Going International - An introduction to export
Emerging markets across the world offer fantastic opportunities for UK companies but selling internationally can be very different to trading in Europe or your home market. There is a lot more to trading overseas than knowing national GDP figures and headline statistics for your target markets. By Lesley Batchelor OBE, director general of the Institute of Export
Einstein once said, ‘First learn the rules of a game; and then go out and play it better than everyone else'. With the appropriate help and training, international trading can be made much easier. The Institute of Export (IOE) was formed to help businesses understand best practice and share their knowledge with others to build confidence and competence when trading overseas.
An important element that is often overlooked is the need to research the detail of how to trade in a specific overseas market. There are some crucial research areas that new exporters must get right before they start. If they don't they could end up with costly mistakes.
Key areas to research are:
Culture - it is important to find out what the business culture is - from business cards to wearing suits and how business is conducted. This includes how to negotiate, perhaps using credit terms or trade agreements to secure a sustainable deal, should you discount or set a price stick to it. You may need to adapt your product, the packaging or your marketing to operate in a particular market - remember to be flexible and imaginative in your initial sales meetings.
Pricing - finding out what duties the market imposes including local taxes is vital, as well as understanding how to price your product appropriately to reflect the issues the purchaser may face. Research the methods of payment and the cost involved in using each one. Link this to the manner in which the purchaser wants to pay as it's important that the customer is happy with the risk you are expecting them to take. You need to know how long it will take for you to be paid, the type of payment that will be used - and if risks will be mitigated when selling with local currency. Remember, there is a simple risk ladder that shows advance payment = customer takes full risk and payment on account = seller takes full risk - there must be a happy medium to make the sale work.
Product or service - before embarking on exporting, do find out if there is actually a demand for what you are selling within that country. If so, check if they will accept what you are offering as you may need to make modifications. For instance, if your product uses electricity voltage, will modification costs make selling it prohibitive? Do you need safety packaging or instructions? And how to sell, if through a third party, it may need some liability insurance.
Translations are also important as sometimes it may be law that you operate in the local language. Always remember that it is much easier to fulfil a demand than to try and create one.
Trading name - it is crucial to check what your trading name means in the local language (including the slang words!) and to find out if anyone else is trading under the same name before you start, this will save you a lot of anguish and time as infringing someone else's rights could be costly. Another area to check is the country's attitude to copyright, design rights and international trademarks - take advice if you are uncertain.
Delivery - while you may have given great thought to the type of product you plan to sell, serious consideration needs to be made about how you will both communicate and deliver to your customer. Consider broadband infrastructure as well as the physical road system, because a lack of access could jeopardise the administration of orders and deliveries. Packaging for safety and packaging design must be appropriate for the culture you are selling to.
There are many more issues around selling internationally that are overlooked at the peril of novice exporters and could easily wipe out potential profits from a new market. That is why we advise all those seeking to export to do their homework before embarking on any new initiatives.
When compared to the US, where 33% of SMEs export, to Germany where 20% are involved in international trade and to China where 60% of SMEs are exporting, it is clear that British firms have not caught on to the wealth of opportunities that are available.
The reasons why UK SMEs are reluctant to export include an unwillingness to take any kind of risk, cost concerns, a lack of qualified international trade professionals and managers - and a general lack of market knowledge.
While SMEs account for roughly 95% of all companies in UK - and create 65% of all jobs - only one in five currently exports according to the CBI.
The latest BIS survey of SME employers found that only 28% of participants felt they were strong in entering new markets. However, companies who start exporting are 11% more likely to survive.
With this in mind, here are 12 suggestions for SMEs to reach new markets:
1. Trade missions should be the end result of a research project or a plan, not a whim. They should be business-to-business driven, with an action plan - a meeting programme and follow-up incorporated in each mission. This approach enables the business to take ownership of this programme.
2. Much is publicised in the media and industry associations about realistic markets. India and China are not realistic markets for most SMEs, unless they operate in very specific niche markets. British firms need to know more about where real opportunities and real customers are. There is a need to promote Latin and South America, East and West Europe, and the small strong markets in Asia such as Singapore, South Korea and Taiwan.
3. Understand that we live in a competitive global world and learn how to trade internationally. The Institute of Export provides a series of courses and programmes that can give companies a competitive advantage in export, import and international trade.
4. Connected with the above, be prepared to spend money and time gaining the necessary knowledge and training on international activities, such as how trade works using Incoterms, finance products, and freight forwarders. It's not rocket science and it should be a part of every SME's business activity.
5. Understand the value of the impact of social media on your international marketing potential. While Brits have one of the highest uses of the internet on a per capita basis among the Organisation for Economic Cooperation and Development countries (OECD), we really need to convert that skill to trade. It's not that difficult to set up a PayPal account and, in twenty minutes, you can identify a segment of real customers using LinkedIn.
6. Understand it is not about markets; it is about reaching real customers. It doesn't matter which country(s) you choose to sell in, but it does matter if they have customers. Ask your colleagues and your networks where they sell to in the world, why they have been successful and what lessons they have learned. Use the forums such as digital platform opentoexport along with networks such as Institute of Export or the British Chambers of Commerce to talk to those who have exported.
7. Pick on someone your own size. Don't go after customers in large, complicated, non-transparent markets. Choose countries that have SMEs that want to work with you.
8. If unsure of where to find countries that have growth potential and a need for your product or service try Google; use your initiative and experiment with searching in the different languages. We know that people are four times more likely to purchase in their own language, so the websites you research should be the ones your customers use.
9. Don't be afraid to collaborate. Find local partners or agents; their knowledge of how things work will save you a lot of time money and give you a head-start in your new market. Learn how to work with these third parties; they will need a lot of support and investment to start with, but all projects do.
10. Develop a ‘selling point'. Find something that differentiates your products or offering from your competitors. You'll need to talk to creative people to find the answer but it will be there. Look at what makes you the best at what you do and build on that. By the way, it cannot simply be because you're a British company; there has got to be more. Customers care about product quality, after-sales service, good communications and strong supply chains.
11. Budget for market development. Nothing is free and international markets can take time to develop. Working capital and the simple fact that an international sales cycle takes longer could stifle your export growth before it starts. Look at this business tool that simply explains your exposure to extended financial risk:
12. Exporting is a long-term commitment; a one-off sale needs no planning but would be a missed opportunity to balance out the peaks and troughs of dealing in one market. Good customers are hard to find - and, once found, are worth the effort of staying with and developing a long-term relationship.
For more information call the Institute of Export on
01733 404400, email firstname.lastname@example.org or
visit the website on www.export.org.uk for more about training qualifications or business membership.
Post Date: March 3rd, 2016