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 * the largest markets for its product, * the fastest growing markets, * market trends and outlook, * market conditions and practices, and * competitive firms and products. 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) 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: * Attending seminars, workshops, and international trade shows. * Hiring an international trade and marketing consultant. * Talking with successful exporters of similar products. * Contacting trade and industry association staff. 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. * Step 1. Obtain export statistics that indicate product exports to various countries. * Step 2. Identify 5 to 10 large and fast-growing markets for the firm's product. Look at them over the past three to five years. Has market growth been consistent year to year? Did import growth occur even during periods of economic recession? If not, did growth resume with economic recovery? * Step 3. Identify some smaller but fast-emerging markets that may provide ground-floor opportunities. If the market is just beginning to open up, there may be fewer competitors than in established markets. Growth rates should be substantially higher in these countries to qualify as up-and-coming markets, given the lower starting point. * Step 4. Target three to five of the most statistically promising markets for further assessment. Consult with Commerce district offices, business associates, freight forwarders, and others to help refine targeted markets. 2. Assess targeted markets. * Step 1. Examine trends for company products as well as related products that could influence demand. Calculate overall consumption of the product and the amount accounted for by imports. Industry sector analyses (ISAs), alert reports, and country marketing plans, all from the U. S. Department of Commerce, give economic backgrounds and market trends for each country. Demographic information (population, age, etc.) can be obtained from World Population (Census) and Statistical Yearbook (United Nations). * Step 2. Ascertain the sources of competition, including the extent of domestic industry production and the major foreign countries the firm is competing against in each targeted market, by using ISAs and competitive assessments. Look at each competitor's U.S. market share. * Step 3. Analyze factors affecting marketing and use of the product in each market, such as end user sectors, channels of distribution, cultural idiosyncrasies, and business practices. Again, ISAs are useful, as is the Comparison Shopping Service (CSS) offered by Commerce. * Step 4. Identify any foreign barriers (tariff or nontariff) for the product being imported into the country (see chapter 11 for an analysis of tariff and nontariff barriers). Identify any U.S. barriers (such as export controls) affecting exports to the country. Country information kits produced by the Overseas Private Investment Corporation (OPIC) can be helpful. * Step 5. Identify any U.S. or foreign government incentives to promote exporting of the product or service. 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. SOURCES OF MARKET RESEARCH There are many domestic, foreign, and international sources of information concerning foreign markets. 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. 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. Worldwide General Information * International Financial Statistics (IFS). Published by the International Monetary Fund, IFS presents statistics on exchange rates, money and banking, production, government finance, interest rates, and other subjects. It is available by monthly subscription for $188 yearly (yearbook, $50 alone, included in the price); single copy, $20. Contact International Financial Statistics, Publication Services, Room C100, 700 19th Street, N.W., Washington, DC 20431; telephone 202-623-7430. * UN Statistical Yearbook. Published by the United Nations (UN), this yearbook is one of the most complete statistical reference books available. It provides international trade information on products, including information on importing countries useful in assessing import competition. The yearbook contains data for 220 countries and territories on economic and social subjects including population, agriculture, manufacturing, commodity, export-import trade, and many other areas. The latest edition available (1987) is about 900 pages and costs $100. Contact United Nations Publications, Room DC2-0853, New York, NY 10017; telephone 212-963-8302. * World Bank Atlas. The World Bank Atlas provides demographics, gross domestic product, and average growth rates for every country. The latest edition, 1990, covers data for 1980 to 1989 and costs $6.95. Contact World Bank Publications, 1818 H Street, N.W., Washington, DC 20433; telephone 202-473-1154. * World Factbook. Produced annually by the CIA, this publication provides country-by-country data on demographics, economy, communications, and defense. The cost is $23 (GPO:041-015-00169-8). Contact Superintendent of Documents, U.S. Government Printing Office, Washington, DC 20402; telephone 202-783-3238. * World Population. The U.S. Bureau of the Census