Selling more to Bermuda and Bahamas versus Brazil ? More business in Hong Kong than China ?
Join the club. The long road to BRIC success is filled with dangerous curves and uncertain junctions. “Low hanging fruit” opportunities in these countries have long disappeared replaced by a scrum of category combatants from all corners of the world wrestling for market share in what could be small categories for a long time to come. There are no miracle solutions! Our ten tips apply to large emerging markets such as China and Mexico as well as companies having troubles penetrating Germany, Japan,Italy or the USA. Read our comments on “Fixing the Problem- Small Shipments to Big Countries”.
1. Apply Fundamental Lessons Learned from your Home Market
Think about the factors that drove your success in your home market: Unique product, Consumer Research, Local Production, Competitive Pricing, Marketing Budget, Strong sales team etc. The same fundamentals apply to entering large new markets. I always challenge the senior management of my clients with the following Business Case Study: What would you do if Global Brand “A” from another continent tried to enter your home market ? The response is filled with aggressive plans to defend the home turf. My next question is “Don’t you think that the local competition will react the same way when you plan to enter their home market ?”.
2. Stop Treating Large Countries as Export Markets
Shipping small quantities of product thousands of miles and visiting twice a year will not win in a large market like Germany, the USA, Mexico, or China. Large markets need to be treated strategically, with a separate business strategy and resource commitment versus a small export market. In some cases, it is better to exit a large market if you can not commit versus potentially harming the brand image with lackluster shipments through a subpar effort.
3. Conduct Category Research
Extensive category research is required in strategic markets. Is your category developed or evolving?
For developed categories, what unique characteristics does your brand deliver and how much do you plan to invest to source share from existing brands? In new categories, what does the consumer say about your brand? Is the taste profile appreciated, even if it foreign versus the local cuisine. Or are you better off pursuing a different brand from your portfolio. For example, we have seen Beverage manufacturers pursue enhanced juices and baking companies launch pancakes even though these were not the core items from their home market. Syndicated data is available which will help you gauge the size of the prize.
4. Pursue Local Manufacturing
Export programs to large countries infrequently generate substantial businesses. The incremental overseas freight costs and duty structures normally translate to retail prices far higher than competition produced in country. Building a factory represents a long term commitment. Contract packing could provide a less costly, interim option.
5. Prepare Your Board for a Long Term Investment
Creating a meaningful new business in a large country is not a 1-2 year event. More realistic is a 5-10 year plan depending on existing acceptance of your category. Brands and habits and practices take years to create except in the case of true innovation. A significant Investment in marketing is mandatory, even in the case of a true category innovation. “Me too” products or latecomers probably will need to spend twice as much to gain traction.
6. Buy a Local Competitor
The quickest way to gain a presence in a large market is to acquire a local competitor. Conduct a category review and see which competitor would be the best “fit” for your company from a product portfolio and cultural standpoint. Price is always a consideration, as you do not want to overpay for future growth in an emerging market or pay too much for market share in a mature market.
7. Don’t Tackle Many Large Countries At Once
Companies multi task. Morning meeting on Mexico and we’ll attack Russia after lunch.
A better idea is to pick one major country and plan to focus the teams resources on winning in that country for the next 1-2 years. This includes deployment of human resources as well as investment dollars. Get it right and management will be pleased to fund a broader expansion. Spread yourself too thin and you may fail everywhere.
8. Invest in an Expatriate
Companies need a soldier from your head office on the ground in the country of focus. This facilitates the transfer of best practices and company culture to the new country. The expatriate knows who to call at the home office to get things done. He can report the true status of initiatives and has a long term dedication to the company. Best bet is to partner the company soldier with an experienced local player who knows the local market, culture, customers etc. Language barriers can present a challenge, but the benefits far outweigh the issues.
9. Scorecard against In Store Fundamentals
Your sales team must be equipped and measured against the fundamentals of securing strong in-store presence at leading retailers. Too many times, a team’s progress is judged solely upon shipment numbers. Another scenario reflects positive reports regarding chain headquarter authorizations, but no follow up execution at store level . Our business succeeds with a team focused with winning the battle store by store. Many emerging markets require sizable teams of merchandisers to handle store level activities. How many people does your in country team ( direct or distributor) have dedicated to store level servicing ? Can each merchandiser articulate your in store objectives regarding shelf space, positioning, pricing, and off shelf merchandising? How are merchandisers graded and compensated ? Can the merchandiser distinguish between an “excellent” store for your brand and a “poor” store for your brand ?
10. Consider a Local Partner
Plans may be fast tracked through a local partner. Partnerships can take many forms including a joint venture, licensee, services contract, or distributor type relationship. Extensive due diligence is required as unsuccessful partnerships can be difficult to exit. Export Solutions has a thorough nine step process we deploy on our many partner identification projects. Lessons learned including alignment from your partners senior management to the retail merchandiser, as often the partners commitment gets diluted through the supply chain. It’s advisable to have your own representative “in house” at the partner to look out for your company interests. Partner results are directly proportional to your investment as even the best sales teams require the right financial resources to allow them to obtain optimal performance.