How We Use Data-Driven Decisions — Part 1: Helping Companies To Boost Their Exports
Recently, I wrote about our AI-base platform that was designed to help analysts to find actionable insights and make data driven decisions. According to our records, one of the most popular question that analysts ask is how to find the best overseas market to boost a company’s exports.
Our AI platform can answer this question, like many other, using its own algorithm, that we called ‘5 Easy Steps’. It was primarily developed by our in-house analysts and then was adjusted with machine learning principles. To be honest, these steps are easy only if you have big data at your fingertips. Hopefully, we’ve got it.
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Before we dive into the five steps export guide, let me introduce you to the hero of our post. Our hero is a producer of bananas who sells his products on the local market. The competition here is quite severe, and the market size is limited. He needs new ideas to grow his business. The producer decides that the time has come to supply his goods to other countries.
As he looks at the map, he understands that there are great opportunities before him. There are more than 200 countries and in each of them people eat and love bananas. But here’s the question — 200 countries are too many for him. Our hero would really love to choose one country — the best and most promising country.
As he starts weighing up his options, how does he make sure, that he doesn’t make the wrong choice?
How can he be sure, that he will not lose his time and money trying to enter a market, where nobody is waiting for him?
Entering a new market is a long road. We will help the banana producer make his first steps in the right direction.
#1 Market Size and Growth. Looking for the Best Performing Markets
The first question we will help banana producer answer is: Which markets performed best in terms of banana sales in the last 5 years? And which markets were among the outsiders?
In order to do that, we will build our own map. Let’s take a square and divide it into four parts. On the right side, we will mark the countries with the highest level of consumption of bananas — these are the largest markets. On the left we will input the small markets. We will put the countries, where banana consumption has been growing for the last 5 years, at the top of the graph. At the bottom of the graph, meanwhile, we will input countries where consumption has been declining or showing very little growth.
Now let’s gather the necessary information here and put the countries in the relevant quadrants.
In the lower left quadrant, we can see countries with small markets, where the consumption of bananas is falling. These countries are not appealing to our producer, so cross them out and leave them out of further consideration. The rest of the markets showed a relatively good result. The best countries, in terms of volume and dynamics, can be found in the right upper quadrant. But let’s not rush to conclusions, so let’s take the remaining countries and move on to the next stage of our analysis.
#2 Market Saturation. Looking for the Most Promising Markets
At this stage, we will answer the following question: which countries are the most promising, in terms of banana consumption growth, and which ones are already saturated?
To answer this question, we will be using information on per capita consumption. In other words: how many bananas does one person consume on a yearly basis?
We will source this data here.
Let’s arrange the countries in descending order.
Thus, at the top, we have countries with the highest average per capita consumption. This means that these markets are saturated and, most likely, will no longer grow. They don’t have any further growth potential. That is why we will exclude them from our analysis and move on to step 3.
#3 Imports and their Growth. Looking for the Markets That Are the Most Reliant on Imports
The next question is: in which countries are local producers unable to satisfy the increasing demand for bananas? Or, in some cases, which countries do not produce bananas, at all?
In order to find out, we will draw a new map. We’ll simply take a square and divide it into 4 parts. On the right, we will mark the countries where a large volume of imports is observed. To the left — those countries where import levels are low. At the top, we will mark countries with growing imports. Below — where imports are falling or showing little growth.
Let’s source the necessary data here and place the remaining countries in the square in accordance with the import dynamic and volume.
As you might guess, in the left lower quadrant are countries with a low volume of import of bananas and a negative dynamic. Most likely, local producers assume strong positions in these markets. This market holds a lack of development potential for Importers. We will exclude these countries from our analysis and move on to the next stage.
#4 Market Entry Barriers. Looking for the Most Accessible Markets
At this stage, we will answer the following question: what barriers should the manufacturer overcome in order to enter new export markets?
Entrance barriers can be associated with high tariffs, the need to obtain licenses or certificates, and the complexity of logistics, etc. For each of the remaining markets, we will conduct an analysis of the barriers for entry, information about which can be found here.
If a barrier is proving difficult to overcome, we will mark it with an X. In the end, we will end up with markets with relatively low or surmountable barriers.
#5 Import Prices. Looking for the Most Profitable Markets
In the last 5th stage of our analysis, we will answer the following question: which markets are the most profitable for banana producers?
In order to do this, we will draw a new map. Take a square, divide it into 4 parts. On the right, let’s mark the countries where we observe the highest price of imported product. On the left are the countries with the lowest prices. In the upper half, we mark the countries where the prices of imported products have grown in the last 5 years. In the lower half, we’ll input countries where they fell.
Take the necessary data here, and place the countries in the corresponding quadrants.
It is easy to see that the countries with the highest and growing prices for imported bananas are in the right upper quadrant. For our producer, these are the most profitable markets.
Summary
We’ve gone through 5 steps. First, we chose the largest and fastest growing markets. Of these countries, we took the markets which are still unsaturated. Then, we chose the markets with a large and growing share of imports. After this stage, we filtered out the markets with insurmountable entry barriers. Of the remaining countries, we selected markets with the highest import prices. As a result, we helped our banana producer to find the most promising new target market. If you want to grow your business and enter new export markets, you can use the 5 easy steps to conduct your own analysis.
