The Market Diversification Tool Understanding Results

Understanding Results From the Market Diversification Tool

The Market Diversification Tool provides a clear and comprehensive ranking of potential export markets based on your specific inputs. Whether you’re exploring new opportunities or expanding existing ones, the tool calculates an overall score for each market, reflecting its potential based on various indicators. The tool helps you easily compare and prioritize markets to make informed export decisions.

Dive into your results to uncover the best opportunities for your business.

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Overview

Once you’ve run your search, you’ll see the “Results Overview” page.

The markets are ranked in order of their calculated scores with the highest-scoring markets at the top of the results report and the lowest-scoring at the bottom. You can see each market’s score (on a scale from 0 to 100) next to the market’s name on the “Results Overview” page or the “Results Table” page.

When looking at the data in your search results, there are a few things you should keep in mind:

A higher value for an indicator isn’t necessarily better. For some indicators, like imports from the United States, a high number improves the country’s score. For other indicators, like distance, a low number improves the score.
Not all countries will appear in the results. The results report only includes the markets you selected and countries with sufficient data.
Changing the markets searched for will change a country’s score. The markets are only compared to those you selected to include in the results. If you change which countries are included in the results, each country’s score will also likely change.

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Looking At The Overall Market Scores

The “spread” between the results

The “spread” or “gap” between the countries’ scores shows how much better or worse they scored than the other markets in the list.

If one market has the best values for multiple indicators, its score may be much higher than the next market in the list. If one market has the best value for the most heavily weighted indicator, there may be a large gap between it and the next market.

Average Imports from the United States and Potential Trade are the most heavily weighted indicators when you use the standard weights. The Potential Trade Growth indicator uses the market’s average imports of the selected product(s) from the United States as the base from which to calculate the potential dollar value growth. Therefore, large trading partners, or partners with higher imports and some potential trade growth will often float to the top of the results. Smaller markets with high growth rates may rank lower because the growth is being applied to a smaller base.

For example, in this search for an auto part exported to Latin America, Mexico has, by far, the highest score at 89.17. The next highest score is only 28.9, and there are a number of markets with similar scores in the twenties.

Looking at the detailed data on the “Results Table” Page, it’s clear that the main reason for Mexico’s high score is the size of the Mexican market for this U.S. product. Mexico’s average imports from the United States were nearly $1.2 billion. The next largest market in the results has average imports from the United States of only $23 million. Mexico also has high import growth at almost eight percent and high GDP growth. These factors, along with the average imports from the United States contribute to the potential trade indicator, which is also highly weighted.

This doesn’t mean that smaller markets aren’t competitive export destinations for this particular product. Smaller markets often present opportunities for U.S. exporters with growing markets that may be underserved by other exporting countries. We encourage you to look at both the largest markets for your products as well as smaller markets that may have export potential. If you find that one market is dominating the results, you may want to re-run the search without that market. This will allow you to better gauge the differences among the smaller markets.

You should also consider what types of buyers you are trying to serve. In the case above, Mexico has a large automotive manufacturing industry, so much of the sales of this auto part may be going to those manufacturers. If you’re an exporter trying to serve the automotive aftermarket (repair shops rather than original equipment manufacturers), you wouldn’t necessarily focus on markets that have an auto manufacturing industry.

Another possibility you may find in the results is when most of the markets have scores pretty close together and no markets have a particularly high score. This will happen when the markets being compared have very similar scores for multiple indicators.

For example, in this search for certain tractors being exported to the European Union, the highest score is only 54.41. The next few scores aren’t much different. No one market seems to stand out.

All these markets are in the European Union, so they have the same Maximum Average Tariff. None have an FTA with the United States. They all have similar scores for Distance (because they are close to each other), Regulatory Quality, and Logistics Performance. And there’s no market with significantly higher average imports of the product from the United States. This is a product where they all have relatively low imports from the United States of less than a million dollars. All this means there’s not a lot of variation among the markets’ individual indicator scores, so no one market stands out and receives a high final score. Furthermore, since the markets have high overall imports of the products, but low imports from the United States, one suggestion might be to look into who the big suppliers of these products are to these markets and investigate why that is.

