Are you wondering why it’s important to learn the most essential Colombia market entry strategies? As Colombia’s largest trading partner, the U.S.’s exports to Colombia were valued at 15.2 billion U.S dollars in 2018, with an expected increase!
Between Colombians’ preference for U.S products and services, and the physical proximity between the two countries, Colombia is an excellent choice for business expansion in Latin America.
If this info piqued your interest as to why you should enter the Colombian Economy, read on to learn HOW you can actually do it (and yes, you can!)
Colombian Market Analysis
The Republic of Colombia is the 4th largest economy in Latin America. It is also the 3rd largest Latin American market for U.S exports. This is a result of the U.S – Colombia Free Trade Agreement on May 15, 2012.
Colombia is considered a promising export partner based on recent security improvements, steady economic growth, and moderate inflation.
It is the only South American country with access to both the Pacific and Atlantic oceans. This strategic advantage helped the nation become an attractive destination from a shipping perspective.
Let’s explore some of the challenges and opportunities that exist within this market.
Challenges and Opportunities of Colombian Market Entry for Foreign Businesses
Despite the challenges presented by the Colombian economy, the opportunities that exist for foreign businesses are incredibly vast. This is especially true for U.S. companies.
- The government requirement of open bidding in public tenders results in lack of transparency.
- Firms with >10 employees cannot have more than 10% of general workforce and 20% of specialists be foreign nationals.
- Commercial presence required to bid in government contracts, and to enter industries such as telecommunications and information processing.
- Economics needs test for foreign providers of professional services to operate temporarily.
- Residency requirements for services such as: accounting, auditing, engineering, architecture, dental, medical, etc.
- Colombian partner required for foreign law firms to operate in Colombia.
- 4 Levels of Custom Duties, with up to 100% tariffs on certain protected agricultural products.
- Massive planned infrastructure projects will require: financing, logistics, transportation and construction equipment, mass transit systems, etc.
- EXIM’s bank commitment to Colombia’s Ecopetrol provides export opportunities in gas and oil equipment & services.
- Airport and concessionaires upgrades require equipment to modernize them.
- High level of tourism provides opportunities for hotels, restaurants, bars, etc.
- Export opportunities in medical equipment, automotive parts, electrical parts, computer hardware, and plastics.
- Other great export opportunities: what, cotton, soy, corn products, etc.
- Growth in IT industry provides opportunity for IT services and Fintech companies.
Your company can be incredibly successful in this market, as long as you navigate the barriers correctly.
To do so, be sure you adopt a combination of the following key strategic elements and incorporate them into your business’s market expansion plan… You got this!
5 Tips to Improve your Colombia Market Entry Strategies
Now that you learned about the main opportunities and challenges that lie in the Colombian market, let’s explore the best market entry methods.
The 5 ways to improve your Colombia market entry strategies are as follows:
1. Secure an Agent, Representative, or Distributor in Colombia.
Colombia scored low in Hofstede’s Cultural Index. This means people in Colombia focus on the “we” rather than the “I”.
Their collectivist nature adds significant weight to the importance of building a strong professional relationship with your partners.
The professional relationship must go beyond a mutual agreement of contract terms. It must focus on mutual trust and formality that will become beneficial both short and long-term. Make sure to show proper local business etiquette in Colombia.
A good way to build this trust is to support each other’s marketing efforts to further strengthen the relationship. For example, you can brainstorm ad campaigns and attend trade shows together. Make sure to always support each other every step of the way.
Take your time when you research potential partners.
Pick a partner that you can rely on. If you’re having a hard time, the Commercial Service can assist your company in both market and partner research.
2. Provide High Quality Products and Services
A focus on high-quality products and services nudges Colombians to choose you over your competitors. Additionally, offer competitive prices and affordable financing to reach more people in the market.
Above all, it’s essential to offer after-sales service and arrangements with your importers. This is critical to strengthen the professional relationship. Examples of after-sales services include warranty offers on imports, quality assurance, and customer support.
3. Visit the Market Often!
Take advantage of the close geographic proximity between the U.S. and Colombia.
In fact, there are hundreds of flights between Colombia, the U.S., and the rest of Latin America. Buy a ticket and hop on one of those flights!
This will not only strengthen your relationships with your partners. It will also keep you in-the-know about what’s locally going on.
Plus, you can take a few extra days to explore the amazing things Colombia has to offer.
Talk to locals, go to new places, and ALWAYS KEEP YOUR EYES OPEN.
It will provide you with a better understanding of local customs and culture, necessary to understand the market.
4. Translate Sales Collateral and Service Manuals Into Spanish
It comes as no surprise that Colombia’s main spoken language is Spanish, given it is a Latin American nation.
Some sectors such as the medical products sector require sales collateral and service manuals to be in Spanish. Make sure the U.S. based staff you hire have some sort of training or skills in the language to avoid miscommunications with partners and customers.
5. Attend Local Business Promotion Functions
Organizations such as the American Business (CEA) and the American Chambers of Commerce (AmCham) prepare functions to promote local businesses. These functions are great opportunities to network and meet potential customers.
You can use these events as a way to create awareness and set a reputation for yourself and your business.
Finally, communicate with the U.S. Commercial Service and the Economic Section of the U.S. Embassy in Bogota. They are always available to answer your questions or concerns such as regulatory issues.
Market Entry Strategy Tie In
If your business has the ability to play a role in further developing the industries mentioned in the graphic above, this is an excellent time! Take advantage of U.S – Colombia relations established through the recent multilateral trade agreements and infrastructure investments.
Colombia has 5 major commercial hubs in the country. It offers U.S exporters direct access to potential partners in Bogota, Medellin, Barranquilla, Cali, and Cartagena.
Consider each specific location’s unique market opportunities and which best fits your business’s goals.
Remember to focus on formality and building trust above all else when negotiating business agreements and contracts.
Let’s Assess Your Position!
Would you like to learn more about the Colombian market and its opportunities?
Do you believe your business is ready to enter the Colombian Market?
If so, contact us at at firstname.lastname@example.org today!