“We’re not in the shipping business;
we’re in the information business.”
Peter Rose, Founder of Expeditors.
The UK’s freight
forwarders are an important cog in UK PLC’s export machine – a machine that is
ramping up in the wake of the Brexit vote, with the fallen pound making our
products more competitive overseas, and with a government drive to increase
exports, particularly among small- and medium-sized enterprises (SMEs). Exports
have already risen since the Brexit vote, and are growing at the fastest rate
in six years (CBI); and freight forwarders are there – particularly for
those taking uncertain first forays into international markets – to organise
shipments, as experts in the logistics network. They offer a variety of
services, with some more diversified than others, from packaging and sending
single items, to warehousing large shipments, to fully-operating as a company’s
outsourced export department. And, of course, they act as import agents too.
This is a
highly competitive industry, and particularly so given research from the US by
consultancy firm A.T. Kearney – a
good firm, with whom I have worked in the past – that showed the levels of profitability achievable
in freight forwarding, with the top companies achieving a return on capital
(ROC) akin to that of Apple.
From where I am
based, near Telford – right on the M54, 25 miles from the M6, 29 miles from the
M5, 40 miles from Birmingham Airport, and 80 miles from the port at Liverpool –
there is a robust local road freight sector. Looking at the SIC code that most
such companies file under, there are 1,261 firms in the immediate vicinity
covering TF (133), SY (179), WV (441) and ST (508) postcodes. Turning to
freight forwarding specifically – given only a small portion of these will be
forwarders – the membership of the British International Freight Association
(BIFA) shows 67 members within a 25 mile radius of Telford – which, clearly, is
competition enough. They are mapped below, noting the gatherings along motorway
corridors around the Black Country and West Birmingham – they are often
treading on each other’s toes on the same business parks or streets.
Not only is
there competition in terms of the number of freight forwarders, but also their
near-parity in a fragmented market. Excluding those that are national or
multi-national, with a footprint in the region, and one other that is local but
is far more highly-diversified than the rest, the chart below shows market
share estimates (redacted) for these companies, if we considered the region as
a discrete market. None has more than 9% share, with the top four all having
between 7% and 9%, and ten having between 2% and 3%. Again, A.T. Kearney has it right when they say
that, “…the market is still fragmented –
with a mix of global providers, thousands of small competitors, and a rash of
market forces disrupting business as usual.”
There are a
number of highly-competitive clusters. The foremost cluster of four are
Birmingham-based (with one in Walsall, just outside), before the larger middle
cluster spread all across the Black Country, Wolverhampton, Staffordshire
and Telford. The bottom eleven-or-so are largely specialist (i.e. industry
niche), new companies, or small family-type firms.
Scale is
important in this sector – particularly because larger forwarders get better
rates and can book capacity well in advance – so all of these firms will be pursuing growth determinedly in a growing
market. The point to take away is that it’s hard if you’re a local freight
forwarder in the middle of this: you have ten-or-so firms breathing down your
neck, and a further ten-or-so just ahead of you; in addition to another
ten-or-so a long way ahead of you, and ten-or-so in a niche or new.
And that is
just the level of competitiveness that we have here, within a small radius of
Telford and where we are not even at the heart of what is, clearly, a global
industry – just 4.5% of BIFA’s 1,500 members are in this area, largely because
it is not in the proximity of major ports or airports, and even Birmingham
Airport is only the eleventh largest in the UK for freight (seventh for
passengers). By contrast, nearly half of the industry is concentrated within a 25
mile radius of central London, with large concentrations across the South East
(Suffolk, Kent, Hampshire) – an area that provides access to ports at London,
Felixstowe, Dover, Southampton; as well as Heathrow, Stansted and Gatwick
(three of the top five for air freight). The largest concentration outside of
London is in the North West, with close to one-fifth of the industry being
within a 25 mile radius of Warrington, thereby encompassing the ports at
Liverpool and Manchester Airport (fourth largest for freight). From the
perspective of our cluster, this could be viewed in two ways: perhaps the local
area is less competitive than others, meaning it’s easier to win business with
local importers and exporters; or, perhaps, these firms are at a disadvantage
when competing nationally due to not being in such close proximity to key
infrastructure.
