The organisation operating from a single location develops a tendency of settling down in the market over the years. The present market gives security to the entrepreneur and manpower in terms of everything seems comfortable. The entrepreneur knows almost every vendor and customer in the present market.
The only uncomfortable factors are:
- the business is not growing; or
- margins are coming down because of increased number of competitors.
New markets are new territories for the organisation. There are new people, new culture, new challenges, involvement of risks, etc. But, despite all the aforesaid, the new market offers certain advantages:
- Margin advantage
- Margins are dependent upon income capacity of the consumers alongwith availability of goods and how informed the consumers are?
- Margins in village /countryside markets could be better than city markets depending upon product availability;
- Western countries offer better margins than Asian countries but the products must be of good quality.
- Purchase price advantage
- Purchase price from the new market cheaper than the existing market → purchase cost savings;
- High levels of automation like in China offers purchase price advantage;
- Wholesale markets offer better purchase price than others;
- Countries and organisations in distress offer substantial discounts to the offer price (e.g. scenario during sub-prime crisis OR economic slow-down in European countries, etc.).
Strategies to be adopted
- Identify demand and supply conditions of organisation’s products in various countries, risks involved, logistics cost, etc. → purpose
- “Where else we can go to increase turnover alongwith improved margin?”
- “Where demand exists for my products?”
- Identify markets catering to organisation’s raw material (at least 70-80 % of total purchase value), terms & conditions, SWOT (Strength – Weakness – Opportunity – Threat) analysis of vendors, logistics cost, risks involved, etc. → purpose
- “Where we can locate raw material with better price?”
- “Whether the new vendors can be trusted same as present vendors?”
- Start from small supplies and small purchases → get the experience of dealings with new customers & new vendors → carry out test / pilot run → Increase the levels gradually.
Important developments in the New Market exploration
- Internet as a power databank provides the data on each product → products can be viewed online 360 degree OR through mobile applications (WhatsApp, etc.) OR video conferencing OR skype or any other means;
- Meetings with prospective customer and vendor can be set through internet without investing in travelling.
Traditional / Normal ways of working for New Market exploration
- Researching about various markets → choosing the best one → Travel to the location → search for right vendor / customer through market survey → set-up the meeting → start the business in small lot before going full throttle.
Conflicts (Inter-departmental) / Challenges for New Market exploration
- New market carries the initial cost of market survey, travelling & boarding, agent’s fees, etc. → costs may go waste after initial study of the market;
- Increased cost due to
- Customer may default the payment; or
- Vendor may supply poor quality material.
Some of the Process Implementation for better New Market exploration
- Monthly report on
- Market survey of various markets for product and raw material; commercial advantage in each product; risks involved; progress of survey till date;
- Prospective Vendors and customers visited; products they are dealing in; price & terms and conditions; feedback.
- Half-yearly Budget for market exploration account-head wise.