Why should you become involved in exporting?
In the future businesses who are exporting will have advantages because of the increased exposure. Exporters will be able to expand their volume and take advantage of being able to spread their costs beyond their local market. They will also be able to take advantage of higher pricing structures in some countries.
Once you become involved in exporting, you will find many innovative ideas are introduced to your business and your products and services. Ideas and opportunities which can completely transform your approach to their local market and even your lifestyle.
Future export opportunities are becoming plentiful but are still challenging for many smaller businesses and not-for-profit organisations. However, opportunities to operate on the world stage have never been so good. To help you on your exporting journey you must address certain key areas.
These areas include preparing your business for exporting, developing an export strategy, winning export contracts and financing exports. Getting paid on time and expanding your business overseas requires careful attention because it is difficult to follow up in some countries. This website will provide more of the basic information you will require, http://www.efic.gov.au/
Here are some sound reasons to become involved in exporting
- Exporting can be a great way to expand your business because if done properly, it can significantly increase your profitability.
- Exporting can soak up your excess production capacity while helping to keep production volumes at optimum levels.
- Getting the right balance between international and domestic trade will probably protect your business if there is a downturn in one of your markets.
- Exporting will expose you to new ideas also ways of competing that you wouldn’t generally experience at a local or national level.
- Expands your business and spreads your risks, because it reduces your dependence on the local market.
- Buffers your business against seasonal demand, while stabilising production and employee levels.
- Broadens your skill base, management practices, marketing techniques, along with ways of competing in your local market.
Maybe you can afford to do business overseas after all. With the advent of cloud computing, social media, market information, transport systems and improving financial systems, exporting has become so much easier. Your goods can be freighted quickly to anywhere in the world due to the increased competitiveness of overseas transport.
Exporting from the birth of your business
Taking a small business global is a complex and dynamic process, but not as complex as it used to be because of new technologies. Gaining a deep understanding of the targeted markets is critical. The competition involved, current local market trends and the requirements to successfully export and drive growth are important foundations. However, with all the international travel most people do today, useful information is collected and many useful contacts are made. This can quickly lead to exporting opportunities coming to life much more easily and less expensively.
The pace of globalised trade is expanding rapidly because of global communications becoming readily available. The impact of social media is very significant and has considerably shortened the sales and buying cycles.
For small and emerging businesses, exporting is a significant undertaking because it could disrupt existing business ideas. You need to understand the full impact on your vision for your business. Determine if the rewards will outweigh the risks as you get your business off the ground. Many companies operate from their home country with some using agents. Others choose to have branch offices in key markets since it gives them more direct exposure to customers.
After years of doing business domestically, small enterprises slowly evolve to do business internationally. By contrast, born global businesses begin with a borderless world view, and immediately develop strategies to expand themselves abroad before the first sale is made.
Many businesses today are born global
The rhetoric has always been there, now the action is catching up. From inception, these businesses seek to derive significant competitive advantage from the use of resources and the sale of products and services in multiple countries. What distinguishes born global businesses from the rest? They originate by creating a global focus with global thinking and commit their resources to global opportunities.
Getting started in exporting
You need a distinct way of doing business and your management team will need to view the world as their marketplace from the very beginning. You will need to use your aggressive entrepreneurial mindsets to pursue international markets immediately you decide to export.
One way to begin exporting is to start exporting your current products and services as a market entry and build from there. You could start importing components for the products and services you propose to start with because this will help you gain experience as you move forward. In developing new markets, employ differentiation strategies so as to make a niche for your business internationally. Look to satisfying a market niche that is too small to interest larger corporations. Focus on niche products, not commodities because commodity markets can be a dangerous place for small businesses.
Strive for superior product quality and make full use of leading technologies. This advantage allows you to not only pursue markets around the world but offers superior products designed for the specialised markets where you can develop niches. When it comes to niches, quality and technology, avoid relying on your own understanding seek appropriate advice.
Born global businesses are unique from other major international organisations. This is simply because they are born doing business internationally, they have an international mindset. Creating a special international mindset is something that many larger corporations often take years to develop. One way businesses can succeed in expanding overseas is to consider merging with a brand in their chosen market.