The chart below
shows the share of the UK’s forwarders that are in different locations, while
the map overlays that (size of circle) with the UK’s ports and airports (size
depicted by size of image).
Diversification – “altering course”
In a highly
competitive, and reasonably homogenous sector, it is increasingly important
that forwarders find ways to differentiate themselves from the competition.
This is a point recognised by A.T.
Kearney, among others, in their report, ‘Thinking
outside the box’ (shame they didn’t take their own advice with the clichéd
title; they could at least have gone for “container”,
rather than “box” for a bit of
relevance). In addition to this, I have reviewed two other papers, one out of
Oxford University[1],
and one out of Erasmus University Rotterdam (‘Diversification in the Dutch International Freight Forwarding
Industry’, by Yusuf Yusufoglu).
A.T. Kearney states that freight forwarders need to
diversify, add differentiated offerings and more added-value services. The
predominant reasons for doing so – evidenced across all three papers – are: a)
the increasingly competitive environment; b) due to decreasing profits in the
core business, i.e. to improve profitability; and, c) due to increasing
customer demands.
“Complex demands arise because customers,
seeking to improve their supply chains, present freight forwarders with a huge
universe of opportunities to design customized services. Customized value-added
services can allow freight forwarders to keep high margins, escaping the sad
fate of standardized transportation services, which are increasingly
commoditized.” Jeff
Ward, Partner, A.T. Kearney.
I would add
another, more positive reason, in that the UK export market faces huge
opportunities – but currently uncertain and undetermined – driven by the weaker pound, but also the national strategic interest in
exporting and the array of new trade deals in the coming years; while,
simultaneously, the import market presents various threats.
A summary of
the key areas of diversification, identified by these papers, are as follows:
·
(A.T.
Kearney) Protect revenues with innovation – develop a “sticky”, differentiated offering.
·
(A.T.
Kearney) Establish focus and critical mass, by region and industry; maximise
profits by adapting the offering to serve the most attractive customer segments
– “forwarders that focus on a particular
region gain administrative and marketing expertise in that region.”
·
(A.T.
Kearney) Expand relationships, sophisticated value-added services – “the more services the forwarder provides,
the more influence it wields, and the stronger and stickier its relationship
with the customer.”
·
(A.T.
Kearney) Win new business by attracting new customers in developing markets.
·
(Oxford)
Strategic partnerships within the supply-chain, deepening the relationship with
customers.
·
(Oxford)
Emphasis on knowledge and expertise.
·
(Oxford)
Value-added services.
“The more services the forwarder provides,
the ‘stickier’ its relationship with the customer.” A.T. Kearney.
The importance
of all of this cannot be understated. Firstly, as already alluded to,
forwarders will be seeking greater market share (scale) in a market with
anticipated growth – it’s about to get a whole lot more competitive, and
diversified companies are more likely to have higher revenues, because they
offer more services, and tend to do so at stronger margins. Secondly, without diversification, a forwarder’s only
option to become more competitive is to cut prices, which is not a great place
to be strategically (see Porter’s Generic Strategies and Bowman’s Strategy
Clock, which I blogged about here).
Many
freight-forwarders are already highly-diversified, often into the wider
logistics chain, including warehousing, or into added-value services such as
insurance. The highly-diversified competitor that I kept off the market share
chart previously is one such example, in that it offers consultancy services
and a wide array of logistical and warehousing solutions – it would have stood
out, with 11.2% market share, already suggesting the benefits of diversifying.
The chart below
shows the return on capital employed (ROCE, X axis), the gross margin (Y axis),
and the revenue per employee (bubble size) for the local companies where these
calculations could readily be made. The company just mentioned – which offers
consultancy services mostly around logistics and lean – stands out, with a ROCE
(84%) far higher than any other, and gross margins (24%) and revenue per
employee right up there too. Another interesting observation – given the nature
of this paper – is that the one that stands out with the highest margins is
also the only one that publishes its own ‘White Papers’ and thought-leadership
pieces on its website (see picture below)!
