Chapter 3: MARKET RESEARCH

To be successful, exporters must assess their markets through market research. Exporters engage in market research primarily to identify their marketing opportunities and constraints within individual foreign markets and also to identify and find prospective buyers and customers.

Market research includes all methods that a company uses to determine which foreign markets have the best potential for its products. Results of this research inform the firm of

A firm may begin to export without conducting any market research if it receives unsolicited orders from abroad. Although this type of selling is valuable, the firm may discover even more promising markets by conducting a systematic search. A firm that opts to export indirectly (see chapter 4, Methods of Exporting and Channels of Distribution) by using an intermediary such as an EMC or ETC may wish to select markets to enter before selecting the intermediary, since many EMCs and ETCs have strengths in some markets but not in others.

A firm may research a market by using either primary or secondary data resources. In conducting primary market research, a company collects data directly from the foreign marketplace through interviews, surveys, and other direct contact with representatives and potential buyers. Primary market research has the advantage of being tailored to the company's needs and provides answers to specific questions, but the collection of such data is time-consuming and expensive.

When conducting secondary market research, a company collects data from compiled sources, such as trade statistics for a country or a product. Working with secondary sources is less expensive and helps the company focus its marketing efforts. Although secondary data sources are critical to market research, they do have limitations. The most recent statistics for some countries may be more than two years old. Product breakdowns may be too broad to be of much value to a company. Statistics on services are often unavailable. Finally, statistics may be distorted by incomplete data-gathering techniques. Yet, even with these limitations, secondary research is a valuable and relatively easy first step for a company to take. It may be the only step needed if the company decides to export indirectly through an intermediary, since the other firm may have advanced research capabilities.

METHODS OF RESEARCH

Because of the expense of primary market research, most firms rely on secondary data sources. Secondary market research is conducted in three basic ways:
  1. By keeping abreast of world events that influence the international marketplace, watching for announcements of specific projects, or simply visiting likely markets. For example, a thawing of political hostilities often leads to the opening of economic channels between countries.

  2. By analyzing trade and economic statistics. Trade statistics are generally compiled by product category and by country. These statistics provide the U.S. firm with information concerning shipments of products over specified periods of time. Demographic and general economic statistics such as population size and makeup, per capita income, and production levels by industry can be important indicators of the market potential for a company's products.

  3. By obtaining the advice of experts. There are several ways of obtaining expert advice:
Gathering and evaluating secondary market research can be complex and tedious. However, several publications are available that can help simplify the process. The following approach to market research refers to these publications and resources described later in this chapper.

A STEP-BY-STEP APPROACH TO MARKET RESEARCH

The U.S. company may find the following approach useful.

1. Screen potential markets.

2. Assess targeted markets.

3. Draw conclusions.

After analyzing the data, the company may conclude that its marketing resources would be applied more effectively to a few countries. In general, efforts should be directed to fewer than 10 markets if the company is new to exporting; one or two countries may be enough to start with. The company's internal resources should help determine its level of effort.

The following section describes the publications that have been mentioned and includes additional sources. Because there are many research sources, the firm may wish to seek advice from a Department of Commerce district office (see appendix III).

SOURCES OF MARKET RESEARCH

There are many domestic, foreign, and international sources of information concerning foreign markets. Several of these sources are given here, and others may be found in the bibliography (appendix V). Available information ranges from simple trade statistics to in-depth market surveys.

Trade statistics indicate total exports or imports by country and by product and allow an exporter to compare the size of the market for a product among various countries. Some statistics also reflect the U.S. share of the total country market in order to gauge the overall competitiveness of U.S. producers. By looking at statistics over several years, an exporter can determine which markets are growing and which are shrinking.

Market surveys provide a narrative description and assessment of particular markets along with relevant statistics. The reports are often based on original research conducted in the countries studied and may include specific information on both buyers and competitors.

Potential exporters may find many of the reports referred to in this section at a Department of Commerce district office (see appendix III) or at a business or university library. In addition, the Foreign Trade Reference Room in the Department of Commerce (Room 2233) offers extensive trade statistics. The NTDB is a source for much of the following information. Call 202-482-1986 for more information on the NTDB.

The following sources fall into two broad categories _ general information resources and industry- or country-specific information resources. Each category is divided into several subgroups.

GENERAL INFORMATION RESOURCES

One of the best sources of information is personal interviews with private and government officials and experts. A surprisingly large number of people in both the public and private sectors are available to assist exporters interested in any aspect of international market research. Either in face-to-face interviews or by telephone, these individuals can provide a wealth of market research information.

In the private sector, sources of market research expertise include local chambers of commerce, world trade centers or clubs, and trade associations. In the federal government, industry and commodity experts are available through the Department of Commerce, USDA, and SBA. In addition, these agencies provide the following publications, many of which can be found in local libraries.

Sources of General Information

Worldwide General Information

GENERAL INDUSTRY AND AGRICULTURE INFORMATION

Industry Information

Agriculture Information

Country and Area Information

DETAILED PRODUCT-AND INDUSTRY-SPECIFIC DATA RESOURCES

U.S. Government Product and Industry Resources

Private Sector Product and Industry Resources

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