Choosing the right market is crucial for successful expansion, especially for startups with limited resources. Here are seven key steps that will guide you in selecting the most promising international market.
Global expansion is a goal for most startups, as it offers access to larger markets and a more diverse customer base. In fact, 60% of startups aim to expand internationally in their first three years of operation; However, only 4.6% successfully transition to scaleups.
Achieving scaleup status improves your chances of success in international markets, but this is a challenge in itself. Only 2.5% of startups formed in the activation phase ecosystem achieve this milestone.
Choosing the right market will determine whether your expansion becomes a success or a costly mistake. This is especially true for startups, where resources are often limited and early failures can have lasting consequences. But how can you make sure you’re making the right decision?
Here are seven crucial steps that can guide you in the process of choosing the most promising right market for international expansion.
How informed is the market? Consider factors such as Internet penetration, the maturity of your industry, and consumer purchasing habits to help you get a comprehensive view of the local landscape. For example, if your business is e-commerce, look for markets where people have already started placing orders online. An alternative strategy involves entering less developed markets that are not as accustomed to your sector and are therefore less competitive. However, in this case, it is a long-term play, as you will need to invest time in cultivating new customer habits and targeting early adopters. Your business can also alternate strategies depending on location: we currently operate in both mature and emerging markets, each with different levels of e-commerce and e-gifting adoption.
If three or more competitors share the market, it is a highly competitive environment that will require significant investment to achieve significant results. However, if there is a dominant competitor whose ways are relatively rigid, you can try to secure second position in the market by leveraging your agility, modernity and a different approach to customer engagement. At this stage, it is important to evaluate the total size of the market and its distribution among competitors in monetary terms. Key metrics include:
Total market size (TAM): This indicates the total earning potential available in the market. In our case, it reflects the total sales of flowers throughout the country.
Accessible Market (SAM): For Flowwow, this reflects current online sales figures and revenue generated by our competitors.
Attainable Market (SOM): This metric estimates the portion of the market you can realistically capture, representing the portion of the market revenue you can control.
Once you have assessed the product’s readiness for the right market and analyzed the competition, you will have identified several priority countries that can be considered potential markets to scale. Scoring models can be very helpful in selecting the top one or two options. For example, Amazon used a scoring model to evaluate key success factors when expanding into Asian markets. The focus was on India and Japan, where the company made significant investments in infrastructure, local partnerships and the adaptation of payment systems. In both countries, Amazon became one of the market leaders, overcoming a complex and diverse environment.
Field research is one of the key steps in the process of scaling a business, as it helps to understand the real situation in the target market. This method reveals real customer problems, which may not be evident from general data. Customer development interviews provide a deeper understanding of cultural nuances, local habits, and the specifics of interaction with the product or service. If in-person meetings aren’t possible, conduct online interviews with customers (you can find them on LinkedIn or in interest-based communities). For example, our startup is a gift marketplace that relies primarily on online payment methods. Through market research, we found that online payments are a customer favorite, but method preferences can vary significantly. When entering a new market, we must integrate local payment systems, a process that requires legal and technical work, as well as extensive research. If preparations are not complete, the market simply will not be able to accept new orders.
In the age of high-speed Internet, user experience is critical to e-commerce success. Slow-loading pages frustrate users, leading to high bounce rates, fewer conversions, and a negative impact on brand perception. According to Amazon, a 100 millisecond delay in page loading time could result in a 1% loss in sales, while another survey suggests that 53% of site visitors will abandon the page if it takes more than three seconds. in loading. In contrast, satisfied customers can spend up to 140% more and will recommend companies to others when they feel valued.
Start by developing a Minimum Viable Product (MVP) that directly addresses the core problems of your target audience. Launch this MVP and collect detailed feedback from users, analyzing their behavior and preferences. The key is to refine your product based on these insights, adjusting its features to better align it with market demands. Regularly track performance indicators, such as user satisfaction and engagement, to confirm whether your product solves the market problem. Continually iterate and improve until you achieve a steady stream of sales from the local audience, indicating that you have achieved product-market fit (PMF).
A well-known example is Airbnb, which began during a conference in San Francisco when its founders rented out their own property to address the housing shortage. By gathering user feedback, they refined their offering, highlighting the value of unique stays and ease of booking. This iterative process, combined with a focus on user needs, helped Airbnb become the global leader in short-term rentals.
Once you’ve achieved product-market fit — that is, gotten a steady stream of sales from your local audience — consider hiring a country manager. This will provide a deep understanding of the local market, adapt the company’s strategy to the cultural and regulatory specificities of the country, and establish important business connections, facilitating business development in the new market.
Choosing the right market for international expansion is a critical decision that can determine the success or failure of a startup’s global journey. Following these seven steps can significantly improve your chances of making strategic decisions. Careful market selection and adaptation to local needs and conditions will lay a solid foundation for sustainable international growth.
