10 myths about entering international markets
International business and trade is not just a more difficult process than domestic business. The difficulty of international trade stems from the complexity of the environment, and also because there are many different stakeholders with interests that can conflict with each other. While some myths are widely held beliefs across industries, others may vary depending on which industry you're in. This blog post tackles the 10 most common myths about entering international markets to help set expectations for your potential international sales efforts.
Let's begin by discussing...
- Myth #1: International markets are unpredictable and volatile.
While market conditions can change rapidly in some international markets, there is often a long-range trend. For example, U.S. and Chinese industrial output has steadily risen over the last decade, as seen in the chart below:
Chinese industrial output to U.S. has grown over the past 10 years (blue line), while China's currency has steadily declined over the same period (red line). Note that it took almost two decades to see this growth from China's manufacturing sector since its economic reforms began in 1978.
- Myth #2: The quality of your products or services will be instantly judged.
As soon as you enter an international market, you must expect that there will be differences in local tastes and expectations. Even if your products are not completely "new"—or truly unique—you can still make them more attractive to the target market. Local tastes differ from country to country, so don't expect there to be a perfect match. For example, the French have a very classic taste when it comes to their food, which is why French wines have been a favorite of wine connoisseurs for hundreds of years. The Japanese, on the other hand, tend to favor softer, less acidic wines.
- Myth #3: You will be immediately viewed as an "importer."
Once you begin your international sales efforts, it is inevitable that some customers will perceive your brand as a "foreign" brand. As soon as you start importing goods into a country, there is a high likelihood that competitors will also start importing competing products to try and gain market share. This is not only acceptable but also encouraged. It gives your company opportunities to win over would-be customers with better service or by offering different products than their local competitors.
- Myth #4: All the customers are in one location.
Successful companies have learned that it is very difficult to build a business on a single market or location—even if the market is strong and growing. It may be better to start with smaller segments of a country, perhaps where your products are unique, and work outward into larger markets as you gain expertise in the local market. This reduces the risk of capital expenditures and marketing costs.
For example, look at companies like French cosmetics company L'Oréal or American home building company Lowe's, who have been successful by choosing specific countries or regions to enter first and then slowly expanding their sales efforts over time.
- Myth #5: You can't manage the operations for your new international locations.