An important first step in adapting a product to a foreign market is to determine the

An important first step in adapting a product to a foreign market is to determine the degree of newness as perceived by the intended market. How people react to newness and how new a product is to a market must be understood. In evaluating the newness of a product, the international marketer must be aware that many products successful in the United States having reached the maturity or even decline stage in their life cycles, may be perceived as new in another country or culture and thus must be treated as innovations. From a sociological viewpoint any idea perceived as new by a group of people is a innovation.

Whether or not a group accepts an innovation and the time it takes to do so depends on the product’s characteristics. Products new to a social system are innovations and knowledge bout the diffusion (i.e. the process by which innovation (spreads) of innovation is helpful in developing a successful product strategy. Sony’s marketing strategies for the US introduction of its PlayStation 2 were well informed by its wild successes achieved six months earlier during the product’s introduction in Japan. Conversely mid 1990s dips in Japanese sales of Apple computers were preceded by dips in Apple’s home US market. Marketing strategies can guide and control to a considerable degree the rate and extent of new product diffusion because successful new product diffusion is dependent on the ability to communicate relevant product information and new product attributes.

A critical factor in the newness of a product is its effect on established patterns of consumption and behavior. In the preceding cake mix example the fancy iced cake mix was a product that required both acceptance of the difficult to believe that is that dried eggs and milk are as good in cake as the fresh products, and the acquisition of new ideas that is that easy to bake fancy cakes are not a slight to one’s domestic integrity. In this case, the product directly affected two important aspects of consumer behavior and the product innovation met with sufficient resistance to convince the company to leave the market. Had the company studied the target market before introducing the product, perhaps it could have avoided the failure.

Another US cake mix company entered the British market but carefully eliminated most of the newness of the product. Instead of introducing the most popular American cake mixes the company asked 500 British housewives to bake their favorite cake. Since the majority baked a simple very popular dry sponge cake, the company brought to the market a similar easy mix. He sponge cake mix represented familiar tastes and habits that could be translated into a convenience item and did not infringe on the emotional aspects of preparing a fancy product for special occasions. Consequently after a short period of time, the second company’s product gained 30 to 35 per cent of the British cake mix market. Once the idea of a mix for sponge cake was acceptable the introduction of other flavors became easier.

The goal of a foreign marketer is to gain product acceptance by the largest number of consumers in the market in the shortest span of time. However, as discussed and as many of the examples cited have illustrated new products are not always readily accepted by a culture; indeed they often meet resistance. Although they may ultimately be accepted the time needed for a culture to learn new ways, to learn to accept a new product is of critical importance to the marketer because planning reflects a time frame or investment and profitability. If a marketer invests with the expectation that a venture will break even in three years and seven are needed to gain profitable volume, the effort may have to be prematurely abandoned. The question comes to mind of whether the probable arte of acceptance can be predicted before committing resources and more critically if the probable rate of acceptance is too slow, whether it can be accelerated. In both cases, the answer is a qualified yes. Answers to these questions come from examining the work done in diffusion research – research on the process by which innovations spread to the members of a social system.

“Exporting offers great opportunities for Canadian businesses, but you need a good export plan,” says Bill Macheras, Manager of the Info-Centre at Global Affairs Canada and a long-time Trade Commissioner with the Canadian Trade Commissioner Service.

Macheras specializes in advising exporters on how to develop their international business. “Many business owners have no strategy and chase every lead. With a strategic approach, you can be proactive and improve your results,” he says.

Macheras, a Certified International Trade Professional, suggests three essential steps to enter a foreign market. The advice below also includes recommendations from BDC’s expert advisors.

1. Review your company

Take a careful look at your business to make sure you’re ready to expand internationally. Be sure to review these elements:

Capacity to expand

Do you have the capacity and resources to start exporting? You need the financial capacity to make a long-term commitment to the venture. You should also think about your capacity to expand your workforce, production and support functions to accommodate expected sales growth.

Leadership

Are the owners and senior managers on board? Are you ready to get the outside expertise you’re missing? You may need to appoint a senior dedicated executive to manage the international business. “Without a dedicated executive to handle exports, the CEO may get stretched and neglect other tasks,” Macheras says.

Your team

Do you have adequate marketing, sales and other human resources? Think about any training and other gaps you will need to address—for example, to operate new equipment or systems, or to communicate in the target market’s language.

Product or services

How will you stand out against the competition in a foreign market? Are you ready and able to adapt your offering to the needs and tastes of international customers? Just because something sells well in Canada doesn’t mean it will do so elsewhere.