While this
chart is not definitive – it is based on one year of data, and there can be
various other factors affecting these – it is, nevertheless, true to say that the
companies towards the upper-right segment of the chart are the most
diversified; and those in the bottom-left segment of the chart are the least
diversified, predominantly just offering freight with little focus on wider
services or consultancy.[2] Five of the six highest
positions on gross margin are occupied by the five most diversified companies.
Diversification: a threat, as well as an
opportunity
Diversification,
of course, works both ways; it is both an opportunity, and a threat. Freight
forwarding firms diversifying into the wider logistics and marketing chain is a
hot topic in the industry, but what about the threat of the reverse also being
true? The margins outlined in the chart immediately above, and in the A.T. Kearney report, make this an
eminently attractive proposition.
It should not
be overlooked that any number of the freight companies in this area – the 1,261
mentioned previously – could have an eye on diversification into freight
forwarding, especially so given the anticipated continued growth of UK exports.
I can immediately think of three locally – one on the map above, two not – that have
done so in the last few years.
One is in a
specialist sector, representing a diversification into freight forwarding and
logistics from an import / export company. Another is a logistics company that
has diversified into freight forwarding, and began to push this service last
year: “Having launched their
International Services…[Company] has now emerged as a total logistics &
supply chain solution partner.” And the third is the subject of the case study below:
Case Study: Black Country
Logistics Firm
A road freight
company in the Black Country started out as a small courier and, through
acquisition and organic growth, has expanded its services over two decades,
culminating in a relocation to a large new facility in 2016, enabling further
vertical diversification in the logistics industry (warehousing). The company
added air freight to their services along the way, and have made further moves
recently. They incorporated an Irish subsidiary in 2015; then appointed a
Business Development Manager in February 2016, who came from a freight
forwarding background and, specifically, a company that specialises in
movements to-and-from Ireland. They added a Daily Ireland Service in July 2016,
which they have started to promote more heavily, for example via Twitter, in
recent months. What’s their next step? More recently, their Twitter account has
promoted services for, “all your import
and export needs.” How close a competition does it bring this new entrant
to your business?
And those are
just recent, local, examples – I haven’t even mentioned Amazon!
“Clarity in Murky Waters”:
Export Market Intelligence
Now I would
like to introduce another premise, pointing towards the area of diversification
that I can develop for a freight forwarder, addressing an identified market
failure. Nearly half of small businesses have identified market intelligence as
a challenge to exporting, the second most significant factor;
while the OECD showed that SMEs found “identifying
foreign business opportunities” and “limited
information to locate/analyse markets” to be the second and third most
significant barriers.[3] Freight forwarders exist
to enable their customers to overcome all of the practical barriers involved
with importing and exporting, so the Challenger
MI proposal is a partnership with a forwarder in order to add a market
intelligence service to help their customers overcome this barrier too.
And this is
important now, more so than ever, as we are entering uncharted, and murky,
waters with the UK beginning to carve out a new position in the global economy,
in the wake of the Brexit referendum. While this presents significant
opportunities, one concern, for example, was that the Institute of Export found
that 42% of its members were forecasting
long-term decline if
Britain left the Single Market – this was post-referendum pessimism, in my
view, but directly results in future lost business for freight forwarders if it
does transpire. Likewise, import costs are likely to rise, meaning that
forwarders will be squeezed by their customers on that side of their business.
Regardless of
that, more recent research from the Institute of Export showed
that the majority of its members are optimistic about future global trade
opportunities, with 54% seeing the extension of overseas markets as their
single biggest opportunity in 2017. And the two biggest areas of investment for
exporters will be new markets and marketing – both of these should be preceded
by market intelligence, and this points towards additional revenue potential
for forwarders if they can get involved in these activities.
So, with
companies reviewing and refreshing their import / export strategies, realigning
their budgets and focus, I contend that freight forwarders, with their
expertise supplemented by additional analytical capability, are well-placed to
get a piece of this pie too.
Challenger MI has worked directly with a number of
SMEs – from a sweet maker, to a generator distributor, to a GPS manufacturer
and a fertiliser company – on projects to identify the best export
opportunities for them. The general approach is shown in the Challenger MI Export Market Intelligence
Cycle, with more detail and examples in Appendix 1.
