Being Data Driven


Mistakes in New Markets That Can Cost Companies Millions  

How Failing To Do Your Homework Can Have Severe Financial Toll.

New markets can have unexpected twists, and companies that don't do their homework before diving in can pay a heavy price. UK market is no different.

The article lists several valuable tips to help businesses understand what they should be focusing on in order to succeed.

2 July 2022  \\ Growth                         

Patrycja Maksymowicz

The UK is the perfect market for companies to expand their operations thanks to its robust, business-friendly environment, mature, high-spending consumer market and open, liberal economy.

It also offers world-class talent and business-friendly regulations. Investing in it opens up a market of more than 60 million people, diverse suppliers and partners as well as a range of programmes for companies of all shapes and sizes to grow. (Department for International Trade) 

The Inward Investment Report 2020-2021 (DIT) indicates that the UK economy has shown resilience in the face of COVID-19, rapidly bouncing back and maintaining its appeal to investors worldwide.

Overseas businesses are showing a lot of interest in entering the UK market.

The UK has retained second place in EY’s annual ranking of European countries by their ability to attract Foreign Direct Investment projects. There is a strong focus on attracting greater ‘value’ FDI projects over ‘volume’, building on the UK’s recent successes in Research & Development and digital technology. Digital technologies are driving new growth in the UK and providing opportunities for investors from around the world.

In sectors identified by investors as key sources of future growth, the UK performed well: utilities, healthcare and pharmaceuticals. Cleantech, a sector driving growth in the EU, is also on the rise.

Electric vehicles and battery technology are two of the top growth sectors for UK cleantech, followed by heat networks and carbon capture.

This is reflected in some of the inquiries that we have been receiving at Open Solutions Global over the last few years ranging from biotechnology, cleantech, and green energy solutions to fintech and insurtech.

Despite their increasing popularity, the above sectors do not guarantee an easy time launching your products in the UK or expanding overseas.

Our experts have compiled a list of blunders to avoid when investing in the UK.

  • The wrong gateway to the market 

London’s position as the UK’s most attractive destination for investors has been under pressure over the past year, with Scotland and other English regions slowly gaining ground.

Recent EY surveys show that only 27% of investors view London as their preferred investment location, down from 49% in 2019.

This is in contrast to Scotland, which saw its share of investor interest rise from 7% in 2019 to 16% this year. All other English regions and UK nations scored below 10%.

Investors are looking beyond London when deciding where to invest within a country. Skills and infrastructure are still important factors in their decision-making process, but they also take into account local business networks, support from regional development bodies, and access to regional grants. These factors are significant because they reinforce the importance of devolving power and fostering local ecosystems.

Each region offers opportunities.

Levelling Up, which relies on £4.8 billion in UK-wide funding, is designed to make every area of the country globally competitive, boosting prosperity and creating specialised and innovative business communities. It will do this by creating an environment where businesses can thrive—and that starts with getting gigabit connectivity right.

  • Not enough research. Not enough awareness of the market 

You're expanding your business's market. Congratulations! Before you get too excited, though, it's important to understand that just because something sells in one country, does not mean it will sell in another; just because a business model works in one country doesn't mean it will work in another. This is especially true when you are expanding into new markets with cultural and socio-economic differences.

For every product launch that is a success, there are plenty that crash and burn.

Google Glass is one of many examples. 

Google Glass was an eyeglasses-shaped head-mounted device with smartphone capabilities. It launched in 2013 as the first piece of tech to connect the typical consumer to augmented reality.

The product failed in such a way that Google continuously tried to find a place for it, including targeting businesses in 2017.

Do your research before expanding, and not just a cursory glance at the competition and industry trends, but a full understanding of what makes this particular market tick. Once you know what makes your potential customers tick (and how they're different), you can make an informed decision about whether or not this expansion is worth your time and effort.

Don't assume that just because someone has heard of your brand they'll automatically buy from you. You need to do some real research into why people buy from you and what makes them choose one brand or product over another, and then make sure those reasons apply in this new market as well.

You want to research the demand for your product or service in your target market. You may also want to contact any agencies or government departments at home which might be able to help you. 

Learn about cultural differences between your country and the country where you are entering. It’s not enough to just be able to speak the language; it’s important to understand how people from that culture interact with others. For example, some cultures may prefer direct communication whereas others may be more indirect or passive-aggressive in their approach.

  • No pilots to test the product before launch - failure to adapt 

When you're launching or entering a new market, it's easy to get caught up in the excitement of expansion and forget about the need for adaptation. But the truth is that no matter how much you know about your current market, there will always be differences. And those differences can be huge!

In other words, while your current customers might have been motivated by price or quality when they bought from you, they may not be in the new market. So if you don't adapt your strategy to consider what motivates people in that new market (and also what doesn't motivate them), then you could find yourself with an unprofitable product on your hands.

Untested assumptions result in failure.

That's why when developing plans for entering a market, it's important to constantly test each assumption with real customers instead of just relying on assumptions or past experience. This way, you can make sure that every part of your plan is based on actual data rather than assumptions or guesses—and thus more likely to succeed!

