Jeremy Gray Season 5 Show 4
IBGR.Network - PROFIT Radio. Everything a business owner needs to start, grow or exit a business. GROW WITH US. How do you assess how much demand there is for your products in your targeted overseas market? Understanding the true desire or demand of your product or service is key before you enter a new market. Some products or services seem to be universal. Anywhere you go in the world today you will see people on their mobile phones, many of which are smartphones. So common are smartphones in Singapore that a key response to Covid pandemic was to provide a track and trace app for mobile phones. Although the government did make provision for citizens without smartphones the assumption was that most of the population had smartphones. It’s hard to accept that the common use of mobile phones is only about 30 years old. Other products are more regional. Take breakfast cereals, as an example, in many parts of the world these are well accepted and the demand is high. However folks in Vietnam do not eat cereal for breakfast and the demand for them is limited to international hotels and supermarkets catering for expats. The point I am making is just because there is a demand for your product and services in your home country that demand may not exist in your target market. You need to ensure that there will be a demand for your product or service before you invest time and dollars entering a market. Like real estate where Location, Location, Location is the key to price, in terms of assessing demand it is Research, Research, Research. Research can be hard work but there is no substitute for it. But before you do your research; do your research. Take the time to find out what resources are available without charge. Many governments provide a wide range of support services to companies thinking about expanding overseas. As an example the UK government through the Department for International Trade offers, using their network overseas posts and UK-based trade advisers, support for UK companies wishing to expand into overseas markets. This includes information on the main forms of overseas investment reasons, why UK businesses may consider expanding into overseas markets, information on overseas investment opportunities for your products or services. I took a look at where the DIT overseas posts are located, and most countries are represented and certainly the highest potential exports markets are covered. Think about it, thanks to free services such as Zoom you can conference with someone who is located in, and knowledgeable about, your prospective target country. Many governments provide similar services so take the time to find out what is available in your home country. Also, on the other side of the coin you will likely find that your target countries' governments have departments that provide information to potential investors. Also consider gateway service providers as a source of information. Gateway service companies will help you set up your company in your target countries, help with work permits etc. To attract clients they publish articles about the countries they operate in. These can be great sources of information. This pre research research will help you frame the questions you need answered before you venture forth on your international venture. And it will not have cost you a dime. Completely free, just a time investment. And doing this research can save you time, if you find that your business offering is not open to foreign companies. Some countries limit foreign investment into some industries, usually defense companies and critical infrastructure. They can sometimes be company specific like several government concerns about Huawei, the Chinese Telecoms company, involvement in 5G networks in their countries. As an entrepreneur this type of company specific restriction is unlikely to impact you. You are now ready to start assessing the potential demand for your product or service in your target country or countries. GDP per capita can be a guide and again this information is available free of charge. The World Bank defines a lower middle income country as one with GDP per capita of between $1,026 and $4,035. Below this a country is considered a low income country. Between $4,036 and $12,475 a country is considered to be upper middle income. However, there can be a wide range of per capita incomes within a country. Take India as an example the per capita income for the country as whole in 2019 was $2,099 put India in the lower income category, but Mumbai’s per capita income was $7,830 putting the city in the Upper Middle Income Category. Similarly for Thailand, the country per capita GDP is $6,729; for Bangkok it is $16,909. This pattern is common – the big cities have higher GDP than the county as a whole. This is good news; it means that the majority of potential buyers for your products or services will likely be concentrated in a small geographic area. This will help lower distribution costs. While we are on the topic of GDP, the numbers I have given are nominal GDP expressed in US dollars. The country or city GDP divided by the population. There is another measure of GDP which is known as Purchasing Power Parity or PPP. Put simply this adjusts GDP for the cost of living in the country. Looking at Bangkok, the nominal GDP is $16,909 but the PPP equivalent is $46,056 due to the lower cost of living in Bangkok. This is important to you because it means the folks living in Bangkok have a higher disposal income than might be apparent from the nominal GDP. GDP is only a general guide but it can help, if you are selling luxury items a country with a low GDP may not be ideal. But looking at the number of Gucci, Louis Viton, Prada and Hermes stores there are in the malls in Bangkok there is certainly a demand for these premium products in the city. Some governments publish population information by income which is a subset of data that can be helpful. An example of how you can use population data to estimate demand for your product or service. Being part of the IBGR team I have recognized that I can help entrepreneurs in more ways than just via my consulting company. One product I could offer is training videos for budding entrepreneurs but what price point