In summary:
this is a methodical approach to identifying and prioritising target markets
for export, using proven analytical techniques and a combination of a company’s
internal data and trade data. A freight forwarder adds considerable value to
this approach through its general experience of the markets concerned, through
its contribution to any primary research via its networks ‘on the ground’, and
through the ability to take action upon the findings.
The benefits to the
customer: The
ultimate objective behind this analysis – as with any market intelligence – is
to inform the client’s export strategy, and prioritise their investment in the
markets that present the best opportunities. In turn, this contributes to
greater sales, increased volumes shipped, and therefore increased business for
the forwarder. In my experience, this type of analysis always turns up
opportunities – and prioritises opportunities in such a way – that would not
otherwise have immediately sprung to mind. The benefits to the end customer
include:
·
Overcoming
the market intelligence barrier, identified by half of SMEs and among the most
significant barriers to export.
·
Identifying
the best export opportunities for investment and growth, enabling the company
to align with those.
·
Identifying
the current areas of investment that might be best divested.
·
Identifying
competitors, understanding their relative position, and therefore being more
competitive.
·
Identifying
early trends in export markets and anticipating changes.
The Diversified Offer
The OECD study
cited earlier also observed that limited firm resources, including a lack of
managerial time and knowledge, was a problem for SMEs in pursuing overseas
markets. This is a gap that freight forwarders already fill through their
existing services, while they also offer further advice to their customers and
prospective customers; including on blogs, websites, and sharing information
via Twitter and LinkedIn. Hence, a diversified market intelligence offer is, in
many cases, an extension of certain value-added services, including
consultancy, that some freight forwarders already offer.
Returning to
the points that A.T. Kearney, and the
other papers, advanced as to what diversification should incorporate, the table
below shows how a market intelligence offer contributes to each of those:
Diversification
recommended
|
Market
Intelligence offers…
|
(A.T. Kearney) “Establish focus and critical mass, by
region and industry; maximise profits by adapting the offering to serve the
most attractive customer segments.”
|
Market intelligence can
identify what these key industries and regions are, how they are changing,
and which of your customers and – importantly – your prospects are going to
be interested in them. For example, identifying the growth trends for
particular UK export products will enable a forwarder to prioritise its focus.
|
(A.T. Kearney) “Expand relationships, sophisticated
value-added services.”
(Oxford) “Strategic partnerships within the
supply-chain, deepening the relationship with customers.”
(Oxford) “Value-added services.”
|
By offering market
intelligence, a freight forwarder attains a new level of strategic
partnership with customers, expanding and deepening those relationships in an
area that many SMEs struggle with. What’s more, it also involves the freight
forwarder at least one stage, maybe two, ahead of where they would otherwise
be involved, “deepening the
relationship”.
|
(Oxford) “Emphasis on knowledge and expertise.”
|
Market intelligence is a
‘knowledge industry’. By offering this service, a forwarder will be conveying
new knowledge to the customer and, inevitably, enhancing its own knowledge.
The offer can also manifest itself in the form of blogs, Tweets, product or
country-themed briefing events, as a demonstration of the forwarder’s
thought-leadership.
|
(A.T. Kearney) “Win new business by attracting new
customers in developing markets.”
(A.T. Kearney) “Become customer and sales oriented.”
|
Market intelligence
enables forwarders to identify new business opportunities by identifying the
developing export markets in the UK and aligning with those. In a recent
project, for example, I identified that UK guitar exports had grown 33%, in a
market that had declined worldwide.
It also enables a
forwarder to win new business with an entirely new offering to its
prospective customers – it could potentially bring in business from companies
that had never thought about exporting before.
It is also
customer-oriented, given that its main objective is to address a barrier that
customers face to exporting, and to increase their sales.
|
The benefits to the
forwarder:
“We rise by lifting others.” Robert Ingersoll.
“A rising tide lifts all boats.” John F. Kennedy.
As well as
addressing the diversification imperative identified in the industry, other
specific benefits of developing a market intelligence offer for freight forwarders
include:
·
Increased sales, courtesy of identifying greater
opportunities for customers to increase their own sales. “We rise by lifting others.”