collects and analyzes worldwide demographic data that can help exporters identify potential markets for their products. Information on each country _ total population, fertility, mortality, urban population, growth rate, and life expectancy _ is updated every two years. It also contains detailed demographic profiles of individual countries, including analysis of labor force structure, infant mortality, and so on. The cost of the latest edition, 1989, is $7.50 (GPO:031-024-07074-0). Contact Superintendent of Documents, U.S. Government Printing Office, Washington, DC 20402; telephone 202-783-3238. * Worldcasts. This eight-volume annual series presents 60,000 abstracted forecasts for products and markets outside the United States (150 countries). Forecasts are arranged by modified standard industrial classification (SIC) codes and are typically one-line entries providing short- and long-range projections for consumption, employment, production, and capacity. A product volume and a regional volume are published each quarter. The complete annual set of four product volumes and four regional volumes costs $1,300; the product set and the regional set, $900 each; single volumes, $450 each. Contact Predicasts, 11001 Cedar Avenue, Cleveland, OH 44106; telephone 800-321-6388 or 216-795-3000. GENERAL INDUSTRY AND AGRICULTURE INFORMATION Industry Information * Foreign Trade Report: Monthly Exports and Imports _ SITC Commodity by Country, FT 925. This monthly publication by the Department of Commerce provides statistics on all export and import trade engaged in by the United States. Annual subscription cost is $139 (GPO:703-091-00000-8). Contact Superintendent of Documents, U.S. Government Printing Office, Washington, DC 20402; telephone 202-783-3238. * U.S. Industrial Outlook. This annual publication of the Department of Commerce provides economic and commercial assessments and forecasts on U.S. industry, including statistics on trade, investment, and finance. The cost for the 1991 edition is $28 (GPO:003-009-00586-8). Contact Superintendent of Documents, U.S. Government Printing Office, Washington, DC 20402; telephone 202-783-3238. * Export Information System Data Reports. Produced by the SBA, each data report covers approximately 2,700 product categories. XIS helps small businesses determine which export markets to pursue. Upon request, SBA provides a small business with a list of the 25 largest importing markets for its product, the 10 best markets for U.S. exporters of that product, the trends in those markets, and the major sources of foreign and UN data. This service is available free to small business. Contact the local SBA field office or telephone the Small Business Answer Desk, 800-368-5855 or 202-653-7561. Agriculture Information * AgExporter. This monthly magazine is published by the USDA's FAS. Appealing to the farm exporter, the articles analyze conditions affecting U.S. agricultural trade. AgExporter highlights market development and export activity. The annual subscription cost is $14. Contact Trade Assistance and Planning Office, Foreign Agricultural Service, U.S. Department of Agriculture, Washington, DC 20250; telephone 703-756-6001. * Export Briefs. This weekly bulletin produced by the FAS presents current news and statistics on world production and trade of agricultural commodities and highlights upcoming trade shows. Available free and on line (electronically). Contact High-Value Products Division, Foreign Agricultural Service, U.S. Department of Agriculture, Washington, DC 20250; telephone 202-447-3031. * Trade Policies and Opportunities for U.S. Farm Products. Published by the FAS, these reports document the policies other governments use to help their agricultural exporters compete against U.S. suppliers. Also identified are import barriers to U.S. farm products and marketing opportunities for U.S. agricultural exporters. Fifty countries and the trading blocs of the European Community (EC) and the Gulf Cooperative Council are covered. Available free. Contact Trade Assistance and Planning Office, FAS, U.S. Department of Agriculture, Washington, DC 20250; telephone 703-756-6001. Country and Area Information * Country marketing plans (CMPs). CMPs are prepared annually by the commercial sections of U.S. embassies for the US&FCS, covering 67 countries. Each CMP is a planning tool that analyzes an individual country's business and economic climate, emphasizing the marketing and trade statistics, development, and issues. CMPs are available at $10 per report through the Commercial Information Management System (CIMS). * Foreign Economic Trends (FETs). Published by the Department of Commerce, each FET covers a single country and provides in-depth assessment of political, commercial, economic, and investment conditions and developments. Special emphasis is given to implications for U.S. business opportunities. Annual subscription cost is $50 (GPO: 803-006-00000-8). Contact Superintendent of Documents, U.S. Government Printing Office, Washington, DC 20402; telephone 202-783-3238. * Overseas Business Reports (OBRs). Published by the Department of Commerce, the OBRs provide background statistics and information on specific countries useful to exporters, current