Markets Where to Play

In my last newsletter I provided an overview of how the Strategic Compass Framework can shape your approach to international growth, helping you make informed, confident decisions about which markets to prioritize and how to optimize your brand’s global potential.

After completing the initial stages: 1) Home Market Benchmark 2) Competitive Advantages and formulating the hypothesis, you will get a range of potential markets that you should evaluate more granularly to know the markets where to play.

Once you've identified potential markets for your product, the next challenge is to assess which markets offer the best opportunities for success. This evaluation is done using the Attractiveness Map from the book “Where to Play” written by Marc Gruber and Sharon Tal Itzkovitch . ?

The Attractiveness Map

The Attractiveness Map is a visual framework that assists in this process, allowing you to map out each market based on two crucial dimensions: On the X-axis we evaluate the size of the opportunity (the potential) and on the Y-axis the effort and risks of implementing your value proposition in the target market (the Challenge).

Once you have rated each option (market) according these two criteria you can compare your options and choose which of them you should pursue first.

The Potential

To evaluate the size of the opportunity of a target Market this methodology takes in consideration 3 factors:

• Compelling reason to buy – What unmet need does your product address? Who is the target audience for your product? What are the main benefits of your product (economic, functional, emotional, etc.)? Is your product a "nice to have," "should have," or "must have" for consumers? How does your product improve upon existing solutions in the market?
• Market volume – What is the current size of the category for your product (value/volume)? What’s the Per Capita of the category in the Target Market? ?How saturated is the market with similar products? What market segments offer the most significant opportunities for growth? What’s the % of imported brands in the category?
• Economic viability – What is the estimated recommended price point to the end consumer? What are the expected profit margins for your product? Are there sizeable margins to be shared by all stakeholders in the value chain (price structure – From the shelf price to your production cost)? What are the setup investments to launch a brand in the target market (i.e. listing fees; Marketing investments)?

The Challenge

To evaluate the effort and the risks of a target Market this methodology takes in consideration 3 factors:

• Implementation obstacles – What are the difficulties we will encounter to produce a product adapted to the target market (i.e., adapted formula, packaging and minimum production batches)? Are there any regulatory requirements or certifications needed for your product (i.e., Compliance with specific legislation)? How will you establish and maintain your distribution channels? What marketing strategies will be needed to create awareness and demand?
• Time to revenue – How long will it take to implement your product launch (between 6 and 18 months)? ?What is the estimated time frame to secure necessary regulatory approvals? How long will it take to establish your distribution channels? What milestones need to be achieved before generating revenue? How long will it take to see a return on your initial investment (payback in the 2nd or 3rd year)?
• External risks – How strong is the competition in your market segment? Is it easy for your product to be copied (IP risks)? ?Are there any geopolitical risks that could affect your product demand (political risks)? How might changes in trade policies or tariffs affect your business? Can the currency depreciation in the target market affect our future business?

Types of Markets

You can group markets into four main categories in the Attractiveness Map. I have renamed them from the original to adapt to the reality of the Food & Drink Industry. They are: Natural Markets, Venture Markets, Opportunistic Markets, and Markets to Avoid.

Natural Markets

Natural Markets represent markets where your company naturally fits due to your existing competitive advantages. These markets have high potential, and the challenge is easier to overcome.

When validating your market hypothesis selected in the previous section of the Strategic Compass Framework, and answering questions for each factor, you are assessing whether or not those markets are truly 'natural' for your brand. The goal is to determine if they allow you to leverage the existing competitive advantages identified in the earlier section.

Venture Markets

Venture Markets represent new, ambitious expansion opportunities that may offer high potential but come with significant risks. These markets may have high demand for your product category, but there are numerous unknowns in terms of compliance, customer preferences, and distribution channels. We have problems of scale, and we need to invest disproportionately in the first years without knowing if there will be the possibility to achieve a growing sales stream.

This is where we put our current and future Project Markets. No SMEs should have more than 2 projects in this quadrant.

Opportunistic Markets

Opportunistic Markets are low-risk, low-investment markets that don’t require any customization of your product. You can sell the same product range you already offer in your home market or other international markets. These are markets where trade barriers are low, currency risks are minimal, and logistical challenges are straightforward.

These are small markets which have low potential and where there is no winning aspiration for our brands and no investment is required. They may not offer enormous growth potential, but they provide a steady stream of sales with minimal resources or effort.

Markets to Avoid

Markets to Avoid are the ones where, despite potential consumer demand, the challenges outweigh the benefits. Have you ever had the experience of exporting to “the Neverland”?

• You will never have a differentiated value proposition.
• You will never have the investment capacity to make a difference.
• You will never have a price structure to be competitive.
• You will never have the scale to have specific packaging to comply with the legislation…

These are small markets with required customization, that require their own ranges without scale and with specific compliance. They have complicated documentation processes (logistics and financial) and a foreign exchange risk. These markets have high setup costs and no potential scale.

Optimizing your Existing Markets Portfolio

Many of us have already an international business and we are present in many countries. This assessment should be done for existing and potential markets.

When you have a strong portfolio of markets, and you are growing consistently it means you have a set of well-managed natural markets with an increasing sales stream. You already have a target audience that loves your product. There's little customization, or you have an exclusive range because you have scale. There are no implementing obstacles or external risks. These are profitable markets for your company.?

But in your Natural Markets there is always room for optimization. Sometimes our brand is not present in all channels or chains. Sometimes our local distributor is not doing a great job. Most of the time we haven’t invested enough to maintain or grow.

In the New Markets we will find one or 2 projects that are a headache! We must repeat the market assessment and decide whether to keep the project or not.

In your Opportunistic Markets, it doesn’t matter what happens! They are small markets that usually behave like natural markets or are opportunities that arise, and you should grab them even if they will not be repeated in the future.

And finally, get out of the markets to avoid! Remember that Export Business is not a race to fill the world map with your product flags!