Evaluating New Opportunities in Uncertain Times: Market Diversification

In a COVID-19- impacted world, policies and market conditions are constantly evolving. Economic lockdowns are resulting in falling demand in traditional markets, supply chain disruptions, and unprecedented operational challenges for firms across the globe.

These challenges have been felt particularly by SMEs, who might not have the financial or structural security that bigger companies do. Twill is built to help SMEs by levelling the playing field and making logistics simple and accessible. Alongside our platform and expertise, tools like the Global Trade Helpdesk – a multi-agency project from the World Trade Organisation, International Chamber of Commerce, African Development Bank, and more – can help SMEs get valuable insights. In this blog, we explore just how it can work, through a real-world example:

Danilo and his journey to an expanded business

Danilo – a dried coconut flake producer and vendor based in the Philippines. He is looking for opportunities to expand his exports beyond the traditional markets (the United States and the Netherlands) to diversify some of the market risks in uncertain times.

Given that the pandemic has hit different regions and countries at different times, exporting to several markets could provide greater certainty and stability in income over time, as well as present new opportunities for growth – which is good news for Danilo!

So, what are some of the key elements Danilo needs to consider and compare in order to gain these new opportunities?

  1. Firstly, he needs to evaluate how economically attractive the new market could be. He can look at market dynamism and export potential, helping him find attractive markets with room for growth.
  2. Secondly, Danilo should compare the costs of reaching a new market. Specifically, what are the custom’s tariffs on his desiccated coconut?
  3. Finally, he should also have an idea of how stringent the regulatory requirements are, to be sure that his goods will comply and can enter the market.

Making it happen, with a little help…

Using the Global Trade Helpdesk, Danilo can achieve all this and access an integrated source of crucial trade, market and business information. He begins by selecting the Philippines as the exporter and entering desiccated coconuts in the product line (HS 080111). By placing the cursor within the target market box, he can compare potential across markets before selecting a market.

Market diversification

Market diversification

 

Danilo decides to explore the German market with an estimated annual export potential of $35.9 million in the coming years and looks at the summary provided in the Market Overview.

  1. Danilo starts by looking at factors like market size, dynamism and potential. He can then see that Germany is the 3rd largest importer for dried coconuts with global imports of over 33 million last year and that exporters from the Philippines have a strong share of the market, with a market share of nearly 50%.

Imports have been growing 4% on average in the last five years and while last year’s imports were over $16 million, export potential estimates indicate that there could be considerable room for growth in the next 4 years, reaching a total potential of over $35 million. With nearly $20 million in export growth over the coming years, this makes it larger than the estimated potential for growth in the Canadian market ($5 million).

  1. Using Global Trade Helpdesk, Danilo can also see that exporters to the German market from the Philippines, or any other WTO Member economy, enjoy duty-free access. This gives him an indication of his transactional costs to reach the market, aside from transport-related fees.
  1. Next, Danilo can get detailed information about the 19 regulations for dried coconut imports into the German market, as well as the national regulations applied by his own market. Given that the Philippines already has a considerable market share in the German market, he can feel confident that other firms from his country have been able to reach this market and meet the regulatory standards.

Finally, Danilo can also get further information on potential partners to help him reach this new market including businesses, trade finance providers, and export promotion agencies.

Now, he is ready to dig deeper, explore competition in Germany, and prepare his market entry strategy.

Could you tackle a new market like Danilo? With Twill’s platform, taking your products to a new market is simpler than ever – and thanks to tools like the Global Trade Helpdesk, it is more accessible too.