economic and commercial profiles, and information on U.S. foreign trade with the country. Annual subscription is $14 (GPO:803-007-00000-4). Contact Superintendent of Documents, U.S. Government Printing Office, Washington, DC 20402; telephone 202-783-3238. * Background Notes. This series surveys a country's people, geography, economy, government, and foreign policy. Prepared by the Department of State, it includes important national economic and trade information, including major trading partners. Available by set or by subscription. Price of the set is $58 (GPO:844-000-914-7); with binder, add $4.75. Annual subscription cost is $18 (GPO:844-002-00000-9). Contact Superintendent of Documents, U.S. Government Printing Office, Washington, DC 20402; telephone 202-783-3238. * Commercial Activities Report (CAR). The CAR is prepared annually by the economic and commercial sections of the U.S. embassies, covering 67 countries where the Department of Commerce is not represented. Designed as a planning tool, each CAR provides the basis for an ongoing evaluation of a particular country's political, economic, and business activities. Special emphasis is given to identifying U.S. marketing opportunities, particularly to assessing market potential and strategies for increasing U.S. sales. Topics include the commercial setting and trends, import data, best prospects, major projects, and trade information and event activity. CARs are available at $10 per report through CIMS. Contact the local Commerce district office or telephone 202-377-4767. * Congressional Presentations of the State Department's Trade and Development Program. This annual document reports Department of State dollar expenditures by industry in specific countries around the world for the past several years. (For a description of U.S. Trade and Development Program [TDP] activities to stimulate U.S. exports, see chapter 7.) Contact U.S. Department of State, Information Office, Trade and Development Program, Room 301, SA-16, Washington, DC 20523; telephone 703-875-4357. * Country information kits. Covering developing countries and 16 regions worldwide, the kits are put together by OPIC. Each kit includes most of the background information considered necessary when a business is considering entry into a specific foreign market. Available free. Contact Overseas Private Investment Corporation, 1615 M Street, N.W., Washington, DC 20527; telephone 800-424-OPIC or 202-457-7128. * Exporters Encyclopedia. This extensive handbook on exporting is updated annually and contains exhaustive, in-depth shipping and marketing information. More than 220 world markets are covered country by country. Topics include country profile, communications, trade regulations, documentation, marketing data, health and safety regulations, transportation, and business travel. The annual price is $535. Contact Dun's Marketing Services, 3 Sylvan Way, Parsippany, NJ 07054-3896; telephone 800-526-0651 or 201-605-6749. * Foreign Agriculture. This annual factbook published by the FAS presents agricultural profiles of 65 countries, focusing on production, marketing, and trade, and it includes a full atlas of world agriculture with maps and graphics. The cost is $12. Contact Trade Assistance and Planning Office, Foreign Agricultural Service, U.S. Department of Agriculture, Washington, DC 20250; telephone 703-756-6001. * Investment climate statements (ICSs). ICSs are prepared annually by the commercial sections of the U.S. embassies for the US&FCS, covering 67 individual countries and designed as a planning tool. Through statistics, policies, issues, and analyses, each ICS comprehensively assesses a particular country's environment for direct investment, particularly foreign direct investment. Available at $10 per report through CIMS and NTDB. Contact the local Commerce district office or telephone 202-377-4767. * Organization for Economic Cooperation and Development (OECD) surveys. These economic development surveys produced by OECD cover each of the 24-member OECD countries individually. Each survey presents a detailed analysis of recent developments in market demand, production, employment, and prices and wages. Short-term forecasts and analyses of medium-term problems relevant to economic policies are provided. The surveys are shipped from France. The complete set costs $180 ($203, airmail); a single copy, $13. Contact Organization for Economic Cooperation and Development, Publications and Information Center, 2001 L Street, Suite 700, Washington, DC 20036; telephone 202-785-6323. * OECD publications. OECD publishes widely on a broad range of social and economic issues, concerns, and developments, including reports on international market information country by country, such as import data useful in assessing import competition. The chartered mission of OECD is to promote within and among its 24-member countries policies designed to support high economic growth, employment, and standard of living and to contribute to sound economic expansion in development and in trade. For information and prices on these publications, contact Organization of Economic Cooperation and Development, Publications and Information Center, 2001 L Street, Suite 