Export Potential: Product and Market Analysis

Posted on Nov 3, 2024 in Economy

The Product and the Market in Export

Identifying a Product with Export Potential

A company must begin with a thorough understanding of its product characteristics, production capacity, and the efficiency of its production processes. It must determine if it can achieve the required quality and volume.

Finding Information on the International Market

Companies can obtain information from various sources, from personal visits to historical statistics of the target market. The main sources include:

  • Public and State Research Sources
  • Specialized Study Centers
  • Industry Events
  • Internet Resources

To access import statistics, consider these criteria:

  • Countries
  • Ranking by tariff heading
  • Exploration by country
  • Exploration by tariff heading

Information on Potential Markets and Product Supply & Demand

Potential markets have high demand for the good or service, resulting in higher sales volumes. Key information sources include:

  • Carriers: Provide information on shipping, insurance, and packaging.
  • Banks’ Foreign Trade Departments: Liaise with banks in other countries, provide information on letters of credit and other financial instruments, and assess the credibility of foreign banks.
  • Private Organizations: Such as World Trade Centers.
  • Peru’s Commercial Counselors Abroad: Offer insights into specific countries.

Information is freely available on websites like:

  • SUNAT
  • PROMPERÚ
  • COMEXPERÚ
  • ADEX
  • Ministry of Foreign Trade and Tourism

Identifying the Competition

Companies must monitor competitor activities and evaluate their impact on their own goals. A competitive analysis should consider:

  • Number of competitors
  • Key competitors/market leaders
  • Competitor locations
  • Target markets of competitors
  • Business strategies of competitors
  • Inputs used by competitors
  • Competitor pricing
  • Competitor’s market presence (duration)
  • Production capacity of competitors
  • Advertising strategies of competitors
  • Sales channels used by competitors
  • Customer service approach of competitors
  • Strengths and weaknesses of competitors
  • Key success factors of competitors
  • Distinguishing features of each competitor

Competition can be classified as:

  • Direct Competition: Companies offering identical or very similar products/services.
  • Indirect Competition: Companies targeting the same markets with similar products/services.
  • Replacement Competition: Companies offering products/services that address the same customer needs but in a different way.

Critical points for any competitive analysis:

  • Identifying current competitors
  • Identifying potential competitors
  • Identifying current and potential product/service substitutes
  • Identifying critical aspects of competition
  • Determining the value proposition for the customer
  • Analyzing each competitor individually

Selecting the Target Market

Steps:

  1. Gather import statistics for the chosen product from various countries.
  2. Identify three major markets where consumption of the product is growing.
  3. Identify two or three smaller, emerging markets that offer immediate opportunities.
  4. Identify three promising future markets and monitor their development.

Factors to Consider

  1. Demand Level: Measured by per capita income and quantity demanded. Consider if purchasing power is stable and if consumption is continuous or seasonal.
  2. Economic and Political Stability: Consider country risk.
  3. Transportation Facilities: Evaluate logistics, costs, and efficiency.
  4. Experience of Other Companies: Research if other companies are exporting similar products to the target market.
  5. Cultural Similarity: Consider language, values, business practices, and traditions.
  6. Trade Barriers and Benefits: Analyze tariffs, non-tariff barriers, trade agreements, and market access conditions.

Conducting a Market Analysis

Few companies conduct thorough market research before exporting. Data sources are categorized as:

  • Secondary/Desk Research
  • Primary/Field Research

A basic international market research outline includes:

  • The market itself
  • Market factors
  • Market access

A comprehensive market analysis should include:

Market: General Information

  • Location
  • Border limits
  • Area
  • Climate
  • Distance from exporter
  • Time difference
  • Population
  • Language
  • Major cities
  • Ports and airports
  • Media
  • Roadways

Economy

  • GDP
  • Per capita income
  • Resources
  • Main products
  • Major industries
  • Foreign trade
  • Main exports
  • Main imports
  • International reserves
  • External debt
  • Currency
  • Exchange rate
  • Major banks

Services

  • International transport
  • Frequency of transport modes
  • Freight rates
  • Availability of containers, refrigeration, etc.
  • Insurance
  • Mandatory transport/insurance requirements

Regulations

  • Tariffs
  • Tariff preferences
  • Import restrictions
  • Anti-dumping duties, countervailing duties, safeguards
  • Internal taxes
  • Foreign exchange regulations
  • Import zones
  • Customs formalities