Four Things to Consider When Entering New Markets
By Suraya Roos
Businesses are affected by many internal and external factors. You are mostly able to control the internal factors, but that is not so easy for external factors, such as politics and legislation, socio-cultural aspects, the economy, and technology. If you want to expand, or export your product to another country, you need to know the ins and outs of that market. Just keeping up with the news isn’t going to be enough. Market Entry Strategists at M74 Group have all the necessary knowledge to help you navigate your way to new markets in the United States of America (USA), Nigeria, the Philippines, Spain, Portugal, India and Guyana. Here are four things to consider.
Politics and legislation
Many political issues have an impact on businesses. If you have an exporting business, you are not only dealing with the political situation in your own country, but also with those of the countries you are exporting to, as well as the relations between them. Changes at the political front in any of these places, could have consequences for your business. Taxes and tariffs, laws and regulations, they all follow from political decisions.
Rules on who you are allowed to hire, and minimum and maximum pay regulations are of major influence on a business. For example, the Portugal Labour Code provides employer-friendly legislation concerning the organisation of the workforce, giving Portugal more flexible employment legislation than other European countries.
Social and cultural aspects such as demographics and social trends can make a business soar to great heights, or fail miserably. Often, success in business is a matter of being in the right place, at the right time.
The demographics of a certain area is one of the social-cultural circumstances that can greatly influence a business, especially if it caters to a specific group of people. Society can be divided in groups according age, gender, ethnicity and more. One group may have more “spending power” than other groups. It seems logic that working adults have the most money to spend. But they also have the most bills to pay. Other groups, like teenagers, have a small income from little work, and some pocket money, but no further commitments like houses, cars and families. They only spend their money on the things they like. Though this group is small, it can become a very powerful consumer group and this can be very lucrative for businesses who deal in items that teenagers are typically interested in, such as certain fashion items, mobile phones, music players and head phones. In India, 88% of adolescents own a mobile phone these days, and they all want the latest one.
Social trends are another social-cultural impact on businesses. For example, the recent “green” trend is changing the behaviour of many consumers into buying organic and environmentally friendly products instead of plastic and products that harm the environment. Some consumers want to reduce their so-called ‘footprint’ by saving fuel, using recyclable goods and reducing the amount of plastic that they use. Consumers can choose to buy from organisations that claim to be ‘environmentally friendly’ or choose products with a ‘green label’ over products that use plastic materials. Nearly 70% of consumers in the USA think it is important for a brand to be eco-friendly.
The economy plays a big role in the life of a business. After all, a business aims to make a profit, and when money is concerned, the economy is an all-important force to be reckoned with.
In a growing economy, consumers will have the confidence to spend on essential and non-essential goods, that’s when many businesses can make a good profit and grow and expand. Remarkably, Guyana is one of the fastest developing countries in the Western Hemisphere at the moment.
However, in a shrinking economy, consumers tend to keep their wallets closed and choose to save their money rather than spend, or only spend on essential goods. In this situation, businesses, especially dealing in non-essential goods, could end up with undistributed stocks and a slowdown in revenue flow, which makes it difficult to pay suppliers and employees.
Furthermore, when the economy is low, and a company faces financial challenges, it will also be much harder to get a loan or financial support and the company can’t grow or expand. This in turn has a negative effect on the economy and the employment rate.
Technology has been changing the way businesses operate ever since the industrial revolution. New products, improved services and changing demands follow each other in dazzling speed these days.
Advances in technology can be very beneficial for a company, for example by speeding up the production process and cutting costs for employment, thus making the end product cheaper and the profit margin larger. Technology is also used to make better forecasts, analyze the market and improve marketing strategies, for example by using social media platforms.
On the other hand, inventions, and advances in technology can have a negative impact on businesses when new products are brought onto the market that replace existing products. For example, when the Sony Walkman was brought onto the market, sales of cassette tapes quickly overtook the sales of vinyl records. Later, cassette tapes were replaced by CDs in a matter of a few years and nowadays, music lovers download music onto their portable devices or memory cards. Businesses that can’t keep up with the advances in technology can get into serious trouble when their product or service becomes obsolete.
You need to keep all these things in mind when expanding your business, or entering new markets. Although some external factors are impossible to control, having the knowledge on how to deal with them could make the sink-or-swim difference for your entry into new markets.
Suraya Roos is an intern at M74, and a recent graduate from the Open University Malaysia, where she received a BA in English Studies. She is also an English teacher. Her passions are languages, cultures and communication.
The views expressed above are those of the author and do not reflect the official position of the M74 Group, which remains neutral on all matters. Publishers assume no liability for content.