Small and medium scale enterprises or SMEs generate as much as 70 percent of a country’s employment, especially in developing nations. But more importantly, SMEs help their countries by employing those who benefit most from getting jobs – the poor, women, and the youth.
The performance of SMEs in the domestic and international markets are vital for economic development, accounting for the most significant contributions in both employment and gross domestic product.
As such, it is critical for countries to provide ample support for SMEs, especially in terms of promoting sustainability. By providing adequate support and a robust platform for SMEs, governments can help business owners take full advantage of available opportunities in the global market.
Apart from governmental support, there are a few crucial factors which can spell the success or failure of SMEs on the global stage. These include company’s available resources, experience, and expertise and the prevailing conditions in the country where the business is planning to enter into trade.
For the latter, export market research is critical.
Success through diligent market research
Understanding a company’s target market overseas is by no means an easy feat. Each market has its own set of characteristics that may be unique to itself.
A thorough research process will provide the company and its key decision-makers insights on a diverse variety of areas.
First, it is crucial to determine if there is indeed a demand for the product or service the business is eyeing to export. Research should provide a snapshot of the customers the company should target, as well as the number of players in the industry.
Finally, companies should also have a clear idea of the prices of potential competitors in that market.
One key stumbling block a business may face is the presence of cultural differences. An excellent example of that is the way a product should be marketed. A company’s approach in its home country may be acceptable there, but frowned upon in another.
The language barrier can also pose difficulties, primarily when companies deal with their counterparts in another country.
- Laws and regulations
Legislation and regulations related to specific products or services can curtail a company’s ability to penetrate a market. It is crucial for companies to be aware of these and weigh the pros and cons before diving head-on.
The importance of market intelligence
Making a foray into exporting provides SMEs with new opportunities that may not be readily available in their home countries. However, along with those opportunities come a new set of risks.
Acquiring good market intelligence allows smaller players to avoid, or at the very least, mitigate these risks while increasing their chances of success.
In order to acquire market intelligence, there are critical tasks that need to be undertaken:
- Developing an export strategy
At this stage, an SME must ascertain where there is a high volume of demand for its goods or services, as well as potential risks that can hamper the smooth flow of trade. Specifically, an SME’s research team should analyze market conditions, trade agreements, taxes and tariffs, legislation and regulations, political climate, and economic risks.
- Performing secondary research
Conducting secondary research entails looking at available data published online and on print from governments, trade organizations, and non-governmental institutions like Legatum.
- Facilitating primary research
Primary research entails diving deeper into the specific country an SME is planning to enter. Among the strategies a company can use for conducting primary research are interviews, surveys, trade fairs, and test marketing.
The Legatum Prosperity Index
In performing secondary research, SMEs have a diverse variety of resources at their disposal, most of which are free.
One vital resource that companies can consult is the Legatum Prosperity Index, which seeks to illustrate how the included countries have moved toward or away from prosperity. The index is published by Legatum Institute, an international think tank and educational charity based in London.
What makes the index unique from other potential resources companies can use for the secondary research is that it goes beyond a country’s material wealth or prosperity. In addition, the report looks at personal and social being.
Among the key indicators or Nine Pillars that the Prosperity Index factors in are Economic Quality, Business Environment, Governance, Personal Freedom, Social Capital, Safety and Security, Education, Health, and the Natural Environment.
The index uses data from 149 countries, spanning over 11 years of research.