Once you have your short list of export markets, you should build up a short profile of each market. For this, more accurate information should be collected. The questions that have to be answered can be assigned to three areas: the market, competition and technology.
Important Areas
1. The Market:
You must distinguish between the total market and the segment of it you hope to serve. For instance, if you were considering exporting instant coffee to Japan, you would be well advised to find the total size of the Japanese coffee market and also the size of the instant coffee segment.
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The second would be much smaller than the first, but quite probably growing, while the other is declining.
Next, check the growth rate. You are unlikely to enter a declining market. In stable markets, competitors will react fiercely when you enter, because the only way you will get business is by taking it from them. If the market is growing, entry may be easier, provided you have the product that the customers want.
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The important questions you must answer are:
Is the market or the market segment big enough?
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Does it have a future?
Then, study the channel of distribution for your product. If it is too long, it could squeeze out your profits.
2. Competition:
Who will you have to out-perform to be profitable in each of your short-listed markets? If the main suppliers to the market are large powerful firms, competing head-on will be a disaster.
However, if such companies do not cover certain segments of the market, then you may have found a real market opportunity, but which is probably small in size.
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If there are many relatively small competitors chasing the same customers, you may be able to compete with them. However, competition will tend to revolve around pricing tactics, so your expected profits will be low.
You should consider yourself lucky, if you have identified a market segment or niche where there are few direct competitors. There, you could have the opportunity to build up long-term customer loyalty to a specialised product or service.
3. Technology:
You need to know where you stand in regard to the prevailing technology levels for your kind of products.
You can now use the scoring procedure outlined below to determine priority among the short-listed markets. Depending on the resources available to you, one or more markets can thus be identified.