should I charge? When I researched potential competition I found a wide range of prices from essentially free to several hundred dollars. I thought $10 for a 15 to 20 minute lesson would be about right. Not a huge investment and therefore not a large barrier to purchasing. Although nowadays many people expect this type of product offering for free. And indeed there are a lot of good quality free products on YouTube. If you have listened to me in the past you will know I am passionate about Vietnam and would love to help Vietnamese entrepreneurs get started. But $10 could be a significant investment for a young budding Vietnamese entrepreneur. So let's change the price point to 49,000 Vietnamese Dong. About US$2 or the cost of a couple of beers from your local shop in Saigon. Would there be enough demand to justify my investment in equipment, marketing costs and time? My back of the envelope calculation says yes. The population of Vietnam is approaching 100 million, globally around 5% of the population are entrepreneurs, which if Vietnam was average would mean there are 5 million entrepreneurs. According to the World Bank new business registrations in Vietnam were 1.1 new business per 1000 people aged 15 to 64. 70% of Vietnam’s population fall into that age group. That would indicate that 77,000 new businesses are launched in Vietnam each year. Making some assumptions that only a third of folks who think about starting a business actually do so, and that may be high, as an entrepreneur you have beaten the odds and made the leap into running your own business, and if it takes a couple of years to get started that would mean that at anyone time about 500,000 people are considering starting business in Vietnam. So I have a potential audience of 500,000 for business start up videos and 5 million for more advanced videos. If I can capture 1% of this potential audience for startup videos I would sell 5000 videos per topic for an income of $10,000 per year. As my price point is significantly below comparative offerings in Vietnam, I may be being conservative with my 1% estimate. This is of course a very simple analysis but as I will invest only a few hundred dollars in software and I already own a good quality video camera the financial risk is minimal. There is an opportunity cost of my time to consider but it will be fun to try to make educational videos. And how will I avoid folks from other countries buying my videos at a knocked down price – they will be in Vietnamese of course. And if a Vietnamese speaking Australian wants to buy the video I would be delighted. I’ll you know how I get on with my venture. Customs data could be another source of information. Not every country provides the level of detail that the United States provides but it is worth checking out. I was once trying to understand how my competition seemed to be able to regularly outprice me in an ASEAN market and by accessing that country's customs data I was able to find who they were buying their imported raw materials from, how much they were buying and what price they were paying. Invaluable information again available for free. And do not forget LinkedIn, Facebook and other online social media. I particularly like LinkedIn. Even with their free service you can search industries, people, jobs in the targeted markets. If a trade association for your industry is present in the target country, they could be a low cost source of information. For the price of membership you may be able to get details on your competition, potential customers and suppliers. Some associations aggregate members sales so you can get accurate (ish) information about the market size. Free and low cost information can only take you so far. As I mentioned if your investment is low then this may be enough to make a go, no go decision. If you are making a larger investment you need to understand more about your potential customers, and their buying decisions. Ask questions such as: • Who is the customer? • What does the customer want to buy? • When does the customer want to buy? • Where/How does the customer buy? • How does the customer pay? • What price is the customer willing to pay? You also need to learn more about the market you are entering: Asking questions to learn more: • What is the market size? • Is the market growing or contracting? How quickly? • How many potential customers are there? • What barriers to entry exist? • What is the bargaining power of suppliers? • What is the intensity of the competition? • Is there a threat of new entrants or an established player entering your market? This type of detailed specific information is going to come at a cost. If you are fortunate there may be off the shelf research reports that you can buy that will provide all this information and more. If you are entering a niche or specialized market off the shelf publications will probably not be available, you will need to commission your own study. Either by hiring a market research company to do the work or by finding an in-country expert to guide you through the process. Finally, my regular reminders do not allow biases to impact how you interpret the data. Question yourself on every assumption you make to ensure you are not allowing biases to impact your judgement. If you can, check your assumptions with a trusted local to ensure you are on the right track. You are operating outside your comfort zone when you enter a new country and you do not know what you do not know. The other danger is that enthusiasm can blind you to risks. Do not brush aside any red flags or inconsistent data. If you see either of these items double check. Note this risk gets greater as your progress along with a project. You get excited about the potential, you develop a vision of success. Do not ignore any warning signs. You may find that warning signs only mean you need to adapt your market entry approach rather than abandon it altogether. You can contact me via the following links: mailto:jeremy@business-in-asia.org Or schedule time via Calendly: https://calendly.com/3-continents-consulting My websites include: https://business-in-asia.org/ https://thedentistscfo.com/ My LinkedIn URL https://www.linkedin.com/in/jeremy-gray1
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