Market research is an integral component of the export process to determine which markets you are most likely to have success exporting your product. This market information would include:
- where your product is in greatest demand
- where there is future potential growth for your product
- tariffs and non-tariff measures in your potential markets
- networking and mission opportunities in your target market.
Using data to find potential markets
Determining where your product may be most successful is important. The first step before you find your customers is to see where your customers may be. This Government of Alberta’s Export data tool can help you find the top markets based on what product you intend to export. It identifies which markets have the most trade with Alberta, which markets Alberta has more influence in, and which market has the highest import growth for your specific product.
Some indicators that might help you narrow down your target markets include:
- Top markets by total imports: This value reflects the total imports of your selected product by a given market. This gives you an indication of which market has the largest demand globally and must import the selected product to meet their domestic demand. This is important because you can see where you will have a better chance of finding a customer.
- Top markets by Alberta exports: This value reflects the markets where Alberta businesses are exporting their products to. This will allows you to see where Alberta businesses are doing business and could be a better indicator of your success in exporting. This could show a market that may be smaller overall however due to a location advantage Alberta companies have more success in this market.
- Top markets by Alberta market share: This calculated ratio displays where Alberta businesses are exporting to in relation to the markets total imports for a product. This shows where Alberta companies are best able to meet demand. An example would be if a market ‘A’ imports $10 worth of product ‘B’, and Alberta businesses export $1 worth of product ‘B’ to market ‘A’. This would mean Alberta's market share is 10% ($1/$10).
Preliminary research on potential markets
Using trade data can help you identify some potential markets, but the trade data does not give you the full picture. For example, the market might seem like a good prospect based on the data, but further research might show that the market has an unstable political climate that could. To help narrow down your target markets, you should do some initial research to answer the following questions:
- How politically and economically stable is the market? And how are the relations between Canada and this market?
- Are there any trade agreements between Canada and this market that might make trade more favourable?
- Alternatively, are there any embargoes, tariffs, or non-tariff measures that could make trade more difficult or costly?
Much of this information can be found online. You can start your search with the Government of Alberta International Market Profiles. However, this type of secondary research is only a starting point. You'll need to verify your market's prospects by doing research on the ground and making contacts in your target market, which will be discussed in the next section of this guide.
Risk within markets
Exporting your products opens up a world of business opportunities. When choosing a target market, it is important to be aware of the political and monetary risks you are faced within the country you plan to export to.
A risk is a potential loss or event that could negatively affect your bottom line. While some risks are insurable, others like brand integrity are not.
Currency fluctuation is a natural phenomenon of the floating exchange rate system. It arises when there is a change in the price of one currency in relation to another. An exchange rate risk exists when a company needs to make or receive payments in a foreign currency. Even if a company completes every transaction in Canadian dollars, it is still exposed to risks from exchange rate shifts and monetary policy changes.
Currency fluctuations may be affected by unexpected conditions beyond control. Therefore, planning for them in advance not only helps mitigate the risk exposure of exporting abroad but also maximize profitability to your export strategy.
Even in countries perceived as politically stable, political change can have a significant impact on business. This may include changes in the legal framework or setting up or removing trade barriers. It could also be that a change of government changes the political attitudes towards business. This may result in less 'business-friendly' policies or political changes that affect the company’s marketing.
Political instability in a company’s export market will mean that the firm has to be very flexible and adaptable: ready to change its export strategy at very short notice to reflect changes in the political environment.
There are a number of areas to monitor for political stability:
- Trade agreements signed between Canada and the country of the target market
- Trade barriers – Look for information on quotas, customs tariffs, import licensing and/or restrictions, anti-dumping trade measures and recommended safeguards.
- Consistent changes in government in the target market – Greater political instability leads to greater uncertainty concerning future economic policies and consequently, to lower economic growth. This in effect may impact consumer behaviour in certain market segments or towards some products and services.
Build your export plan
Answer these questions to start filling in your export plan template. As you answer each question, your responses will be sent to your export plan template, which you can download below.
Export plan completion
This information is a guide only and should not be considered or quoted as a legal authority. While best efforts are made the keep this guide up-to-date, parts of it may become obsolete at any time without notice.