·
Improved margins, as there are generally stronger
margins in value-added services.
·
Standing out in a highly-competitive, often
homogenous, market by offering a new and innovative service.
·
Attracting new customers, with a new service, and often at an earlier stage in the decision-making
process – typically, a customer decides it wants to export, and then approaches
a forwarder; whereas this offer enables a forwarder to approach prospective
customers with a powerful message: “we
know the ten fastest growing markets for your product, and we can help you get
your product there.”
·
Deepening relationships with existing customers, and providing
a new service to offer to the current customer base.
·
It
is, inherently, an ongoing piece of work as markets change, the data changes,
and should be reviewed at least annually – it is another regular touchpoint between the forwarder and their customers, and a
way of re-engaging lapsed customers.
·
Enhance
the forwarder’s own business development
efforts, by understanding and aligning with growth segments (products) and
markets (countries, regions) as a specialism.
·
And,
likewise, counter threats (declining
segments and markets) through their own market analysis, enabled by having an
analyst on-board.
·
Using
thought-leadership pieces for
positive PR and customer engagement.
·
Seep
the learning through the business, i.e. ‘data
mastery’ (another of A.T. Kearney’s points),
instilling a data-driven culture, providing foresight for the forwarder’s own
business. This is particularly applicable for the powerful tracking software
that forwarders utilise – are you getting the full analytical capability out of
it?
Examples of Good Practice – Some
Competitors are Already Ahead of You
“We’re not in the shipping business;
we’re in the information business.”
Peter Rose, Founder of Expeditors.
Expeditors –
arguably the gold standard in the industry – derives about a quarter of its
revenue from wider services[4] and includes “data & analytics” and “data integration & visibility” among
those. Buzzwords in their ‘corporate culture’ include: “insight”, “vision” and “curiosity”.
At the time of writing, they are recruiting a Director for Global
Enterprise & Analytics, a CRM Business Analyst, 3 x Pricing Analysts, an
Associate Analyst, 2 x Customer Business Analysts, and 6 x Business Process
Analysts. In total, they are currently recruiting for 19 roles with the word
"analyst" in the job title.
That’s a lot of
analysis! And, granted, they are a massive multinational company – Fortune 500,
15,000 staff, 300 locations. But what if I told you that I wholeheartedly
believe that SMEs have greater competitive advantage to be gained from such
analysis than their larger rivals do? This is at the heart of my thinking, will
be a future white paper, but largely boils down to the greater adaptability of
SMEs, and the shortened lead time between intelligence and decision-making. One
analyst in an SME can be as effective as an army of them in a large,
bureaucratic, slow-moving organisation.
But it’s not
just this global leader, as there are examples of good analytical practice
elsewhere in the industry too. Flexport, US-based but with a European footprint
in Amsterdam, are among the most advanced as a disruptor in the industry, a “data-driven freight forwarder.” They
offer supply chain analytics and business intelligence to their customers.
In the UK, there
is another example of a North West-based forwarder (not on the map) that works
very closely with an export growth consultancy that provides strategic planning
and marketing services, including some market research – the partnership
enables all firms concerned to grow together. That forwarder is also at the
forefront of thought-leadership in general, with advice distributed via blog
posts and trade magazines. Elsewhere, there is a Midlands-based forwarder (on
the map), that is very active in endorsing research services available through
other partners, and also markets its own analytical products to customers, in
the form of ‘KPI packs’ – this is not necessarily market intelligence, but the
wider ‘data mastery’ piece. And, one step further, other forwarders, including
a prominent one in the North West, that offer a fully-outsourced export
department – clearly an export department would want to conduct market
research, and hence this service can be offered too.
But there is
nobody doing quite what Challenger MI
is proposing to do in partnership with a forwarder: offering in-house market
intelligence services to customers in order to identify the best markets for
their growth, and thereby the forwarder’s growth too.
