

A second source of information used by our company is end-user polling, which is especially helpful in finding pricing data, particularly if you are a business-to-business (B2B) firm that does not have a product on the shelf. On larger, more expensive items, this is a very valuable piece of information both for determining price, add-on features, and other changes that may be needed.

For example, the medical industry in Asia has changed rapidly over the last two decades. If your company is considering exporting your products and services to Asia, you might ask:

• Is your business handling alternative medicines, that is, herbal medicines that need a freshness seal rather than the traditional packaging used for pills and liquids?
• Is your business primarily with doctors’ offices or hospitals? If hospitals, are they large with many beds, or small and typically involved in outpatient care? Is there a retail pharmacy on site, or do patients fill prescriptions at local retail pharmacies?

These are questions that our company looked to hospital administrators to answer for us. Typically, we can successfully find answers that cover what the current practices are, why they are being done, and where there are gaps by asking questions such as whether there is a benefit to manufacturing in the country and if so how that would be filled. This information is obviously relevant to the products and services that our client wishes to introduce.

A recent conversation with a source in India about a language software tool intended for hospital use did not produce the expected response. The 2001 India census found that there were 30 languages spoken by more than one million people; 122 languages by more than 10,000 people; and 1,599 other languages spoken in India. Obviously, communicating with patients can be a challenge. Nevertheless, this particular product was quickly dismissed by a top medical professional because it required broadband internet service, which was not available in much of India, and therefore the tool would be too costly for hospitals to access. Instead, the decision-makers believed it would be easier and cheaper to let the patients figure out what languages were spoken in their local hospital, and, if necessary, use the services of a translator via phone or in person.

Key Indicator #3: Conferences and Trade Shows

Great market research can be done at conferences and trade shows if you pay close attention and listen to the right people. Similar to public source data, you have to fact-check to ensure the information you receive is reliable. Venues like these can be great opportunities to speak directly with potential clients or suppliers or to hear what industry experts in the country say about where the particular markets you are interested in are going. It is also a good place to see who your competition is, if they really have a competitive product, and, perhaps, even what they are charging for it.

All of this information is essential to your exploration of market potential and will help you understand and determine what planes to compete on. For example:

• Are you selling a high quality product at a higher price?
• Are you competing on price?
• Are you competing on service?

Going back to X-IO Technologies: In the United States, they offer a superior product at a lower price than their competition. In the Chinese market, a lower price is usually associated with an inferior product. We encouraged them to raise their price in China and compete on their superior quality, which was prevention of downtime, a very important detail in corporate hardware systems.

Key Indicator # 4: In-country Market Research Firms

Although more expensive, in-country market research firms can provide very detailed data. If you are looking to cut costs, they often are not the answer, but if you have the resources, they are a great way to get very detailed reports on all of your data points. The price differential is pretty significant between in-country, local firms, and international firms, so it is possible to find less expensive options that can still provide good research. These firms provide pieces of all of the three methods discussed above, and, if they are good, do it in a more efficient, effective way than your company could using its own time and effort.

1. Developing a Biased View of Market Potential as a Result of Insufficient Research

Doing some online research paired with questioning a few sources and justifying this method by saying we did not have the time or resources for a long, drawn-out study—In my experience, this means someone does a Google search and talks to a few friends in the United States who have experience in the market. What does this typically create? A very biased view of the market.

It is probably fair to say that no one person knows everything about a specific market. For instance, a person who has lived and worked in the United States their whole life, and worked in many different cities across the United States, could make a lot of assumptions, but that person might still overlook many opportunities in specific areas that are unknown to them or misunderstood because the person doesn’t have specific knowledge of that particular area or product. The same holds true for Asia. On the other hand, if you know someone who is really insightful about a particular market, keep that person close.

When looking at a country in Asia, do not rely on a few friends and a Google search to provide adequate information. At the very least, include a search of local media sources. In addition, talk to your law firm and accounting firm. They may have a partner or office in the country; if so, ask them to establish contact for your company. This would be an appropriate source of input, and making a phone call will be worth the time and resources.

• The takeaway: Taking the path of least resistance rarely produces the desired outcome.

2. Not Adjusting Properly for Risk

Here’s an example of what I mean: Some Americans make certain assumptions about a market; if it is a large market, we assume it will stay that way. To Americans, it is almost incomprehensible to think that railroads would be deemed government property or that they would be taken over by the federal government. However, in some countries, such as Russia, historically, the government has played a large role in the ownership of railroads.

• The takeaway: Do not assume all countries operate in the same way.

A false sense of security can develop, and a company may be caught off guard, for example, when a government unexpectedly changes its policies, as the Chinese government did when they adopted the Ex-IOE policy,⁴ which required government offices and state-owned enterprises to show cause to use software other than those mandated by the state.

There are always risks, and often they are much more prevalent than we immediately understand. A great recent example concerns universities in the United States that recruit Chinese students, who are seen as high-quality students who paid full tuition and represent an almost endless supply of future students, given the enormous population of China. But two things have occurred that could change the success rate of this recruitment program: 1) students returning to China after graduation have found it increasingly difficult to find jobs, especially jobs paying salaries that can justify having paid 30 to 50 times more tuition than if they had gone to school in China (Chinese tuition runs between roughly $1,000 and $2,500 per year). The cost is not only monetary. During the Chinese student’s absence, he or she has also lost relationship-development time. 2) Another factor is now in play; the Chinese government recently stated that if you want to rise to a high government position, you must have studied in China. It remains to be seen how this will affect the decisions of Chinese students thinking of coming to the United States and Europe; this will have no effect on students who wish to stay in the United States and Europe after they graduate.

