Diversifying into new markets
Irish exporters to Britain will consider various strategies for managing changed arrangements in light of Brexit. Diversifying into new markets is one option.
Enterprise Ireland Manager for Germany, Switzerland and Austria, Eddie Goodwin outlines key considerations when thinking about diversifying into new markets
How you enter a new market is a strategic decision that will define the very nature of your business there. There are two choices – sell directly or have someone sell for you. Your decision will be guided by resources, opportunity and the nature of your offering.
A software company, for example, may find it natural to sell directly to the customer, while a manufacturer of farm machinery will find a distributor the obvious choice.
Commitment required & resources needed
What budgets do you need to successfully close business in your new market? What is the normal decision making time for closing deals there?
For example Germany is a lucrative market but has slower decision-making times. If you are in a position to commit for a longer period then markets like Germany may be suitable but faster decision-making markets such as Switzerland, the Nordics or Benelux may be more relevant to business.
Can you leverage business won in nearby markets?
The first thing to consider is whether you have a reference customer in one market that could be used as a springboard into another market. After that, where would your reference customers be easily recognised and respected?
For example being geographically and culturally close, the Benelux (Belgium, Netherlands, Luxembourg) would often be a natural next step into Northern Germany or vice versa.
Choosing the market
Consider who your competitors are and the risk they might pose to your success. How different or what added value has your product or service in the target market.
Market analysis is required for this. Enterprise Ireland supports this through our Market Research Centre, market advisors and offices around the world positioned in, or near, most global markets. Enterprise Ireland also offers a range of financial supports tailored for companies diversifying in to new markets.
Business culture in the market
It is important to understand this. Business cultures can vary considerably. Failing to understand cultural nuances can be the difference between success and failure. Your approach may not be well received locally or you may have underestimated the time it takes to actually get your offering onto the market – which could have significant implications for your budget.
Is this an early-adopter market?
Is your company at the right stage for your selected market? For example the Nordic markets are often adopters of early-stage technologies and comfortable partnering with early-stage companies so perhaps these markets are more suitable for a company at high potential start-up stage.
Longer-term resources needed to enter the market
Do you need to employ “boots on the ground” early on or can this all be done remotely. Things to consider would be the product or service. The latter is usually a much more straight forward route in that testing etc., can be done remotely. However some business cultures expect close contact with the HQ and others less so.
Route to market required. Can this be done through a successful distributor or agent or is a direct sale process necessary. A good distributor can cut the sales lead times significantly.
Can you approach the market federally or is a regional approach more suitable?
France is a large target market with clusters and strengths in different regions. In your sector, consider whether it is possible to target one region which is easier to manage from an export perspective. For instance, in large countries like Canada, it is advisable to establish a regional presence first in one location, eg Ontario. This can be a springboard to the rest of the country over time.
Have you the capability to undertake two markets at one time? Can you successfully manage two regional areas with partners or employees? For example it is not uncommon for parts of France, Belgium, Germany and the Netherlands to be handled by the same agent or employee.
Currency issues and whether there is a risk or advantage right now. This hardly needs saying in the context of the UK but the danger currency fluctuation poses to your margin should always be considered. Sometimes the environment can be favourable. For instance, the strong Franc in Switzerland is offering Irish companies an advantage right now, making them more competitive than local competitors.
This article originally appeared in the guide Exporting to the UK? Read the full version here