Conclusion: Let’s Address a Market
Failure
Now is the
ideal time for freight forwarders to diversify, while addressing a recognised
need for market intelligence among SMEs wanting to export. There is a market
failure here: an October 2016 World
First report showed that the proportion of UK SMEs
selling outside the UK has been falling for a decade, to fewer than one-fifth,
and that we drastically lag other developed economies on this. Only 5% of SMEs
had plans to start exporting in the next five years. There is a £141bn
opportunity being missed.
SMEs need
assistance in identifying the opportunity (market intelligence) and then
getting at it (freight forwarder).
It is my
contention that exporters, and potential exporters, have a massive opportunity
before them in Brexit: new free trade agreements, a weaker pound, increasing
global trade. But they will need to pick the right path through the global
economy in the coming years – the knowledge and expertise of freight
forwarders, combined with comprehensive market analysis, can ensure this.
“A forwarder can take further control of
its own destiny.”
If only 5% of
SMEs plan to begin exporting in the next five years, and if 42% of the
Institute of Export’s members experience long-term decline, then freight
forwarders will suffer. But, as mavens in the industry, they can play a pivotal
role in increasing the former number and decreasing the latter, by presenting
solutions to this market failure. A market intelligence offer can contribute to
this: growing the volumes of a forwarder’s customer, thereby those of the
forwarder itself, enabling a forwarder to further control its own destiny in an
uncertain environment.
Their expertise
will be sought out as we move forward uncertainly – how many of you have
already been asked about Brexit, or written an article about it? So why not
commoditise this as a formal market intelligence offer?
The Challenger MI Proposal
The Erasmus
University Rotterdam paper showed that the diversified freight forwarders in
its sample saw the range of services that they offer as key to competitive
advantage – market intelligence is a service that few forwarders are currently offering and
hence, being unique, is another potential source of competitive advantage.
Challenger MI is seeking a partnership approach with a
freight forwarder that wants to develop a market intelligence consultancy offer
along these lines. It is a proposal that deepens the existing relationship
between a forwarder and its customers and, importantly, develops another
channel through which a forwarder can acquire new customers. It contributes to
many of the points that A.T. Kearney
raised as to how freight forwarders need to diversify.
I am an
MBA-qualified market analyst, focused on translating intelligence into action,
and with experience of export market research. If you would like to discuss
this, or any other projects related to how you can further develop your ‘data
mastery’, then please get in touch.
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APPENDIX 1: The Challenger MI Export Market Intelligence Cycle
The approach
that Challenger MI has taken to
various export market intelligence projects to date resembles something like the
below:
Review Existing
Export Markets & Evaluate All Global Markets
The purpose of
these first two stages is to produce a longlist of target markets, prioritised
on the Challenger MI Export Screen Matrix
– this evaluates the market in any given country according to its market
attractiveness (typically size and growth), and the company or wider UK’s
strength in that market. The position of a country along the X and Y axes is
determined against a set of fixed parameters, clearly identifying initial
priority targets.
The example below
was an output for a fertiliser company with which Challenger MI worked, as it looked to build its export business. It
first evaluated their existing markets (yellow) against the agreed parameters,
finding an interesting dichotomy between three that should clearly be
capitalised on with further investment, and three that might be divested. This
company also wanted to explore the BRIC (blue) and MINT (green) countries –
which roll off the tongue of any Financial
Times reader when talking about export opportunities – although none made
it into a green segment here. And these were evaluated against a range of other
countries, producing clearly prioritised targets.
The first
source of data – as I recommend with any market intelligence – is the company’s
own internal data, and especially if it already has existing export markets.
But the matrix is mostly informed by the abundance of open data on trade – from
UKTI, the UN and the EU – which can reveal trends in market size, growth and
the UK’s market share for every country and commodity code.
This data can
also answer other, often more important questions, such as:
·
Is
there latent demand for UK products? Perhaps one of the most important ways to
reveal an opportunity, in my opinion, and similar to the thinking behind a
recent Prosperity
UK report.
·
Which
countries is the UK competing with for exports of this commodity?
Secondary Research, e.g.
PESTLE
Beyond trade
data there is all manner of other data that can help to inform export
decisions. This will include macro-economic data, such as GDP, and its
components like Gross Fixed Capital Formation, GDP per capita (the most common
indicator of wealth), and currency fluctuations. But it might also include all
of the PESTLE factors (political, economic, social, technological, legal,
environmental) or STEEPLED factors (adding demographic and ethical).
