A strategy for businesses to explore new territories
As an entrepreneur and a business owner, you would invariably think about how to enter a new market. It is not easy to explore the opportunities available in a new economy, especially if it is an unfamiliar country for you. While every new venture has its challenges, they are multiplied if the factor of alienness is added to the place.
Think of small entrepreneurs who entered the African Market 100 years back and have now developed their stronghold there. What an enormous risk they might have taken at that time; in the absence of technology and fast means of communication how difficult it would have been for them to establish and sustain their business? Today we have all the technologies and modern equipment to support any new venture, but the new age has more complex challenges, so the question always concerns the new entrepreneurs while exploring new territory.
Here are eight steps which will help small, medium or large companies in preparing their strategy to enter the new market.
Do your research: To know the new market and the underlying business prospects available there, you must do in-depth research about the economy. The study should not be limited to your own industry but should cover the overall ecosystem of doing business in that particular country as a whole. In some countries, opening up a company is very easy while in many it may take months. The findings should also look at the challenges of that market.
Don’t ignore the culture: Business is not only an economic venture but is a part and parcel of the society, local customs and culture. In fact, the local traditions and value systems play a very crucial role in the whole ecosystem of the enterprise. While in some countries there is no culture of gifts, in many, you can’t make good relations without an exchange of gifts. Some countries are particular about the time-bound process while in many there is no such compulsion and each step may take its own sweet time unless followed up regularly. Therefore understanding the regional culture is a very important part of the business strategy.
Develop local contacts: No corporation can sustain and grow without having strong local connections. The local language, conventions and contacts play a significant role in making the business activities smooth and more efficient. If any company thinks that it can run the whole operation without the help of local people, it is gravely mistaken and bound to fail. Especially if the company has to establish and stay in the market for a long, its involvement and participation with the local community and businesses are inevitable.
Be ready for an entrepreneurial risk: Business itself means entrepreneurship and taking the affiliated risk. This is even more critical when you are exploring a new market. While entering the new domain, the risk appetite has to be much more than doing business in your own area because founding a new company in a new part of the world might involve investment and efforts much more than the original estimation. It is very common to surpass the initial budget or not finish the project within the decided timeline. Therefore, pragmatic entrepreneurship is very important in a new market.
Don’t ignore the procedure: Sometimes people advise you to take shortcuts but for a company to sustain itself longer, it is important that all the processes are fulfilled and no rule is bypassed. The administrative procedures are extremely crucial, evading or overlooking them may result in huge losses in future. Remember that such an error may make you pay many times more than its actual price.
Avoid illegal means: Even if the country has blatant corruption and the use of money or muscle power is common, it is important for a foreign player to avoid the use of dishonest practices. The local population may embark on taking unlawful routes, but for a foreign company, there will be much lesser tolerance in government and local people for such tactics. The cases of corruption will be highlighted beyond proportion if you are an alien firm and you might lose business not only in that particular nation but also in other geographies where your firm has a presence.
Think long term: While entering the foreign market, have in mind a long-term objective. The trading relationship might be easier to establish but forming a joint venture or having your own presence in the new market demands a long-term strategy. So don’t take a myopic view. Look for the greater opportunities which will be available in the future in that particular market. Also, invest in such a way that it gives long-lasting advantages to your business and also does not harm the local ecosystem. Corporations which have exploited the resources/people for short-term profit have paid a heavy price later. On the contrary, those who have taken care of the wider interest of the host country have reaped benefits for longer.
Start small: While it is important to have a risk appetite but at the same time don’t put all your eggs in one basket. Start with a small venture in any new market and keep injecting more capital and resources over a period of time. Estimate your capacity and keep enough reserve for any possible unforeseen circumstances. Make your existence stronger in the country and commence contributing positively from the onset so that it provides goodwill to your firm.
I hope this eight-step check list will help businesses looking for opportunities in new markets abroad.
Written for & Published in IMC Journal July-August 2022 issue: Partnering for Growth.