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Why Some Markets Rank Higher or Lower

Let’s say your company exports a type of air compressor classified in HS 841480. You’re currently exporting to Mexico, but you’re interested in exporting to other Latin American countries. You run your search, and the results look like this:

The first thing you notice is that there is a large gap between Brazil (with a score of 87.32) and the next-highest country Argentina (58.89). The next thing you might notice is the 14-point drop between Colombia and Peru, then again between Chile and Guatemala. Now you want to know why the ranking came out this way.

Taking a closer look at the data that contributes to the trade and tariff indicators (the product-level indicators on the “Results Table” page), we see:

Clearly, Brazil is the largest market here for this product, with imports from the world of more than $235 million per year. This is $90 million per year more than the next largest market of Argentina. However, imports from the United States for Brazil and Argentina are very similar—in the low $30 million range. Then there’s a gap with the next market only having imports from the United States of $24.5 million. Peru and Chile have average imports from the United States of $16 and $17 million. Then the imports drop off dramatically with Guatemala. That’s also where we see a drop in scores into the twenties.

We know that the standard weights used in the tool for a current exporter, the market’s average imports from the United States, and the potential trade indicator are both weighted heavily. Brazil’s imports from the United States are not what’s causing it to stand out in the scoring, so let’s look at the potential trade indicator.

But just because the market is the largest for U.S. products, doesn’t mean it’s necessarily the optimal market for your needs. Thinking about the potential for trade growth, the factors that contribute to that are the Import Share Gap, Import Growth, and GDP Growth.

And we see that Brazil has a significant Share Gap percentage of 5.4 percent, while the next few countries don’t. It also has a very high import growth rate of almost 12 percent per year. Colombia and Peru also have high import growth, but those growth rates are smaller and are being applied to lower base import values. So, it’s likely that Brazil’s combination of high Share Gap and high Import Growth, which are factors in the highly-weighted Potential Trade Growth indicator, is differentiating it from Argentina and pushing it out in front of the other markets.

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Think About Your Product’s Classification

While the tool allows you to look at data that is specific to the product defined at the 6-digit level in the Harmonized System, that 6-digit number may not be specific enough to adequately capture trade patterns for your product.

The Harmonized System only has about 5,600 6-digit subheadings. Each one includes a variety of goods. Some subheadings are quite specific, and trade data for that subheading could be used to understand trade patterns for any product contained within. Other subheadings cover a variety of seemingly unrelated products or are a catchall for products not described elsewhere in a chapter. For example, take HS number 854370, with the description “Electrical machines and apparatus, having individual functions, not specified or included elsewhere in this chapter; parts thereof: Other machines and apparatus.” This one subheading contains a huge variety of products, including flight data recorders, e-readers, electronic educational devices for children, touch screens, sound mixers, and plasma cleaners.

If your product is classified in a similar subheading, the trade data for the subheading may not be a good representation of how your specific product is traded. Instead, you may want to find a product you can use as a proxy for the purposes of the tool. This would be an HS 6-digit number for a product that is often purchased with your product or by the same customers.

Another option would be to look at more detailed U.S. export data if there are 8- or 10-digit numbers that better reflect your product. Sometimes this is the case, and the U.S. Schedule B numbers are detailed enough to get a better idea of the trade patterns for your specific product.

Resources for more detailed U.S. export data can be found in the Next Steps.

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Think About Trade Patterns and Trade Data For Your Product

International trade statistics aren’t perfect, and trade data for your product can be affected by a variety of factors including incorrect data, trade affected by supply chains, seasonal trade patterns, and uneven demand. You may need to adjust how you interpret the tool’s results.

Sometimes goods enter a market and are then re-exported without further transformation. This may have not been the original intention, so the goods appear in the trade data as being imported into a market even though they have a different final destination. Many countries don’t record these re-exports, and the trade data in the tool does not account for these re-exports.

Sometimes trade data can be distorted due to the physical port where products enter or leave a region. For example, due to the size of the Rotterdam port, statistics on trade with European Union countries will often show very high trade with the Netherlands when the goods were actually destined for other European markets. This issue is so prominent that economists have given it the name the “Rotterdam Effect.”

