Prior to entering a new foreign commercial market, a company needs to conduct an extensive amount of due diligence—all of which needs to be completed before even selling one widget or piece of software to any customers in that country. In addition to actually visiting the intended country and meeting with a slew of people, the company needs to develop an understanding of the marketplace and market size. Finally, the firm needs to do a post-trip assessment and determine whether or not they should enter the market and if this is the right time.
Once a firm determines which country it is interested in further exploring, it needs to collect some basic data. A firm will need to understand a myriad of facts, including market size and potential, key competitors and their revenue and end-user purchasing habits. When I did business development for a healthcare IT firm, the firm’s management had expressed strong interest in entering the Indian healthcare market. The first step I did was look at the number of hospitals in India, where they were concentrated, what their buying points were and what kinds of competitive firms had already established a foothold in the Indian healthcare market. Lastly, as the firm will need to actually visit the intended country, they need to set up meetings with some key industry experts, potential clients and potential partners or distributors.
The next phase involves the actual visit. A firm will need to go to the intended country and meet with potential customers, industry experts, potential partners or distributors, lawyers and regulatory experts. By doing so, the firm will be able to better understand the current market state, industry trends and issues, regulatory and legal concerns that the firm needs to be cognizant of and, ultimately, gauge market demand and interest in their product. At the healthcare IT firm, I met with several well-respected doctors and healthcare industry experts, pitched the product to a couple of hospitals and even talked to someone who understood the regulatory framework. By doing so, I realized that at the current time, a lot of hospitals did not have the adequate technological infrastructure in place that was needed to allow our system to work.
The final phase involves the post-trip assessment and next steps. After the firm has an understanding of market demand, it can then decide what the next steps should be. Should the firm enter the new market? If so, how? Should it work with channel partners? If so, which ones? If now is not the right time to enter, then when should it? At the healthcare IT firm, I determined that it was too early to enter the Indian healthcare market, we should reassess in 12 months and, if we chose to enter the market, we should only work with distributors that had already sold products to the top-tier Indian hospitals that were planning on upgrading their technological infrastructure in the near future.
This due diligence is not only important and necessary, but it can help prevent costly market entry mistakes that many companies often make.