At this point, you have segmented the world market into a two, maybe three, groups:
- Those countries that have potential for your company (your shortlist of countries)
- Those countries that might have potential for your company
- Those countries that offer no potential for your company
Your main segment (i.e. your shortlist) currently comprises between three and five countries. But this has only been a very superficial examination based on initial desk-research you have undertaken. You still need to study the countries, environments, industry sectors and customers within each the selected countries in order to determine whether they indeed offer the potential for your company. At this point, the time has thus come to do more intensive research on each of these shortlisted countries and to narrow the potential target countries/markets down to one or two countries.
Why only two countries?
Because of the cost involved in researching and operating in export markets, it simply does not make sense for you to choose more than one or two countries at the onset. You will only deplete your resources (time and money) very quickly. If you investigate your chosen markets and you find them not to have any potential, then you can look at other possible countries to study further (perhaps turning to the other countries on your shortlist).
Begin with desk research
In this process you will undertake additional and more extensive desk research on these markets. Desk research is research that you can do while at still in South Africa. Of course, you have already done some desk research in deciding on your shortlist of countries, but this was a very cursory examination. The desk research you will do now will be more in-depth and take much longer.
In doing this desk research, you would use the Internet (referring
to sources such as ExportHelp and CountryHelp), trade magazines, newspapers,
visit the missions
in South Africa of the countries you have selected, or
even contact industry associations and chambers in the countries concerned,
in order to gather the information that will help you decide whether the country
does indeed have potential for your firm or not. The desk research will help
narrow your shortlist down from three to five countries, to one or two countries
at the most (maybe three countries if they are located very close together,
but no more!). It is these one or two countries that you will now visit and
do more in-depth research on. This is not research that can be done in a day
or two. It may take several weeks or even a month or two to complete this
research becuase you will probably be communicating with trade associations,
chambers of commerce and SA
embassies abroad, as well as with potential intermediaries
and customers and waiting for their feedback in order to learn more.
Now turn to in-market research
Once you have decided, based on the desk research you have undertaken, that these countries indeed represent a potential market for your products, you can now move on to the next stage of the research process, namely in-market/field research! At this point, you would consider undertaking a trip to visit the market(s) concerned. During this visit, you would strive to meet with industry associations, chambers of commerce and even potential customers, in order to learn as much as possible about the country, the environment, the industry sector in question, and the customers you are likely to want to target. You might even consider attending a trade exhibition where you know all the industry participants and your potential competitors will be. A trade exhibition serves as an excellent "one-stop shop" where you can get touch with many of the companies and individuals that will give you the insight into the market that you need. This type of research is known as in-market research.
Using the information to make a market selection
During this exercise, you will gather as much information as possible about these markets and this information will help confirm your choice of the country as a suitable export market for your company or perhaps even to reject the market in favour of another. Following on from your visit you will normally decide on only one market to concentrate on (it is very seldom that you would concentrate on more than one country, unless they are very close geographically and culturally speaking, such as Belgium and Holland, or England and Ireland - but don't mention this to the Irish or English).
Country versus market selection
We have constantly referred to the selection of a country, but in fact what you should be doing is selecting a particular market segment to focus on. A market segment comprises potential customers that are similar in a particular way! For example, they may be of a particular age, have a certain education level; meet a certain economic standard, live in a certain area, etc. There are many, many ways in which to segment customers and more likely than not, you will be using several different criteria to segment your customers.
Obviously, you are segmenting these customers according to the criteria that you believe are relevant to your firm. For example, if you produce health foods, you would be interested in individuals that need to follow a diet for health reasons or are very "sporty" in their outlook on life and so you may want to segment your market according to whether they play sports or not. Similarly, if you produce snow boots then you would be interested in customers that live in areas where it snows, or if you produce toys, then you would be interested in children or parents with young children. Each of these is a market segment.
In only focusing on country selection, we are assuming that people living in those countries are similar, which is true to some extent. However, countries can be segmented even further and it may be meaningful for you to narrow your target market down to specific market segment that is meaningful to your company. The US, for example, with its population of almost 300 million persons, will almost certainly need to be segmented even further, while Belgium is small enough to focus on as a single market segment. As the snow boot manufacturer, you would probably focus on the northern parts of the US as your market segment, while the whole of Belgium could be viewed as your market segment.
In deciding on a shortlist, it was acceptable to do the market segmentation on a country basis only, but as you delve deeper with your research, you must begin focusing on specific market segments. Thus with your research, we move away from talking about target countries to target markets! In other words, in research efforts you will not only consider the country as potential market, but you will also need to decide on what market segment within the country you should be targeting.
Also gathering information to be used in formulating a marketing strategy
Not only will this desk and in-market research be used to select your target country and identify an attractive target market/market segment, but you also need to use this opportunity to gather specific marketing information (such as on product standards, pricing levels, promotional options, distribution channels, etc.) that you can use as input in developing an export marketing strategy. The gathering of marketing information is an important step in the research process which we discuss in more depth in the next section. For larger firms, this is clearly a two-step process (first (a) select a country and target market, then (b) research the customers in the target market to identify their needs), but for smaller exporters who cannot afford to travel abroad more than once, we are suggesting that you may need to do both market and marketing research at the same time in order to save money (read the next section on marketing research to learn more about what you should be focusing on). Even bigger firms should not waste an opportunity to gather information that can help them make better decisions. It is no use returning home and then regretting not having collected some or other information that would have helped you formulate your export marketing strategy and refine your export objectives.
Undertaking marketing research
We have indicated that export research is a two-step process in which you firstly identify potential countries/target markets and then, secondly, study the foreign customer to identify their needs in order to develop an appropriate export markting strategy for your firm. This discussion has been about the first step - namely, narrowing your selection to two or three countries and identifying suitable market segments within these countries. The next step now is to research the customer in order to understand their needs, so let's move on.