How to choose the best country to go abroad?

Monday, 31 december 2018 | Redacción CEU

Once the decision to go abroad has been made, the next steps are deciding which country best fits and what the best formula to carry out this undertaking is. The choice of a target market is not a trivial issue, it needs a deep reflection and a meticulous analysis. These projects require a long-term commitment and, therefore, the decisions cannot be taken either in an improvised or a hasty way. The right choice of the target market will be crucial for the mission to succeed. What criteria should be taken into account when choosing a market to disembark on? How to select the best country to go abroad?

This month, Forbes published its annual ranking of the best countries to do business. Despite the uncertainty which was generated by Brexit, the United Kingdom continues to occupy the first place in this list. Once again, the country manages to lead the classification thanks to the fact that it is the only country, from the 161 ones analyzed, that appears in the top 30 in the different categories that the specialized magazine has used to create the list: innovation, tax burden, property rights, bureaucracy, corruption, infrastructure, market size, life quality, political risks, investor protection, etc.

In the ranking, Spain occupies the eighteenth position. A result that, although it may seem low, is not insignificant. On the list, it appears above countries such as France, Japan and Belgium and only occupies one position below the USA. The aspects which make it go down in the list are its excessive bureaucracy and corruption. Although to a lesser extent, tax burden and property rights also impact negatively on the classification.

If we decide to open this article with this news, it is for two reasons. First, when choosing a country to undertake an internationalization process, it is necessary to take into account multiple aspects, not only the ones that are purely economic or those more related to the products or services that the company want to offer. Second, before making a decision to go abroad, it is necessary to reflect on the situation in which the business itself and the home market are.

Looking inside first to look outside then

Before starting to consider which may be the best country to undertake an adventure abroad, it is important to know if the company is ready to face this mission. Whenever entrepreneurs want to assess the business situation of their companies, it is very useful for them to resort to a SWOT analysis. This is an instrument that enables them to know both internal (weaknesses and strengths) and external aspects of the company (threats and opportunities). In this way, it will be easier to identify what competitive advantages they have (quality, innovation, price...) and what their weaknesses are (logistics, financing, qualified staff,...). These issues are essential for designing the right strategy to access foreign markets. Of course, if the result of this analysis is not positive, it is advisable to work on the solution of the problems before looking abroad.

In the same way that it should be subsequently done with the potential target market, the company must be analyzed in detail. It is necessary to know how to answer questions such as: What production capacity does the firm have? Can the company take charge of a rebound in demand? Is the corporation prepared to face serious challenges in logistics? Does it count on the right suppliers? To what extent is it able to bear the costs? How many certifications does it need to undertake an internationalization process?

Key criteria for choosing a country to go abroad

The plan to expand horizons usually comes from the work dynamic itself. Nonetheless, sometimes, the plan simply responds to a thoughtless decision and, therefore, it usually has a bad ending. A detailed study of the different elements that affect a market is the best guarantee of success:

Flows of export and import: Analyzing the volume and development of imports and exports helps to choose a country to go abroad with discerning ability. For example, a continued decline in imports will show that this country is not the right one. It can also be interesting to study the volume of exports from the origin country to the target market.
Data about production and consumption: The more information about the production and the consumption of a product or a service in the country, the easier to get to know the impact that the business may have on this market. These data can be obtained thanks to national bodies which are similar to ICEX. It is also important to assess other data like economic growth and purchasing power per capita.
Competition: The market may seem suitable, but it can also be saturated. It is always advisable to try to start from a favorable situation. It is necessary to reflect on questions such as: What is the local offer of the product or service? Who are the direct and indirect rivals? Where are they located? Who have decided to bet on the country too?
Logistics: Is there a good infrastructure? Is it easy to access the market geographically? Is the transport network efficient? If the answers to these questions are not affirmative, the costs can multiply exponentially.
Legal and political security: The stability of a country is a key indicator that must necessarily be assessed (governing regime, armed conflicts, legal guarantees, level of socio-political maturity,...). It is difficult for a project to have continuity in a market that is exposed to great risks or that is extremely volatile.
Demand: The more details about potential consumers there are, the easier to develop effective strategies is. What is the target audience for a product or service? Where do they live? Is their interest exceptional or permanent? Why do they need the product or service?
Tariff barriers: They suppose an increase in the price of the product and, therefore, a lower competitive capacity. There are also other types of trade barriers that serve as an obstacle to internationalization, for example, licenses and homologations, payment difficulties or quantitative limits.
Other relevant indicators: Cultural factors, market trends, fluctuations in currencies, aid to access markets, level of transparency, etc.

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