• The takeaway: Anticipate the unexpected.

Are there Asian markets where this is less of an issue? Japan has less market risk than other countries in the region, but they are very protective of their markets. Singapore is perhaps the most open to outsiders, having a lot of work performed by companies from other countries. This mainly stems from the fact that their economy is built around shipping and trade, and thus they have always been open to foreign enterprises.

3. Not Paying Enough Attention to Local Competition

Some companies in the United States minimize the impact of competition that does not play directly into the same price or quality category as their product(s) because they do not view it as direct competition. Does Ferrari consider Vespa their direct competitor in the United States? Of course not. Should they consider it in developing their strategy in the U.S. market? Yes.

In emerging economies, it is easy for priorities to shift and changes to occur quickly. For example, even though the high-end electric vehicle market in China had little competition, recently several companies have stepped in because of subsidies and their need to seek growth markets.

As a result of increased taxes on traditional vehicles and the elimination of these taxes on electric vehicles in an attempt to encourage less exhaust pollution in Chinese cities, many companies have quickly come into the electric car market. Today, there may not be a one-to-one comparison with Tesla, but it may not be long before there is direct competition.

In the United States, some might consider it extremely costly and unlikely for a new company to compete with Tesla, but, then again, it was not that long ago that Tesla took the risk with substantial backing from Elon Musk. This relates to imposing our own values on a foreign culture. We see building a factory and developing a business as too costly to justify the process, but in emerging markets, different factors motivate them (glance back at chapter 2 and the discussion of economic values for a refresher, if necessary). Emerging markets can garner worldwide market share because profits are not the sole, or even the primary, motivator.

Look at India, which over the past two decades has seen its economy morph from one almost monopolized by a handful of private companies and state-run companies to an environment in which many new companies keep appearing. In the past, a business person would have looked at and only vetted the several private companies and state-run companies as probable competition. The state-run companies, traditionally, ran at a loss and subsidized the cost of what they produced for the people of India.

• The takeaway: For a company thinking of investing in Asia, ignoring today’s realities and the fact that growth has happened throughout Asia could be fatal.

4. Not Understanding What Part of the Market You Can, and Will, Capture

Nothing happens instantaneously, and, for this reason, initially our company will often target microsegments of a sector to build up a brand reputation; ideally these segments are made up of fast-growing sectors that are in need of new developments, such as our client’s technology. A great example of this is X-IO Technologies. When we were looking at market growth, we targeted, among other areas, social media applications. Social media applications obviously need a storage environment and cannot afford downtime. They need zero failure rates, and that is what X-IO offers because of its advanced engineering technology. Consider the movie The Social Network, when Mark Zuckerberg is yelling at Eduardo Saverin, “We are never down, we can’t go down even for one minute.” If a social site is down for one minute or one hour, their traffic migrates to another option. Thus, downtime can be fatal since there are so many options.

Once we capture a microsegment, we then use this market capture to grow into other segments. We were fortunate that in China, social networks are growing into many new sectors, including banking and retail among others, so there was built-in growth as well, even among the initial target client set. We used small segments as a stepping-stone into a larger market.

• The takeaway: Use a stepped approach to growth into a new market, hitting new plateaus each year and steadily increasing market presence, pairing it with your costs to eliminate unnecessary overhead early on, while attempting to maximize your growth potential for the future.

5. Forgetting Your Established Clients at Home

When looking at the market potential in Asia, you may find that your current clients are already established there. If you sell to Walmart in the United States, it would be prudent to contact their international division and attempt to get into their stores in the foreign markets you are entering. Likewise, if you sell to law firms or accounting firms, make sure they are using your products in the foreign markets. Also consider organizations you partner with and anyone else you can tie in. Too often, when looking at market potential, valuable work you’ve previously done is overlooked.

A glaring example of this particular oversight emerged during a conversation with an Asian subsidiary of a U.S. client and the company’s managing director of Asia. The managing director told me his relationship with headquarters was positive, but also said that he had never met his boss in person, and that they did not share information across the company. For example, our client had no idea who the company’s clients were in the United States, Australia, Europe, or anywhere else. Likewise, other than his boss, no one on the sales team in those countries outside of Asia knew who his clients were either.

My first piece of advice to this company about growing their sales was to share your client list (they looked at me as if I had discovered a cure for cancer). Although, I was caught off guard the first time I heard this story, I do not believe it will be the last time. As an organization, you have worked hard to bring in clients in your geographic area; therefore, it is important to maximize their potential. That client chose you in your home market for a reason, and usually that reasoning will apply across borders, making for an easier sales opportunity than a completely new client would.

• The takeaway: Do not forget simple things, like working with your current clients; they could be your best entry into a new market.

At the end of the day, remember market potential for your business is a forecast, which essentially means it’s a “best guess” on a spreadsheet to pass through everyone’s hands. It may well be an “educated best guess,” but be prepared to adjust as needed. And remember, as you prepare it, try not to make assumptions informed by your own biases. It’s very easy to do, and sometimes hard to catch, but inevitably these assumptions will either set goals too high or bring down your foreign operations by improper expectations. These assumptions can be market based, company based, or competition based. No matter what these assumptions relate to, you’ll need to keep an unbiased eye on them to make sure you have some checks and balances.