Trade patterns can also be affected by supply chains. For example, within the North American auto supply chain, auto parts and components can be traded back and forth across borders multiple times throughout the auto manufacturing process. Trade between the United States, Mexico, and Canada may reflect the same goods flowing back and forth among the countries multiple times.

Additionally, trade data may show a lot of imports of clothing from the United States by Central American Free Trade Agreement partners. These markets are part of the value chain for U.S. textiles. The clothing is partially manufactured, shipped to the other market where it is finished, and then exported again. The trade statistics may show large imports of clothing, but that shouldn’t be taken as meaning it’s a good market for clothing exports.

Furthermore, not all products are traded consistently throughout the year. For some, seasonal trade patterns can be critical. You may want to consider markets where demand for your product will be higher at times of year when demand is lower at home or in the markets where you currently export.

For some products, historic trade may not be a good indicator of future trade, such as products that are purchased infrequently or are part of emerging industries. Trade for a given country may fluctuate widely from year to year. And you may be able to glean information elsewhere about whether there will be demand for your product in the near future.

For example, if you sell products used in large-scale infrastructure projects, a market may have had no imports of the product for several years. But you may know now that the government in your target market is planning on investing in infrastructure, so demand for your products is expected to go up—even if it’s not apparent from the trade data.

If your product is subject to trade and demand patterns that fluctuate dramatically from year to year, you may want to reduce the weighting for the trade indicators in the tool and supplement your research with other data and information not included in the tool.

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Think About Other Exporting Markets

The tool provides data on the other top exporters of your selected product(s) to a potential market. You can see what the other major exporters of the product are to the markets you are considering and how their exports compare to the United States’ exports to that market.

It may be useful to think about why other markets may be large exporters of the product to the countries you are considering.

Do they have FTAs or other trade agreements with your potential markets that would give them preferential market access?
Are they neighbors with your potential markets, making shipping goods easier?
Do they share regulatory and standards schemes so the goods don’t need to be adapted to be sold in the export market?
Are there cultural considerations that would make them more competitive in the markets you are considering?

Answering these questions can help you assess the competition in a given market and understand what advantages or disadvantages exporters from other countries might have in the markets you’re considering.

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Additional Data in the Tool

In-depth Information On A Single Market

While the “Results” page provides the score components for each country, the “Data for a Single Market” page provides additional contextual information not necessarily expressed in the scores.

Under the “Trade” tab, you can see the top three exporters to your target market, as well as the United States (if not among the top three exporters) and imports from the rest of the world. The page also displays import growth from the top three partners and the components of the potential trade indicator.

The “Economy and Population” Tab contains additional information on GDP and population sizes by country.

The “Logistics Performance” Tab contains a breakdown of the components used by The World Bank to calculate the Logistics Performance Index.

Lastly, the “Other Indicators” tab contains the additional country-specific information used in the tool, including the Regulatory Quality Score and its distance from the United States.

Comparing Multiple Markets

The “Compare Multiple Markets” page contains similar visuals to the “Data for a Single Market” page but with the additional ability to directly compare selected markets. You can select up to five markets to compare.

For each potential export market, you can compare top exporters and the components of the Potential Trade Indicator. In addition, you can visually compare the scores of your selected markets. This includes not only the overall scores displayed in the tool but also:

U.S. share of average imports
Regulatory Quality
Logistics Performance Index
Maximum average tariff

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Adjusting The Search

At any point, while viewing your results, you can click the “Change Selections” button on the left-hand side of the page at the top to return to the home screen. There, you can change your selected markets, products, or weights, and then see the new results by clicking the “Go to Results” button.

Change The Selected New Markets

Adjusting the markets in your search results on the “New Markets” page can give you added perspective since the overall score for a country is calculated relative to just the other markets in the results.

As noted above, the Average Imports from the U.S. indicator is heavily weighted in the results. If there’s one large market with high imports, the other, smaller markets can get crowded together in the results. Running a second search without that large market may be worthwhile to show more distinction among the smaller markets.

If one search of multiple regions results in half a dozen good prospects, you may want to run a second search just including those markets.

