According to recent studies, India currently has the second-largest number of global multinational corporations among the emerging economies. Indian entities have acquired numerous prominent foreign firms and set up industries and offices in dozens of countries, apart from exporting everything from pharmaceuticals to electronic goods and software services across the world. This expansion has created multinational giants that are “Made in India” and are giving their foreign counterparts a run for their money.
These businesses have, by and large, sustained their growth momentum by moving to international markets when the timing was right. Notably, the growth rates in international markets are far higher than in domestic markets. The percentage could be as high as 20-25 percent, which is primarily why companies have been making a beeline abroad. The Indian market also happens to be extremely price-sensitive, so success demands a very delicate balance between quality and price. The stifling regulations in the country and the heterogeneous market conditions have resulted in a number of Indian companies enjoying far more success in the tougher global markets than the domestic ones.
However, for the handful of companies that have successfully become MNCs, there are also numerous businesses that lost huge amounts of money, went bankrupt, and even had to shut down their existing businesses for good when their quest to go global failed. Expanding to new markets can easily become a nightmare if not planned well.
Why is market research essential for companies?
Market research is often underestimated and this is one of the biggest mistakes that businesses can make since they are all vying for maximum impact. Market research can give businesses vital information on the culture, economic feasibility, potential distribution channels, local market trends, cost patterns, taxes or regulations, market forecasts of a region, and most importantly, whether or not there are a market and a need for the product or service that the company offers. This provides insights into the key factors that businesses have to consider before going international.
Taking a business globally is an intricate and dynamic process that calls for a tailor-made market entry strategy and unique business plan which will drive success while remaining integrated with the overall corporate policy and objectives. So, efforts to influence purchase decisions are more complex. However, certain business plans may look perfect on paper but in practice, they fail to replicate the success forecasted, since companies must think globally but sell locally.
While the markets may seem familiar, most companies find that once they get down to the operational stage, all the assumption-based planning can only take them up to a point. Companies should be adept at shaping the consumers’ view of their brand. Strategies that have worked back home could be a dismal failure in a completely different culture. Even the largest retail chains like Mattel, Starbucks, and Walmart learnt this the hard way when they attempted to expand in certain countries.
Cross-cultural communication differences throw up unique challenges every step of the way, from communication to hiring, execution, distribution, and budgeting. Different cultures will also respond in very different ways to your product or service and it determines what people buy and use. These differences could potentially affect your business’s viability. Companies should also keep in mind that some markets may also use the product differently.
There is no one-size-fits-all approach to international market research. In today’s information economy, most data can be easily accessed by the public via the Internet, print media, reference, and literature to test the viability of a market entry through secondary sources. However, organizing a global market entry strategy requires far more multifaceted, complex, and specialized market research. What a number of businesses do not realize is that by opting to save a few thousand dollars, they could be setting themselves up for failure to the tune of millions. When companies need to develop a detailed action plan, spending on quality primary research is absolutely essential.
Secondary sources could also quickly become outdated since market trends change regularly. In industries like technology, a report that’s even a year or two old could already be outdated.
The results of such studies can help identify impending business trouble and fresh opportunities, set realistic goals, and overall make well-informed decisions that align with the market demand and provide a competitive advantage.
Businesses might have complete faith in their “great” business idea, but it is imperative to test it against what’s already available on the market. The fact is that there cannot be a successful company that does not keep track of the data about customers, products, and the market in general. Market research from an unbiased perspective is an essential management tool for a viable business plan to evolve into a profitable and sustainable business. When businesses globalize, they have to get used to the dynamics of the global marketplace where first-mover advantage makes all the difference.
Jasal Shah is the spokesperson, CEO, and Managing Director of Markelytics and Velocity MR.
(Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the views of YourStory.)