Assessing A Product's Export Potential
There are several ways to gauge the overseas market potential of products and services. (For ease of reading, products are mentioned more than services in this guide, but much of the discussion applies to both.) One of the most important ways is to assess the product's success in domestic markets. If a company succeeds at selling in the domestic market, there is a good chance that it will also be successful in markets abroad, wherever similar needs and conditions exist.
In markets that differ significantly from the domestic market, some products may have limited potential. Those differences may be climate and environmental factors, social and cultural factors, local availability of raw materials or product alternatives, lower wage costs, lower purchasing power, the availability of foreign exchange (hard currencies like the dollar, the British pound, and the Japanese yen), government import controls, and many other factors. If a product is successful in the domestic market, one strategy for export success may be a careful analysis of why it sells here, followed by a selection of similar markets abroad. In this way, little or no product modification is required.
If a product is not new or unique, low-cost market research may already be available to help assess its overseas market potential. In addition, international trade statistics (available in many local libraries) can give a preliminary indication of overseas markets for a particular product by showing where similar or related products are already being sold in significant quantities.
If a product is unique or has important features that are hard to duplicate abroad, chances are good for finding an export market. For a unique product, competition may be nonexistent or very slight, while demand may be quite high.
Finally, even if domestic sales of a product are now declining, sizable export markets may exist, especially if the product once did well but is now losing market share to more technically advanced products. Countries that are less developed may not need state-of-the-art technology and may be unable to afford the most sophisticated and expensive products. Such markets may instead have a surprisingly healthy demand for products that are older or that are considered obsolete by our market standards.
Making The Export Decision
Once a company determines it has exportable products, it must still consider other factors, such as the following:
- What does the company want to gain from exporting?
- Is exporting consistent with other company goals?
- What demands will exporting place on the company's key resources - management and personnel, production capacity, and finance -and how will these demands be met?
- Are the expected benefits worth the costs, or would company resources be better used for developing new domestic business?
A more detailed list of questions is shown in below. Answers to these questions can help a company not only decide whether or not to export but also determine what methods of exporting should be initially used.