Choosing Foreign Markets in the Software Industry – 5
This series of posts discusses how to choose foreign markets in the software industry. Entering a foreign market in the software industry is a very strategic decision. Finding, winning, making, keeping and growing customers in foreign countries requires establishing infrastructures, which can drive the marketing and sales processes as well as the implementation and support activities. Customers in foreign markets will be reluctant to do business with us unless we can demonstrate a solid commitment for the long haul.
A competitive product is not enough.
Other Generic Information Sources
There are several readily available sources of information for comparing the countries in the world. Most of these sources are available free of charge and can be very useful when preparing for strategic globalization decision-making.
The CIA maintains and publishes an impressive almanac with detailed information on each country in the world. The CIA World Fact Book is updated regularly and is an excellent source of information on even the smallest countries in the world. The CIA database is also available as an app for smart phones and tablets. Kudos to the CIA and the US government for making this service available to all of us.
The World Economic Forum is mostly known for its’ Davos summit meeting in January each year attracting top decision makers from government, business and NGO’s all over the world. However, the organization also provides a rich repository of reports valuable for market entry considerations.
The Global Competitiveness Index is a relevant source of input for choosing foreign markets.
High touch and very high touch software is mostly focused on optimizing business processes or personal productivity. The incentive to invest in improved productivity is affected by the competitive pressure and the cost of labour. The demand for B2B software is therefore much higher in countries with a high cost of operation, especially high labour costs.
As you can see from the Global Competitiveness Index, there is a very strong positive correlation between a nation’s competitiveness and the cost of operations in that country.
As a rule of thumb competitive countries are more attractive markets for high touch and very high touch B2B software. Companies operating in countries with high operating costs are constantly on the outlook for, and thus much more receptive to, productivity improvement investments than companies operating in low cost environments.
Another benefit of high cost and high competitiveness countries is the prices we can charge for our products. While the focus of low cost and low competitiveness countries is on low absolute prices, the focus in high cost and high competitiveness countries is on price/performance, stability and quality.
The Organization for Economic Co-operation and Development (OECD) is an international economic organization of 34 countries founded in 1961 to stimulate economic progress and world trade.
The OECD publishes a vast amount of reports and statistics, which can be very useful in market entry considerations. All titles and databases published since 1998 can be accessed via OECD iLibrary. The country reports, especially, provide detailed insight and forecast on all macro economic parameters including rich commentary on issues that may be important for assessing a foreign market.
National Statistical Bureaus
Each nation in the world has a statistical bureau. They produce vast amounts of data. Some of it may be very relevant for our market entry decision-making. The statistics often include the number and size of companies in various industries according to NACE or SIC codes. Such data may give us a good indication of the market potential.
Export Associations and Investment Attraction Organizations
Most governments in the world allocate funding that supports export activities and attracting foreign investors. These organizations, which are typically organized under the Foreign Service Administration and The Ministries of Economy and Economic Development, also produce vast amounts of reports. It is highly recommended to get in touch with the Investment Attraction Organization in the countries considered, as they will normally be very motivated in helping finding relevant information about their region.
Previous posts in this series:
Choosing Foreign Markets in the Software Industry – 1
Choosing Foreign Markets in the Software Industry – 2
Choosing Foreign Markets in the Software Industry – 3
Choosing Foreign Markets in the Software Industry – 4