Asselin Bannon

Strategic Management Consultants

Division of La Société de gestion et de formation GEXIMTM Inc.

(This text is the sole property of Ronald Bannon – All rights reserved © 2015)

Globalizing your business

Which product or solution to offer first in a foreign market?

By Ronald Bannon MBA, C. Adm., FCMC

Quebec, Canada, July 3rd 2015

In this series of articles on international market development, we have clarified the factors motivating the

selection of a first international target in the previous chapter. The language or culture are often used to justify

the decision to go to this or that market. However, this approach is not that to promote. According to our

observations, you should rather address the market opportunities that offer growth potential in the long term

with products or solutions that can be exported and eventually be produced locally in order to reduce the

impact of transport costs on the selling price and therefore increase the profit margin on the value transferred

to the end user. In our practice, we generally find two types of products or solutions that are seen abroad as

introductory products or solutions: the ones growing strongly called Stars or others that are at the beginning

of the sales cycle describe as Questions marks in reference to the BCG matrix.

Let's review briefly what says this theory from the Boston Consulting Group (BCG):

Products

Relative

Market Share

Market

Growth Rate

Profitability

Stars High High Low

Cash cows High Low High

Question marks Low High Doubtful

Dogs Low Low Negative

It is tempting for a company to push into new markets its products or solutions with a high growth rate (Stars

or Question marks) on foreign markets because entrepreneurs are hoping for a quick return on their

investment of time and money. The reality is quite different. In a new market, the game is far from over,

especially when it comes to introduce a product or solution that is unknown. Generally, according to our

observations, sales expectations are too high and the product / solution introduced is often not the good one.

Take for example a product / solution that has a promising future because of its potential sales but generates

a lower profit margin because its reputation is not yet established (definition of a Star product) versus a product

Ronald Bannon is a Certified Management Consultant (CMC) since 1997 and

involved in international sales & marketing of innovative products and

solutions since 1984. He carries out a long experience on how doing business

abroad and promoting your latest innovation in markets where often

Canadians have never showed up. In 2014, he was appointed Fellow for its

contribution to promote the CMC designation and his excellent reputation.

Asselin Bannon

Strategic Management Consultants

Division of La Société de gestion et de formation GEXIMTM Inc.

(This text is the sole property of Ronald Bannon – All rights reserved © 2015)

that has made his mark, however with low long-term potential, but offer a higher profit margin (definition of

a Cash cow product). Which of the two will you promote to prospective buyers in an expansion strategy?

Given the choice seems obvious to us, we believe it will be better to enter a new market with a product /

solution defined as a "Cash cow" according to the BCG matrix. As this is a product that offers superior economic

returns, it will be easier to adapt to the market with a pertaining marketing strategy because of the greater

profit margin available. If you are in a country where the currency is stronger than yours in your own country,

you will get above an additional margin. As the market share increase of a "cash cow" product is by definition

low or stagnant, the fact of introducing it a new market is a good decision to give to it a new life cycle. In

summary, it will be easier to create demand with a new product or solution that has already proven itself

without risking of burning Stars products that may ensure a good portion of sales in the future. For Question

marks products, it is possible that an introduction into another market may have a beneficial effect. It's a

question of how the product will answer the needs. We have already encountered this situation for

professional services with a technical solution.

Here are some advices on adapting "Cash cows" products/solutions into a new foreign market:

1. Start with a perception test in the targeted market, at trade shows or during visits planned to, to see

other enterprises to measure interested consumer reaction;

2. Identify the discriminating factors or elements which potential customers respond favorably to

eventually be able to develop a suitable offer;

3. Remove the items that bother your future customers (concept of irritants) that might affect the

distribution or sale (packaging format, languages, colors, non-compliance standards);

4. Test the price elasticity to determine how the end user is willing to pay. In our experience, the selling

price is often too low to cover all the expenses incurred to obtain a good yield. If you choose to deal

through a distributor, the establishment of the sales price will be even an important factor because of

the additional cost that will add an intermediary between you and your future customer;

5. Look at the presentation of other companies and see how the message is formulated to targeted

customer in order to adjust yours accordingly. Your marketing materials should reflect your ability to

adapt to the same reality. Make your final product/solution tested by focus groups before.

The BCG theory does not apply to companies that want to expand geographically when the domestic market

is not yet mature enough or non-existent. This is the case of ICT businesses where some applications may have

low demand locally but more sustained foreign sales. We have seen this phenomenon from a video game

company where demand in Canada was negligible but more intense in Japan, in the US and in the UK.

Next subject: What type of distribution to choose when starting in a foreign market?

Asselin Bannon Strategic Management Consultants is a firm of professionals dedicated to the sales and the

promotion of innovative products, solutions or processes issued from applied R&D into multi cross channels.

We provide services to entrepreneurs locally and abroad in a way to help them identify business opportunities,

building added value offers and business models and constructing their commercial plan. In certain cases, we

also provide assistance to facilitate adequate funding required for commercial expansion. To date, we estimate

our involvement in near 1,000 commercial projects. Asselin Bannon brings you into new markets where

nobody has ever gone before.