Market Expansion Solutions or MES is one of the latest and fastest growing trends in international trade and global business practices.
The term entails the outsourcing of key market development tasks to a locally-operating and reliable service provider. Typical tasks that can be outsourced are:
Traditionally, brand-owning companies have relied on local importers to develop export markets. These importers, theory goes, have the infrastructure, local knowledge, goodwill and investment capacity to successfully insert the brand owner’s products in a sustained form.
Whereas this is often the case, more often than not this traditional type of cooperation has the following setbacks:
When companies realize the limitations of this market expansion model, they invariably come to the conclusion that:
"In order to insert their products in a sustained and well managed way, a brand-owning company must take control over the more advanced steps of the market expansion process".
To better understand this concept, please contrast the two graphs underneath:
Graph 1.1 shows the traditional market expansion model, depicting which partner controls each step of the market expansion process. The area in red covers the tasks over which the brand owner has full control. As seen here, the brand owner has no control over most steps of the expansion process, including over critical tasks such as branding, marketing and customer care.
By contrast, Graph 1.2 depicts a more advanced form of market expansion. Under this system, the brand owner in cooperation with a locally operating MES provider is able to carry out the import, distribution, sales and after-sales services of its own products. The area in red shows that under this system, the brand owner acquires full control over 65 – 85% of the most critical steps of the expansion process.
By comparing the red areas on both graphs, we see that companies making use of Market Expansion Solutions achieve control over most of the tasks needed to expand their export markets.
Having a higher level of control over advanced steps of the expansion process grants brand owners several advantages:
The first thing to know is: many companies already do! All major companies engaged in international market expansion acquire control over their value chains by setting up their own distribution centers, hiring local experienced staff and acquiring logistic capabilities in the territories to develop.
The big problem here is that required investments are prohibitive for most middle and even big sized firms.
Hence, partnering up with a proper MES provider, who already has invested in infrastructure and human skills is by far the best bet for middle and big sized companies.