The second stage in creating the export strategy: Enterprise export analysis
- Step four: Analysis of the foreign target market
Analysing the foreign market is an extensive process involving many factors, such as the political and economic environment of the destination country, regulations pertaining to introducing products / services within the market, competition characteristics, cultural differences affecting marketing activities and the communication methods with potential customers. A PEST (or PESTEL) analysis is a useful tool which a company can use to analyse the macroeconomic factors of the foreign target market. A PEST analysis involves assessing the political, economic, social and technological environment, while PESTEL expands the analysis to include environmental and legal issues. This method is easy to use and implement for any business. This involves firstly identifying relevant macro-environmental conditions within individual market places which will have the greatest impact on the business. The business must then assess the potential impact that these factors will have on the company and its products.
| Analysis of the political environment. | Analysis of the economic environment | Analysis of the socio-cultural environment | Analysis of the technological environment | Analysis of the environment | Analysis of the legislative environment |
| Laws related to conducting business activities | Profitability of enterprises | Consumer requirements | Quality standards | Environmental protection regulations | Customs policy |
| Taxation policy | Current level of GDP | Lifestyle | Technological level of the country | Regional conditions related to environmental protection | Patent law |
| Consumer protection policy | Unemployment rate | Consumer preferences | Level of funds directed to R&D | Obligations related to environmental protection towards entrepreneurs | Taxation and business law |
| Political stability | Current trade balance with the country of the entrepreneurs | Community formation | Level of technology density on the market | Environmental awareness of consumers | Competition law & policy |
| Educational policy | Average wage levels | Social mood | Number of patents made by companies | Environmental situation of the country | Labour law |
Source: Own study
- Step five: Develop a marketing strategy
Developing a marketing strategy is one of the most important factors to success in exporting. The first step involves defining the sales strategy of the company’s product or service which can be characterised as either a product, price or distribution strategy. The company should focus on building a marketing strategy and developing a strategy for communication and promotion of goods while taking into account the cultural differences of the destination countries.
- The product strategy involves adapting the product to the target market’s current requirements while anticipating the consumers’ potential future needs. In relation to international markets, the enterprise should determine the product’s functional and emotional values relevant for its consumers and adapt the product appropriately to meet customers’ needs.
- The pricing strategy takes into account price as a starting point for all market activities as well as determining customers’ perceptions of price and the prices set by competitors. An entrepreneur deciding to apply this strategy should focus his/her attention, in particular, on customers (how they perceive the product), costs (which the company must incur to make it profitable and of high quality) and competition (what price levels they set for similar product).
- The distribution strategy is entirely focused on the method of distributing the enterprise’s goods on a foreign market. The enterprise must ensure that the distribution strategy is adapted for the target countries taking into account their various stages of development. Developing countries will require a more comprehensive strategy than developed markets. In the case of exporting, we can distinguish between indirect exporting, where our distribution strategy will include the agent responsible for selling the product, and the direct option where the company is responsible for distributing the product to the customer.
- Step six: Develop an export production strategy
In this step, the company must analyse whether it is necessary to further develop production capacity. It is important to assess suppliers’ readiness to provide more goods for production and also to identify if storage space will need to be increased. Furthermore, it is necessary to establish if there is a need to hire more employees to handle increased production for export.
- Step seven: Develop a strategy for the product’s distribution in the target markets
The product’s distribution strategy depends on whether or not a direct or indirect model is used. If a company chooses indirect exporting, the entrepreneur must find a suitable distributor, while with the direct model of exporting, the entrepreneur must plan each element of distribution himself/herself. It is important for the entrepreneur to pay attention to the Incoterms (International Commercial Terms) rules, which regulate trade between the seller and the recipient. There are currently 11 different Incoterms, divided into four groups which relate to the conditions under which the seller has to deliver goods. The four groups are; Group E – the seller has to makes the goods available for buyers in a specific location; Group F – the seller must conduct the customs and export clearance before giving the goods to the buyer. The seller does not pay for the transportation and insurance; Group C – the seller pays for the transport of the goods and is responsible for customs and export clearance, but is not responsible for transportation and other costs, the buyer is responsible for these; Group D – The seller must transport the goods to the destination indicated by the buyer.
Fulfilling all these steps will provide the entrepreneur and the Internationalisation Service Officer with the basic export strategy of the company.