“It’s important to research beforehand what kind of retooling and hiring you may need to start exporting,” Macheras says. “You can then put the resources in place before you get orders. Many businesses make the mistake of wanting to see orders before they make any investment, but this can lead to delays in fulfillment and shipping and hurt your reputation.

One example that comes immediately to mind is an Ontario-based manufacturer that had to retool its entire production line to produce in metric to meet European Union requirements. The company’s manufacturing line had been entirely in imperial, which it had been using for years to serve its U.S. customers.”

Macheras says it’s “quite common” for Canadian businesses used to operating at a Canadian scale to become overwhelmed when they get their first large international order.

“The company gets a buyer, but the scale is completely off the charts and the price point is much lower because of the volume. They may have to turn down the order or ask for it to be scaled down, which affects their credibility. Or they have to scramble to fill the order by hiring new people and buying equipment in a hurry. This can be avoided if you do your research beforehand,” he says.

2. Develop a market entry strategy

The next step is to develop a market entry strategy. This typically involves these elements:

  • Set clear goals. Decide on:
    • your business goals and targeted level of sales
    • the specific product or service to export
    • the target market
    • major action items, a timeline and your budget
  • Do preliminary research on your market. This should include:
    • size of the market
    • competition
    • your unique value proposition
    • regulatory, certification, trade and other barriers and opportunities
  • Choose your mode of entry. Options include:
    • using a distributor or agent
    • acquiring or partnering with a local business
    • opening a physical presence
    • selling through online marketplaces
    • offering direct e-commerce sales
    • selling indirectly through another company that exports to the target market
    • a blend of several channels
  • Consider financing and insurance.
    • Think about what financing you may need for your investments in the venture to ensure you don’t eat into working capital. Also, consider insurance for such things as shipping losses, non-paying foreign customers and contract cancellations.

“If you strategically narrow down your market and spend resources there, that’s when you can get significant export sales,” Macheras says. “A lot of entrepreneurs make the mistake of trying to service all over the world. They’re used to domestic business where you don’t turn down that purchase order and sell to 20 different markets, making $1,000 here, $1,000 there. They go very wide and very thin. Instead, you should go narrow and go deep.”

He offers these additional tips:

  • Use free online trade data tools, such as Trade Data Online, to find high-potential target markets where Canadian products are valued and competitive.
  • Once you settle on two or three strategic markets, you can visit trade shows or other business events in each market to make contacts and learn more before making a final decision. Cut costs by attending virtual events or participating in government trade missions, which are subsidized and often cheaper than privately run missions.
  • Consider countries that have signed free trade agreements with Canada, which can offer a safer investment climate, reduced tariffs and easier movement of goods and people.
  • Explore foreign government procurement as a potential source of export orders.

3. Prepare and execute an export marketing plan

Finally, create and implement an export marketing plan (sometimes known as an export plan). This is where you work out specifics of your venture. It typically covers:

  • More detailed research on your target market, including:
    • target customer characteristics
    • local consumer needs and trends
    • specific regions or segments to target
    • cultural considerations
    • potential partners and buyers
    • details on regulations and certifications you need to meet

For help with this research, visits to target markets and finding partners, Macheras recommends contacting bilateral chambers of commerce, industry associations, and government trade-promotion agencies, such as the Trade Commissioner Service.

  • Needed adaptations to reflect local needs and customs. You may have to adapt:
    • product features
    • packaging
    • labelling
    • pricing
    • branding
    • business practices
  • Logistics needs, including:
    • transportation of products
    • documentation
    • packing
    • storage en-route
    • customs clearance

Logistics is a highly specialized function and may require you to engage in-house or external expertise, such as a freight forwarder, customs broker and carriers.

  • A promotion plan. This may consist of:
    • website and social media marketing
    • ads
    • media kits
    • brochures
    • business cards
    • testimonials
  • Monitoring your efforts. It’s important to pick a few key metrics and regularly monitor them to stay on target and optimize.

A critical element for exporting success, Macheras says, is having local expertise and partners to help untangle the complexities of international business.

“Canadian companies often underestimate things like the amount of documentation required to enter a foreign market,” he says. “This is when it’s key to have a good local partner and someone in the company who can speak the language of the target market. This will really help resolve problems and ease communication.”

Macheras recommends tapping Canadian university MBA programs, which often have many students with solid international knowledge. “They’re a really underutilized resource for Canadian companies,” he says.