Overseas Market Research – Seizing Opportunities, Avoiding Risks

Expanding overseas requires market research. On one hand, it helps you seize opportunities with precision; on the other hand, it enables you to effectively mitigate risks.

1. Key Directions for Market Research

Market User Research
Behind every successful international expansion lies a deep understanding of the target market’s consumers. For example, in 2018, JD.com decided to enter Southeast Asia, particularly Indonesia, Thailand, and Vietnam, which showed significant growth potential. Before entering the market, JD.com conducted thorough market research, especially analyzing consumers’ payment habits and preferences. They discovered that there was strong acceptance of the "Buy Now, Pay Later" model, which helped the platform rapidly expand its market share.

Competitor Research
By conducting comprehensive competitor analysis, we can not only understand their product strategies, pricing models, and market share but also learn from their failures. For example, a European brand entering the Middle Eastern market overlooked religious taboos, leading to its products being quickly pulled off the shelves. Such reverse analysis helps businesses avoid falling into the same trap.

Channel Research
Understanding how to effectively utilize local distribution networks and the suitability of digital channels is crucial for success in overseas markets. For instance, in Latin America, WhatsApp has become the primary communication tool for many brands and customers. If businesses fail to recognize this, they may miss important marketing opportunities.

2. The Necessity of Market Research

Objectively Assessing Opportunities
The biggest risk for Chinese companies expanding overseas lies in misjudging market opportunities. In 2013, China’s renowned power equipment manufacturer, Dongfang Electric, decided to invest in Kenya to build a thermal power plant, with a total planned investment of approximately $1.5 billion. The company’s leadership overestimated the growth of electricity demand in Kenya and underestimated the challenges posed by the local political environment and infrastructure. After the project launched, the progress was significantly delayed due to financing issues, land disputes, and changes in government policies. Furthermore, Kenya's electricity market was much smaller than expected, leading to disappointing economic returns. Dongfang Electric ultimately suspended the project in 2016, incurring over $600 million in losses.

Avoiding Cultural Conflicts
In 2018, global fashion brand H&M decided to expand further in the Middle East and launched a series of new clothing lines aimed at attracting local consumers. The UAE, as one of the key markets in the region, was a primary target. However, the brand team failed to fully consider local cultural and religious sensitivities. They used designs that included religious symbols and patterns that didn’t align with local aesthetic preferences, offending the Muslim community and triggering widespread protests.

Reducing Legal Risks
In 2015, the Chinese manufacturing giant, Huachen Group, decided to enter the German market and establish a production facility. However, the company failed to adequately understand local labor laws and cultural practices, especially regarding working hours and employee rights. Huachen Group mandated overtime to increase production efficiency, but overlooked Germany's strict regulations on overtime and workers’ rights to rest. This approach led to strong worker dissatisfaction, eventually triggering a large-scale strike that halted production for seven months, severely affecting the company’s operations and reputation.

Summary
Through accurate market research, companies can effectively avoid cultural conflicts, legal risks, and resource wastage, gaining a competitive edge in the global marketplace. Our market research services are here to safeguard your business as you venture into overseas markets.