If you’re in the field of international business, you’ve heard the following comment a thousand times:
“Commercial intelligence is vital to the success of an international business venture”.
And if you’ve been around the traps for long enough, you’ll know how true that is.
For those of you wondering what’s so special about commercial intelligence, let me start with a cautionary tale.
Once upon a time, there there was a company called Amazing Food Co. from a country called Faraway Land. Amazing Food Co. had invested significant time and money to access cutting edge technology in the food space. Amazing Food Co. decided, quite rightly, that it wanted to investigate the possibility of selling its products internationally. It was particularly interested in the opportunities for selling its range of Amazing Fresh Sweets, which included refrigerated desserts.
Amazing Food Co. planned a visit to Paradisia, one of the international markets it was targeting, to secure long-term sales contracts with retailers, distributors and other big buyers. The meetings were planned and Amazing Food Co.’s representative, Arnold, set off to conquer the world. So far so good.
But when Arnold arrived in Paradisia, things started to go wrong. The retailers, distributors and other big buyers were all happy to meet Arnold, but as they talked, they discovered that their interests weren’t aligned.
Arnold told the distributors, retailers and other big buyers about Amazing Co.’s Amazing Fresh Sweets. They nodded politely and pointed out that they were already buying very similar things from Amazing Food Co.’s competitors, who were from countries that were much closer to Paradasia than Faraway Land.
They told Arnold how much they were paying per unit for competitor products and asked whether he could do better. Arnold said he’d have to come back to them. The retailers, distributors and other big buyers nodded politely.
Arnold mentioned that he wanted to sign long-term supply contracts for Amazing Food Co.’s products, but the people he met said that they usually purchased what they needed on a seasonal basis and never planned more than a year ahead. They smiled politely and then ended the meeting.
After a dozen meetings, Arnold was frustrated and disappointed. “What a waste of time,” he said. He got on the plane, went back to Faraway Land and never gave Paradisia another thought.
The “fairy tale” above is based on a real example and unfortunately, the theme is an all too common one. A company new to international trade has a bright idea and acts on it too quickly, without taking the time to gather in-depth commercial intelligence and cross-check the feasibility of their idea against the realities of the market. The story might have had a different ending if Amazing Food Co. had avoided several key mistakes.
What was Amazing Food Co.’s mistake?
Amazing Food Co.’s big mistake was that it overlooked the importance of gathering proper commercial intelligence. The company failed to understand the enormous impact that this information could have on its international expansion plans and so it moved forward, spending time, money and decision-making energy without answering key questions.
What kind of questions should Amazing Food Co. have asked?
The team at Amazing Food Co. should have asked and answered key questions that would have helped them build a clear picture of the market it was trying to enter. These would have included:
- Are we sure the buyer wants what we are selling? How can we demonstrate that?
- Why should the buyer buy from us and not someone else?
- What are the buying habits of the retailers, distributors and other big buyers? Do these habits match our expectations and if not, what does that mean?
- Do we have in-depth knowledge of all our products and how much we would sell them for in the new target country?
- Do we understand our competition, their strategies and their position in the market? What can our competitors offer that we can’t? What does that mean for us?
- Do we really know what the buyer’s real desire is?
If Amazing Food Co. had taken the time to answer these questions, it may have decided that the market was not right for the company and saved the time and expense of a visit to Paradisia. Or it may have adjusted its business model so it could supply products in a way that matched buyers expectations. Or it may have looked for ways to overcome the hurdles of distance and cost associated with transporting products from Faraway Land. Any of these options would have made a better ending to the story than the real ending.
For international businesspeople, the moral of the story is: “if you’re hoping for a happy ending, don’t leave home without commercial intelligence”. If you are planning to expand a company’s business overseas, make sure you research the market, the competition and your own capabilities in depth, before you get started.
If you don’t know where to begin, or just don’t have the time or inclination to do in-depth research, ask an expert for help. I can guarantee the result will be a story with a better ending.
Cynthia Dearin is managing director of Dearin & Associates, an international business consultancy that helps companies access opportunities and capital in fast-growing international markets.