The recent
example below, for a manufacturer of GPS trackers, looked at the three
dimensions of: GDP per capita, as an indicator of national wealth; vehicle
ownership, as an indicator of potential market size; and vehicle thefts, to
determine the extent to which the problem that this company can solve actually
exists in each country. Again, alongside all of the other data considered, it
produced a list of prioritised targets for investment.
Other examples
of good macro-economic analysis have included:
·
In
2013, I was asked to prepare a paper on the Irish economy, in order to help set
sales targets for that area. I concluded that Ireland had been, “hit harder [by the recession], fallen
further, was slower getting up, but is now coming out swinging”, and recommended
anticipatory investment to get ahead of the curve. Ireland is now the
fastest-growing economy in the EU. I looked at a variety of metrics, notably
gross fixed capital formation (GFCF).
·
Likewise,
when reviewing the market for generators in Sierra Leone, I found an astounding
growth in GFCF, the most important component of GDP for firms in the machinery
business.
·
A
project for a specialist agricultural education provider, looking for the best
markets from which to attract overseas students. Of course, an array of
developing countries were identified, but my analysis cross-tabulated the size
of the rural population with gross value added from agriculture to determine
the countries most likely to have large populations of people requiring higher-level
agriculture skills, thereby changing the priority targets.
Review Competitors
Analysis of
trade data will show, firstly, which countries are also exporting the given
commodity and to which specific partners. This can change assessments as to
where the best opportunities lie. In the fertiliser example above, many Eastern
European nations emerged as top opportunities (there are six in the green
segments); but in the case of most of those, Russia – the world’s largest
exporter of chemical fertiliser – dominated the markets: 60% in Latvia, 46% in
Estonia and 45% in Lithuania, for example.
Likewise, when
analysing the market for generators in Sierra Leone, I identified a
longer-running trend of the UK losing market share to the likes of China and
India.
In both examples,
therefore, the longlist of target markets produced in the previous stages is
refined further, with these opportunities dropping down and others looking more
attractive.
Then, further
analysis can be done to pin down the specific competitors. This is important
for establishing how the client’s offer will be dressed-up: are they better
quality? Are they cheaper? The likes of Datamyne,
mentioned above, offer one way to do this; but it can also be done without the
outlay on such tools. As I have found equally useful, once the competitor
countries have been identified it is more often than not possible to establish
the main players in that market from desk research, through internet searches.
In the example of the fertiliser company, we identified the specific Russian
companies they were likely to be competing with and could therefore make
assessments as to the quality of their product and, therefore, how to market
the client’s product.
Primary Research
At some point,
it will become necessary to collect primary data from the ground, in order to
understand the market in depth – including its structure, culture, and specific
industry players. Beyond the normal methodologies for primary research – such
as surveys, interviews and focus groups – this is where freight forwarders can
also add considerable value and something different, by exploiting their
extensive overseas networks for primary data collection.
Talking to
contacts in-country will help in understanding much of the more detailed, often
subjective, information requirements, such as cultural factors, purchasing
behaviour, and the structure of particular industries.
Finalise Shortlist for
Further Analysis
All of the
above results in a shortlist of prioritised target markets, and an indication
as to the scale and apportionment of investment in each market. Recognising the
barriers that SMEs face in identifying the best markets, this provides a solid
basis on which to make these investment decisions, which are important to get
right given the more limited resources available to SMEs. Then, the work to
identify specific customers – again through a combination of desk research and
primary research – and the real hard work of getting the product to them begins
in earnest.
APPENDIX 2: Examples of PR and
Promotional Uses of Data
[1]
Markides, V., & Holweg, M., On the
Diversification of International Freight Forwarders: A UK Perspective,
International Journal of Physical Distribution & Logistics Management, Vol.
36, Iss. 5, pp.336-359.
[2]
Based on analysis of the services that they offer on their websites.
[3]
OECD (2009), Top Barriers and Drivers to
SME Internationalisation, Report by the OECD Working Party on SMEs and
Entrepreneurship, OECD.
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