700, Washington, DC 20036; telephone 202-785-6323. DETAILED PRODUCT-AND INDUSTRY-SPECIFIC DATA RESOURCES U.S. Government Product and Industry Resources * Comparison Shopping Service. CSS is a custom market survey service produced by US&FCS. On request, CSS provides a U.S. firm with detailed market information on a selected single product in a selected market worldwide. CSS answers basic questions about the marketability of the product, key competitors, comparative prices, customary distribution and promotion practices, trade barriers, and other factors. Available at fees ranging from $500 to $4,000 depending on the particular country market chosen. Contact the local Commerce district office or telephone 202-377-4767. * Industry sector analyses. Prepared by the commercial sections of the U.S. embassies for US&FCS, ISAs provide the basis for quickly sizing up one particular commercial or industrial market in a particular country. ISAs present market demand, market size, competitive analysis, end user analysis, and market access criteria as well as marketing opportunities. Available at $10 per report through CIMS. Contact the local Commerce district office or telephone 202-377-4767. * Alert reports. Prepared on an ad hoc basis by the economic and commercial sections of U.S. embassies and consulates for US&FCS, alert reports help to identify unique market situations and marketing opportunities for U.S. business. Available at $10 per report through CIMS and EBB. Contact the local Commerce district office or telephone 202-377-4767. * Agricultural Trade Highlights. The Highlights, published by FAS, provide economic analyses of major overseas markets and demand trends. They also provide in-depth monthly summaries of major activities and events affecting U.S. agriculture exports and imports, and year-to-date summaries of commodity performance. Available as a single free copy or by subscription. For a single free copy, contact Information Division, Foreign Agricultural Service, U.S. Department of Agriculture, Washington, DC 20250; telephone 202-447-7937. For the annual subscription, contact Trade Assistance and Planning Office, Foreign Agricultural Service, U.S. Department of Agriculture, Washington, DC 20250; telephone 703-756-6001. * Staff papers on best prospects. These reports, produced by FAS, offer the best overall prospects for expansion of U.S. agricultural products over the next three to five years. They cover about 15 countries and are available free. Contact Trade Assistance and Planning Office, Foreign Agricultural Service, U.S. Department of Agriculture, Washington, DC 20250; telephone 703-756-6001. Private Sector Product and Industry Resources * American Export Register. This two-volume directory of 38,000 U.S. exporters and the materials, products, or services they sell internationally is published annually. Advertising is accepted. The cost is $120. Contact Thomas International Publishing Company, Inc., One Penn Plaza, New York, NY 10119; telephone 212-290-7343. * Export Shipping Manual. Published annually and updated weekly, the manual is a three-volume looseleaf reference service containing up-to-date, country-by-country shipping and market research information. Social, political, economic, and commercial conditions of each country are profiled. Detail is given to policies, regulations, issues, development, and laws pertaining to commerce, especially foreign trade. The cost is $524. Contact Bureau of National Affairs, Inc., Distribution Center, Keywest Avenue, Rockville, MD 20850; telephone 800-372-1033 or 202-452-4200. * FINDEX: The Directory of Market Research Reports, Studies and Surveys. This reference guide to commercially available market and business research, including international market research, contains more than 10,000 listings of reports, studies, and surveys. The 1991 edition (900 pages) costs $325 (ISBN:0-942189-03-5). Contact Cambridge Information Group, 7200 Wisconsin Avenue, Bethesda, MD 20814; telephone 800-227-3052 or 301-961-6750. * Inside Washington: The International Business Executive's Guide to Government Money and Resources. This publication is a complete source book on government assistance programs and services. It is organized the way executives think about international business and includes comprehensive contact information. The latest edition, 1988 (ISBN:0-8191-6934-X), is 295 pages long and costs $49.95. Inside Washington publications are now available for specific industry sectors and have a special emphasis on financial support programs. Each book contains case studies and a comprehensive exporters telephone directory. The following editions are available at $24.95 each: Environment-Money, High Technology, and Food-Business. Contact Delphos International, 600 Watergate N.W., Suite 960, Washington, DC 20037; telephone 800-288-2582 or 202-337-6300; fax 202-333-1158. * Electronic data bases. A number of private sector data bases are available to provide specific marketing information for firms interested in doing business internationally, such as the PIER service of the Journal of Commerce and DIALOG. Many of these data bases are accessible both at local public libraries and universities and directly by personal computer.