Assuming that your current business model will work in the new market without any adjustments is wishful thinking. Challenge your existing business model when you go to new markets, test each rule, and learn to adapt.

  • A lack of clear objectives - not knowing what good looks like 

You can waste time, resources, and money. You don't know what success looks like because you haven't defined it.

There are a few reasons why you might not be able to define the objectives for your new market. The first is that you haven't defined the success criteria yet. If you don't know what 'good looks like,' how can you measure whether or not it's happening?

The second reason is that you have tried to define success criteria, but they're not specific enough.

In order to achieve an objective, there must be some way of measuring whether or not it has been achieved. If there isn't any way of measuring something, then it's impossible to say whether or not it has been achieved! For example: if your objective was "to make more money," how would you know if this objective had been met?

If this is the case, create objectives and success criteria by asking yourself questions like: What do I want to accomplish in this new market? What does success look like for this new market? Who are my target customers? How will I know if my product is working? What metrics should I use to measure success?

Make sure to include: 

-Key performance indicators (KPIs) that relate directly back to the business goals for this initiative

-A timeline for achieving those KPIs

  • Lack of strategy 

Before you launch into a new market with the intention of disrupting it, we strongly recommend that you first do your homework! A good plan is based on market research and insights, which can help reduce risk, waste less capital and ensure more time and resources are devoted to achieving successful sales and partnerships. Make sure your plan is built around those findings. A big bold idea to disrupt and a list consisting of a few steps does not make a plan! 

What happens when you go into a market with a big bold idea and a list of steps?

We've seen too many businesses on both ends of the spectrum: those who have a great idea and prepare a plan but don't know how to execute it well enough to be successful, and those who set out to disrupt without doing their homework first. 

Many businesses put their entire expansion strategy at the feet of a single large new client in a market. High demand from one source does not necessarily mean that there is equal demand across the whole market.

International expansion is a bold move for any business, but if you're planning to expand into a new market, it's crucial that you do your research first.

Without a clear understanding of what you hope to achieve, it's impossible to know if you've been successful. You need a detailed resource assessment, measured against all related costs; a market research plan; a clear action plan; targets, and metrics for measuring progress to those targets; and an ROI assessment. If you don't have these things in place, then you'll find yourself making missteps before any serious investment has taken place.

A good strategy will have the following elements:

  • A detailed resource assessment that measures the cost of all related resources and compares them with the expected return.
  • A market research plan.
  • A clear action plan that lays out your goals and how you will achieve them. 
  • Targets—and metrics for measuring progress toward those targets—for each goal set in your action plan.

Proper research and planning will prevent many missteps before any serious investment has taken place.

  • Investment in the wrong team or representation 

Your market expansion is only as good as the team you choose to lead it.

When a business enters a new market, it needs to blend the right skills in its team—the right person on the ground needs to be creative and entrepreneurial, while at the same time will seek to utilise the assets and experience of the parent company.

A bad fit can doom a new venture by damaging the relationship with key customers or partners. The wrong type of person may be too maverick or self-reliant, unable to work as part of a team, conform to the company’s culture, fail to understand what it takes to succeed or be too set in their ways (“this is how we’ve always sold our products”).

When hiring for a position, look for cultural empathy as well as an ability to learn and adapt. Getting into the detail and understanding all the moving parts is vital for success—ensure you select the right person to lead your market expansion!

  • Not seeking local partners 

When expanding a business into new markets, there are many options to consider. One of the biggest challenges is how to make a successful entry.

There are a number of ways to do this: 

  • Establishing a subsidiary or branch office in the country or region;
  • Delegating responsibility for the new market to an existing business that has expertise in that country;
  • Finding local partners who understand the market, local business practices and customer preferences.

While some larger corporations take the step of acquiring a well-established local business to absorb their client base and local knowledge, this is often not practical for smaller companies on a more limited or sensible budget. It is important to work with or build a team that is familiar with the market, and local business practices.

We have covered this more broadly in our webinar 'Navigating Your Journey to the British Market'. (Watch on YouTube)

It's important to remember that you don't have to go it alone when you start doing business internationally. There are plenty of ways that you can partner with other companies who already have experience in your target market.

Look for a local partner as they will be fully conversant with not only the local language but also how prices are set, what legal requirements need to be and other nuances that may not be known to an outsider.

  •  Finance & investment

Financing your expansion can also be difficult.  Where are your investment funds coming from? What return on investment can you expect over time?

There are many resources available but they may require time to access and/or approval processes before they can be used.

So, are you really ready?

There are many things to consider before deciding. 

Don’t just jump in head first, make sure that you know how and why!

Make sure that you have a solid plan for your market entry. Know what its objectives are, how it will measure success, and how it will make money. 

Also, evaluate your foundation before proceeding so that you know if there are any potential roadblocks ahead of time (like lack of necessary resources).

Have all these things clearly defined before making any moves.

The first step to success is always proper planning.

To learn more about the key market entry methods to consider and their pros and cons contact our team 

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