The Problem with Top 10 Lists

In the current issue of Entrepreneur magazine, Laurel Delaney of Globetrade.com submits a "Global Village" column which purports to answer the question "how do you find the country in which to do business?" after you have "determined that your product can be sold abroad."   Her answer is to provide the top 10 from the World Bank's rankings provided in its report entitled "Doing Business 2007: How to Reform."  Unfortunately if you're an exporter, it's the wrong answer to the right question.

First off, the list ranks countries according to how easy it is to do business IN the country.  This indeed would be a useful starting point if you were looking to locate operations on the ground.  The fact that a country may be a relatively easy place in which to operate a business does not necessarily make it a good or easy market in which to sell product on an export basis.

Second, the key question for a company looking to sell product abroad isn't "What country is a good market for selling products generally?', but rather, "What countries present the best opportunity to sell our particular goods or services?"

The list, for example, includes Australia and New Zealand.  Both are good countries to do business in generally since they have well developed commercial laws based on the same English common law system which under-girds how we do things in the U.S.  From an export point of view, however, both are relatively unpopulous markets a great shipping distance from home.  Also, being island nations occupying their own parts of the Pacific, they tend to have relatively self-sufficient economies and much of their international trade is tied in with Asian countries which trade much closer in their spheres of influence.   This isn't to say that one or the other couldn't be a good export market for any particular product or service, but in my experience I'd be surprised if either appeared on a top 10 list of optimum export markets for most companies.

Japan also appears on the list.  As I've written about elsewhere on this blog, Japan, being a relatively homogeneous and populous market of affluent consumers with similar technological tastes to those in the U.S., can be an excellent market for many U.S. companies.  From an export point of view, however, Japan presents two challenges that can make it an expensive and time consuming investment for your average exporting company -- (1) it  has some very strict safety, health and environmental code requirements that can necessitate expensive and lengthy testing and approval processes, and (2) developing a quality distribution relationship can take quite a bit of time and investment given the importance the Japanese place on group dynamics and integration. 

On the flip side of these issues, from an exporter's point of view, the mere proximity and size should place Mexico on almost any U.S. company's top 10 list of possible export markets worth examining --  which is why, of course, it's one of the U.S.'s major trading partners.  Yet it is glaringly absent from the World Bank list provided by Ms. Delaney's column.

As a small business owner myself, I am a regular reader of Entrepreneur magazine and do find some useful ideas in its pages.  But if you're looking to select potential export markets for your company, there are far better places to start than this issue's Global Village Top 10 list.

Comments

[China Law Blog]

I completely agree with you. That list makes no sense at all when it comes to exporting.

[Craig Maginness]

Dan:

Thanks for the checking in. Of course from your point of view, China is also missing from the Entrepreneur magazine top 10 list. I would think the sheer size of the potential opportunities in China would make it a more intriguing market to investigate for the average company than say Norway which is on the list.

On my to-do list is a series of posts which would provide what I think would be a better starting point for examining potential export destinations than this list.

Craig