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Tool to Help SMEs Expand into International Markets

By Allan Halcrow

Where to next? It’s a common question posed by small and midsize business owners as they consider expanding into international markets.

When trying to choose the next (or first) place to export, a good answer to “Where to next?” can help grow the business internationally while a poor answer may result in a costly setback. Now, intending to help exporters make smarter decisions, the U.S. Commerce Department’s International Trade Association (ITA) has launched the Market Diversification Tool.1

 

The free online tool won’t choose a new market for small and midsize enterprises (SMEs). But it pools a lot of data—the ITA says the tool contains 12 million data points2—and then ranks the results to help make an SME’s evaluation process much faster.

 

Some SMEs may find the tool more helpful than others, depending on where they are in their growth cycle. The sweet spot is businesses that are already exporting but to only one market. According to Secretary of Commerce Wilbur Ross, that describes more than half of all U.S.-based companies that are currently exporting.3 For those not yet exporting, the tool may be less helpful because its analytics include the SME’s current markets. The tool may also be less helpful for those that export services, not goods, because the government’s data on services is less robust.

 

4 Data Points Help Drive Small Business’ International Expansion

 

Using the tool is as simple as entering four pieces of information into a form:

 

  1. The product (or products) the SME currently exports. It wouldn’t be practical for the tool to have each user enter a product name (imagine all the variations), so it requires using Harmonized System numbers. Standardized across countries, the classification system assigns a six-digit code to all goods.4 Those currently exporting likely know the correct codes or can find them on their export paperwork. If not, the U.S. Census Bureau maintains the Schedule B Search Engine, where SMEs can find any code needed.5
  2. Current export markets.
  3. Potential new markets. The tool allows users to focus on a specific country or region, or to find promising markets anywhere in the world.
  4. The company’s zip code.

Using these simple data points, the tool’s algorithm evaluates three things that are critical to growing a business internationally.6

 

  1. It compares potential markets to a current market or markets, on the premise that it may be easier to export to similar countries.
  2. It examines product-specific trade data to see whether potential markets are primed for more exports from the U.S.
  3. It considers data that reflects whether potential markets are generally good for exporting and doing business.

The Tool Reports on 15 Data Points

 

To illustrate how the tool works, suppose an office furniture manufacturer (Harmonized System code 940330) currently exporting only to Canada is seeking new markets and is willing to consider all options.

 

Once they enter the required data, users can specify whether they want to see 10, 25, 50 or all results. For the office furniture manufacturer, the tool ranked Mexico (with a score of 82.5) as the most promising place to help grow the business internationally. After that came, in order, Saudi Arabia, United Arab Emirates, the United Kingdom, and Costa Rica. For each potential market, the report includes 15 data points. At the top is the current average value of imports from the U.S. in the chosen product category, followed by the average tariff. After that are average imports from the rest of the world, the U.S. import share, and import growth. SMEs will also learn the cost to import and whether the country has a free trade agreement with the U.S., among other things.

 

Even at a glance the report can help SMEs set priorities. Although ranked second, for example, Saudi Arabia had a score of 57.1, a bit over 25 fewer points than Mexico. And fifth-ranked Costa Rica had a score of just 45.

 

Results Help Frame Next Steps for International Growth

 

That said, even though the results in this case pointed clearly to Mexico, the ITA intends that the tool should be the first (not only) step in the process of expanding a small business into international markets.7 Using what the tool reveals as a framework, the ITA suggests that exporters seek additional trade data, determine the tariffs and taxes they would pay, contact a local commercial service office, and review other market research resources.

 

Those resources include many other tools to help exporters grow their businesses. For example, the World Bank’s TCdata360 tool8 (“New Tool Helps Analyze Opportunities in Import/Export Trade and International Supply Chain Management”) can provide the furniture maker with charts and visuals to provide a deeper dive into Mexico’s import/export economy. However, it will not facilitate comparing it to other possible markets. Other tools let users explore shipping records and customs reports to determine who is shipping what (“Data Platforms and Marketplaces Automate Import-Export Trade”).

 

The

Takeaway:

For businesses looking to grow internationally, the ITA’s Market Diversification Tool can help make the necessary first exploratory stage—“where to next?”—both easier and faster. It ranks millions of data points to help SMEs determine how to best focus their efforts. For business owners currently exporting to only one or two markets, time spent using the tool may be time well spent.

Allan Halcrow - The Author

The Author

Allan Halcrow

Allan Halcrow is a freelance writer concentrating in business, human resources, and diversity and inclusion. His is also the author of four books on management..

Sources

1. “Market Diversification Tool,” U.S. International Trade Association; https://beta.trade.gov/marketdiversification/About-the-Tool
2. “U.S. Secretary of Commerce Wilbur Ross Announces New Data Application to Help American Companies Expand Overseas,” MarketScreener; https://www.marketscreener.com/news/ITA-International-Trade-Administration-11-15-18-U-S-Secretary-of-Commerce-Wilbur-Ross-Announces-N--27615090/
3. Ibid.
4. “About the Tool,” U.S. International Trade Association; https://beta.trade.gov/marketdiversification/About-the-Tool
5. “Schedule B Search Engine,” U.S. Census Bureau, https://uscensus.prod.3ceonline.com/
6. “Helping American companies expand their exports to new markets,” U.S. International Trade Association; https://beta.trade.gov/marketdiversification
7. About the Tool,” U.S. International Trade Association; https://beta.trade.gov/marketdiversification/About-the-Tool
8. “TCdata360,” World Bank; https://tcdata360.worldbank.org/

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