Conduct a detailed Due Diligence for the chosen market(s)
Before starting, it is critical to understand what the full impact on your business will have on your chosen market.
- Satisfy yourself that you have chosen the best market to start your exporting so you don’t spend years being frustrated with results.
- Consider the market opportunity and market size because they will both impact on your successful operations.
- Prepare a market segmentation analysis so you can determine if your product will sell.
- Prepare a product gap analysis against local products. What do you have that they don’t?
- Identify demands that are not satisfied by the local companies.
- Perform a SWOT analysis against the competition because you must understand their strengths and weaknesses.
- Will the market buy your product if it has a higher price than local products?
- How long will it take you to capture your needed sales to break even since that will have a big bearing on your success?
- Initiate a patent and trademark review. Be aware that some countries are known for copying good ideas.
- Conduct a Risk Analysis because the risks are far greater than in the local market.
Market research is about finding what drives a market and how to access it and will be a vital part of your Due Diligence. The importance of market research cannot be overemphasised because it will be a critical part of your exporting success. By contacting Austrade or the international trade department in your country you can obtain plenty of advice about various markets. http://goo.gl/uYbmWz
When researching your export markets you’ll need to find out about market size and growth. Along with distribution channels, import duties, insurance and finance, documentation along with freight and logistics.
Market research will help you determine
- Where you should export to.
- Identify any language barriers.
- Your product’s suitability for a particular market.
- The services required so you might have the best impact.
- Anticipated sales volumes and margins.
- Any special requirements you must meet in order for your product to gain market entry.
Develop your Business Model and Business Plan for exporting
Each market has its own nuances due to economic, cultural, government and market conditions. It is important to develop a localised business model and business plan. You want them to drive local success while remaining integrated with your overall vision and objectives.
- Move your business to an ‘investor ready’ status because this will ensure nothing is left to chance. http://goo.gl/FqzKV8
- Define short, medium and long-term objectives so you can look at things more objectively.
- Define success metrics and how they will be managed.
- Complete the business model and structure which may need to be adapted to each market. Don’t rely on you current business model to work well.
- Decide if you set up a separate company, a branch, or a sales office in each market.
- Develop a tactical project plan with commitment dates.
- Establish operating performance reviews against the plan because things can get out of hand quickly in an unfamiliar market.
Products and services must be ready to go
Based on the product gap analysis, take the necessary steps to have your offerings ‘market-ready’. This will help you to achieve high-impact delivery schedules and improve customer service and experience from the start.
- Review government and industry-specific regulations so that your compliance and certifications are obtained as needed.
- Determine if any localisation or customisation of the product is needed. Sometimes simple modifications can make all the difference.
- Pay close attention to the translation of the name of your product into the local language so you don’t use inappropriate language.
- Rework instruction manuals and other materials into the local language.
- Initiate a testing and quality assurance review based on local standards, because problems will be a long way from home.
- Who will sell your product and how will it be distributed?
- Consider a local logistics and distribution network so you have appropriate transport to the destinations.
- What special warehousing and other logistics will be required?
- What training will be required for local people and who will do it, don’t take their knowledge for granted?
Organisational readiness is an imperative
Whether it is language, regulations, or customs, cultural differences require you to be flexible in the policies and procedures implemented. Ensure employees are engaged and executing on the business plan.
- The “one size fits all” mindset can have short-term benefits but will have negative long-term effects.
- Evaluate the organisational structure needed to successfully execute your strategies because reliability as a supplier will be important.
- Develop written policies and procedures. Handbooks that comply with local requirements while maintaining balance with overall company policies.
- Develop competitive programs if you want to attract qualified local employees.
- Look for outsourcing opportunities both locally and in the new market(s) because you won’t be able to do everything.
- Develop competitive compensation packages based on local standards and customs.
- Manage payroll and human resource function so you can retain the right people.
- Develop a local information technology infrastructure that is compatible with your domestic infrastructure.
- Identify ongoing local sources of information and knowledge so you can stay plugged into local trends and issues.
- Address the lifestyle aspects associated with exporting because it can become overwhelming.
Exporting and importing may be a two-way deal, in order for you to get into particular countries.
