6 Essentials of Foreign Market Research

How to perform a truly valuable ground rise assessment when entering foreign markets

By: Alexander Gordin

as seen in the July, 2012 issue of The New York Enterprise Report http://www.nyreport.com

The problem of risk opportunity assessment in international expansion is that every country has its share of inherent risks, which both local and foreign businesspeople need to identify and overcome in their quest for good returns.

Suppose your company decides to explore entering the Ukrainian market, and initially begins exporting your product or service, with an eye for setting up local operations in the next two to three years. Scanning recent press, you could see that a company controlled by US shareholders was recently raided and its ownership allegedly snatched away from them by a state-sanctioned criminal enterprise. In another article, you would read a prediction of economic collapse for the country immediately following the end of the soccer tournament finals in July. On the flip side, you would also see a 100-plus page comprehensive report by the American Chamber of Commerce in Ukraine saying that the greatest investment opportunity sectors are agriculture, alternative energy, retail, and pharmaceuticals. Much of the information you’d read, both positive and negative, is true, yet it should represent no more than five to 10 percent of your decision-making equation.

To do business in emerging markets, you need to become a bit of a detective, building your own local network and getting to know the lay of the land for yourself.

If you are unwilling to invest the time, stay home and continue to read the news on the internet.

1. During your preliminary research, identify potential issues, dangers, and opportunities. Good places to start are Fi180 country profiles, online English language local media, and Western media mentioning the target country and its leadership. Perform internet searches on the target country’s criminal enterprises, corruption, corporate raids, terrorism, and economic development. These will form your initial thesis, which you will either confirm or not during your initial visits into the country. Notice I said visits, as one visit is not nearly enough.

2. Talk to as many people as you can about the issues. Start with representatives of the U.S. Commercial Service, local AMCHAM (American Chamber of Commerce), and the appropriate U.S. Business Council for the target country. Interview law firms operating in the country, and talk to local government officials and get their group of business or legal professionals, the best way to approach the conversation is to frame it in the form of a Q&A. Tell them that you are new to the market and offer one or two of the issues you have identified. Then seek their opinion and comments. When you are between meetings, talk to taxi drivers, waiters, hotel clerks, and local businesspeople. Some will be wary to talk to strangers, but some will be more than happy to provide their honest opinions. The more people you speak with, the more accurate a picture you will get. Good conversation starters with this group are fairly basic—a local sporting event, complimenting the local architecture, weather, or food. Once the ice is broken, you may first have to answer some questions about the US, as many people are very interested. After an initial bond is established, it is safe to move onto more serious subjects.

3. Go out on the streets and observe people’s activities in restaurants, markets, shopping malls, and entertainment venues. Observe people’s facial expressions, their mood, interactions, level of dress, and grooming. See if kids are playing at playgrounds; how full shopping malls, markets, hotels, restaurants, and cafes are; look for signs of civil unrest; and read the content of the graffiti. Often, behavior you observe will clash with published economic statistics. Depending on the business you are in, the consumer behavior may be a direct foreteller of how attractive the market is, or may just simply provide another indication of the country’s state of affairs.  Trust your gut. During your trips, you need to be methodically focused on understanding the true situation and fleshing out opportunities for your company’s business.

4. You need to understand your potential competitors, their allegiance, and power base. While this is not an easy task, you can accomplish this by talking to representatives of local leading accounting and law firms over drinks or dinner (you host) and asking them direct questions.

5. It is very important to understand the forces affecting the particular sector your company plans to enter. For instance, if you carry out your due diligence correctly, you may find out that, although a country’s pharmaceuticals and alternative energy are listed as very attractive sectors, they are controlled by powerful interests, such as an influential local family, that would greatly hamper any attempt to bring new medicines into the country or develop large-scale solar or wind projects. Fantastic opportunities, however, may exist in smaller scale solar development, conversion of gas boilers to woodchips, and export of woodchips production to nations of the European Union.

6. Choose your partners very carefully and perform thorough background checks through the U.S. Commercial Service and, if necessary, through private investigation agencies. Consider buying political risk insurance, which protects US business interests from a number of perils, including expropriation, creeping expropriation, and nationalization.

Once you have done comprehensive due diligence explorations, amend your thesis, share it with some of your local advisors, and begin to plot an all-inclusive business plan that takes into account the information learned and risks identified during your research phase.

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About Alexander Gordin
An international merchant banking professional with over twenty years of business operating and advisory experience in the areas of export finance, international project finance, risk mitigation and cross-border business development. Clients include foreign governments, municipalities and state enterprises as well as Fortune 500 and small/medium enterprises. Strong entrepreneurial instincts, combined with leadership and strategic skills. Transactional and negotiations experience in over thirty five countries. Author of the highly acclaimed "Fluent in Foreign Business" book and creator of the "Fluent in OPIC", "Fluent in EXIM","Fluent In Foreign Franchising", "Fluent in FCPA",and "Fluent in USTDA" seminar/webinar series. Currently developing "Fluent In ......" seminars and publications. Co-author of the Fi3 Country Business Appeal Indices. Extensive international business development and project finance transaction experience in healthcare, aerospace, ICT, conventional and alternative energy infrastructure, distribution and hospitality industries. Experience managing international public and private corporations. Co-Founded three companies abroad. Strong Emerging and Frontier Market expertise. Published and featured in numerous publications including: The Wall Street Journal, Knowledge@Wharton, NBC.com, The Chicago Tribune, Industry Week, Industry Today, Business Finance, Wharton Magazine Blog, NY Enterprise Report, Success magazine, Kyiv Post and on a number of radio and television programs including: Voice of America, CNBC, CNNfn, and Bloomberg. Frequent speaker on strategy, cross-border finance and international business development. Executive MBA from the Wharton School at the University of Pennsylvania. B.S. in Management of Information Systems from the Polytechnic Institute of NYU. Specialties Strategic Management Advisory, Export Finance, International Project Finance & Risk Management, Cross-border Negotiations, Structured Finance transactions, Senior Government and Corporate officials liason

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