Adjusting The Product Search

The tool allows you to search for up to 25 products, but when you search for more than one product, the tool aggregates the trade data so you can’t see if different markets are better for different products you are trying to export.

If you export multiple products, you may want to run searches grouping the products together and then searching for them separately. If one market imports a lot of one product but not another, you will be able to see it in the results.

Changing The Weights

One additional option you have is to change the weights of the different indicators. You can adjust the weights or use the standard set of weights for the indicators.

The most heavily weighted indicators in the standard weights are the Average Imports from the U.S. and Potential Trade indicators. For current exporters, these are set to 42.5% and 40%, while for new exporters they are both at 34%.

This is how the standard weighting breaks down by indicator:

Indicator	Standard Weight for Current Exporters	Standard Weight for New Exporters
Average Imports from the United States	42.5%	34%
Potential Trade	40%	34%
Tariff	1%	1%
Logistics Performance	1%	5%
Regulatory Quality Score	1%	5%
Language Match	2%	6%
Distance	1%	1%
Landlocked	4%	4%
Free Trade Agreement with the United States	7.5%	10%

Note: The standard weights have been analyzed and fine-tuned to provide beneficial results, and we recommend using the standard weights if you are not an expert.

There are many reasons why you might want to adjust the weights. Let’s say enforcement of intellectual property rights is particularly important for your product, you may want to increase the weight for the Regulatory Quality indicator. Or maybe you aren’t concerned at all about the tariff. Then you might want to reduce the weight of the tariff indicator slightly. Or maybe the shipping logistics of your product are critical. Then you might want to increase the weight of the Logistics Performance Index.

To change the weights, click the “Change Weights” button on any of the menu pages.

In the menu, you can adjust the weights of the individual indicators. The weights must add up to 1 (100%). Hovering over the “?” icon next to an indicator displays a pop-up explaining what that indicator measures.

Once you’ve completed adjusting the indicators, click the “Go to Results” button at the bottom of the menu. The scores will automatically change to reflect your updates.

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Global Business Navigator Chatbot ^Beta

Welcome to the Global Business Navigator, an artificial intelligence (AI) Chatbot from the International Trade Administration (ITA). This tool, currently in beta version testing, is designed to provide general information on the exporting process and the resources available to assist new and experienced U.S. exporters. The Chatbot, developed using Microsoft’s Azure AI services, is trained on ITA’s export-related content and aims to quickly get users the information they need. The Chatbot is intended to make the benefits of exporting more accessible by understanding non-expert language, idiomatic expressions, and foreign languages.

Limitations

As a beta product, the Chatbot is currently being tested and its responses may occasionally produce inaccurate or incomplete information. The Chatbot is trained to decline out of scope or inappropriate requests. The Chatbot’s knowledge is limited to the public information on the Export Solutions web pages of Trade.gov, which covers a wide range of topics on exporting. While it cannot provide responses specific to a company’s product or a specific foreign market, its reference pages will guide you to other relevant government resources and market research. Always double-check the Chatbot’s responses using the provided references or by visiting the Export Solutions web pages on Trade.gov. Do not use its responses as legal or professional advice. Inaccurate advice from the Chatbot would not be a defense to violating any export rules or regulations.

Privacy

The Chatbot does not collect information about users and does not use the contents of users’ chat history to learn new information. All feedback is anonymous. Please do not enter personally identifiable information (PII), sensitive, or proprietary information into the Chatbot. Your conversations will not be connected to other interactions or accounts with ITA. Conversations with the Chatbot may be reviewed to help ITA improve the tool and address harmful, illegal, or otherwise inappropriate questions.

Translation

The Chatbot supports a wide range of languages. Because the Chatbot is trained in English and responses are translated, you should verify the translation. For example, the Chatbot may have difficulty with acronyms, abbreviations, and nuances in a language other than English.

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The Market Diversification Tool Understanding Results

Understanding Results From the Market Diversification Tool

Discover More About the Market Diversification Tool

Get In Touch

Global Business Navigator Chatbot Beta

Limitations

Privacy

Translation

Global Business Navigator Chatbot Beta

Limitations

Privacy

Translation

Global Business Navigator Chatbot ^Beta

Global Business Navigator Chatbot ^Beta