Ensure your go-to-market strategy for exporting is in place
The effective marketing of your products and services requires comprehensive and cohesive strategies. They need to address sales, delivery, branding, value proposition, customer service and customer experience. Ongoing marketing programs, pricing and competitive advantage will be critical. Together this can create clear market differentiators that will propel your market acceptance and profitable revenue growth.
- Understand the buying processes in the new market because they will all be different for each market.
- Determine the product mix of your initial offering so you can make an easy entry. Complexity can unhinge you.
- Be sure to protect your intellectual property as best you can.
- Determine your optimum sales model and sales methodology, remembering they could be different fo each country.
- Determine if a new brand will be created or whether you will use your existing brand.
- Develop comprehensive Key Performance Indicators (KPIs) because you will need to keep tight control.
- Evaluate your pricing model to fit the local economic environment.
- Put in place after sales customer service initiatives as a competitive advantage so you attract repeat business.
Exporting will require your finances to be in order
The proper tax and finance infrastructures need to be set up early. This ensures that you are receiving timely reporting and that your foreign entity is adhering to local corporate policies and procedures and government compliance.
- Prepare your financial profit and loss budget and keep it up-to-date.
- Allow for unforeseen contingencies, poor performance and legal costs.
- Understand your breakeven point and the working capital requirements to get there.
- Prepare a detailed cash flow budget because you won’t want to run out of working capital.
- Consider outsourcing accounting, payroll, and tax.
- Prepare to report sales and VAT taxes.
- Establish local banking relationships.
- Develop transfer pricing practices if applicable.
- Understand exchange rates and how they fluctuate.
- Develop a cash repatriation plan.
- Negotiate well in advance extra finance that will be required for expansion.
Exporting will involve your value chain
Gain a strong competitive advantage by creating a dynamic, responsive value chain (supply chain). The relationships in your value chain can support the scaling of your organisation to satisfy market demands while minimising risk.
- Put focus on improving customer service and customer experiences.
- Negotiate new alliance/partner/distributorship programs to help you with your exporting.
- Develop an ecosystem strategy.
- Ensure all the parts of your value chain integrate with your business model for each market.
- Seek complimentary products and services, which can build relationships and sustainability.
- Build an internal team to identify, manage and foster lasting relationships.
- Outsource as many non-core activities as possible.
Establish a ‘beach-head’ team
Many businesses launch into the market with their own people rather than building a local team. Building a local team from scratch can be expensive, time consuming, risky and could slow your time to market. Using proven senior executives allows you to hit the ground running. They can quickly validate assumptions and drive key readiness initiatives. They do this while the business hires the right senior management team and networks to operate in the market.
- Bring on senior interim executives with expertise about your company and its products and services.
- Establish the local infrastructure. You might consider outsourcing this to local service providers.
- Begin the recruiting process for the permanent team because it takes time, to find the right people.
- Establish any local facilities that may be required.
- Ensure the technology used is compatible with all those involved.
- Look at providing additional incentives to the beach-head team for making a fast start.
Exporting will involve legal issues that must be addressed
Some countries are known for being highly litigious. So it is critical that strong legal processes are put in place to minimise unnecessary commercial risks. Many government agencies have strict requirements that necessitate legal documentation being in place prior to operating within their country. Being proactive may require money upfront, but this should more than offsets downstream risks and liabilities.
- Consider experienced localised legal services for dealing with such things as dispute resolution, immigration, customs and shipping.
- Create localised commercial agreements.
- Review industry-specific regulations to ensure compliance and certifications are obtained if needed.
- Maintain good corporate records.
- Practice good governance.
Some of the obstacles and concerns associated with exporting?
- Lack of knowledge about international markets.
- Lack of knowledge about exporting.
- Unfamiliar with customs, regulations and laws of different countries.
- Don’t think it’s worth the risk which will make you less aggressive.
- Product or service offering only suitable for the local market.
- Not interested, doing really well in the local market.
- Your stakeholders only want to do business locally.
- Can’t see how to avoid the high costs.
- You can’t see any opportunities to act on.
- Language and cultural issues.
“Globalisation has changed us into a company that searches the world. Not just to sell or to source, but to find intellectual capital, the world’s best talents and greatest ideas”. Jack Welch
“Merchants have no country. The mere spot they stand on does not constitute so strong an attachment as that from which they draw their gains”. Thomas Jefferson