Growth is part of any business plan and companies have specific choices when it comes to expansion. Businesses either look for different uses for their products or skills, different markets or combine the two. Therefore, looking for new markets to sell to often forms an integral part of growth, be it a physical product, a service or non-physical offering.
As a company starts to understand its position in the UK market it makes sense to use this knowledge to develop a planned approach to selling in new markets. It often only requires a slight modification to a company's offering to find a broader market that can be exploited.
For smaller businesses growth through partnering - using distributors or agents - can fuel expansion into new markets with a reduced exposure to risk. Partnering also provides a local presence that will benefit your company when pitching for business against local suppliers.
Trading internationally changes the entire outlook a company has regarding its products, processes and resources. It often produces new ideas and influences that help businesses stay innovative and fresh. The first step must be to look at what it takes to sell into that market. Experience tells us that to sell effectively firms must make it as easy as possible for customers to buy from them, but empirical evidence shows British companies lean towards quoting in sterling.
Quoting the right price is vital to trading successfully internationally but it is also important to understand different payment cultures. For instance, companies must manage currency fluctuations when first quoting prospective customers. To do this effectively businesses must find a good bank manager. Once you have found someone you can talk to consider the timescale in which you will be operating.
Businesses must set a validity date for quotes, for instance ‘valid for 45 days after date of quotation' and then allow a period for producing the order. Time then needs to be added for packing and producing the documentation for the goods for travel. Customers will need these documents to clear the goods through customs at the final destination. Businesses then need to arrange transportation of the goods, so it is sensible to allow ten days for this. Shipment of goods may take up to a month to deliver and then will have to be cleared through customs before the customer can take delivery. It is normal business practice to give customers credit before they pay, so all firms must be prepared - and have the available finance - to be able to wait between receiving a business order and payment.
To quote in another currency and guarantee you'll achieve the equivalent in sterling business owners must ask their bank to quote a spot or forward rate for the conversion of different currency to sterling. Companies need to enter into a deal with their bank for them to buy the foreign currency and ensure this is a profitable deal, as this financial transaction can incur charges.
The right rate?
Taking advantage of the low exchange rate of the pound is not as simple as it sounds and can be viewed as short-term in a planning sense. The recession is global and most countries face financial problems. So how do businesses take advantage of UK products being cheaply priced due to the low rate of the pound? Companies must emphasise the quality of the products, as well as the low cost. By maintaining a message of quality firms may be able to sustain short-term sales and convert them into long-term business relationships.
Remember that the price for your products will, in all probability increase, so this must be managed while enjoying the short-term benefits of the low pound. Use the low rate as an opportunity to sell your products to markets and cultures that wouldn't normally buy at the higher price, but keep in mind that the rates are likely to go up, so ensure there is a contingency plan.
Using technology
The internet allows easy communication across the world, enabling companies to build and maintain strong business relationships. Keeping in touch means there are no surprises and helps bridge the trust gap. When a client places an order from thousands of miles away they need to feel confident that the business will keep its promise. A simple e-mail can allay any fears they may have about their order. Firms can also use the internet for all their international transactions too. Clearing goods can be completed in minutes instead of days and compliance documents can be generated to each country's requirements. This streamlines the process and encourages efficient trade, which leaves you, as the seller, to get on with selling.
Another way firms can use the internet to their advantage is cost-effectively testing markets and marketing techniques. A test website can establish interest and highlight where changes in style impact. Testing in this way reduces the expense of marketing as any changes can be made relatively easily.
Cultural divides
Firstly, think about how you do business in your home-market and then try and imagine how your clients feel. Why do they buy from you? We know that customers prefer to buy in their own currency. If a customer has to buy sterling to pay a firm and convert prices to ensure they draw an appropriate comparison with any local suppliers, they may well go elsewhere to avoid the hassle.
Other than cultural divides based on British business practice, language can often be a barrier. Language is not always a case of a straight translation - sometimes it goes much deeper than that. Companies must be careful when researching to not ask qualitative questions that can be misinterpreted; otherwise they can't be sure that the respondents' culture isn't skewing the response.
Remember that in some business cultures haggling is the norm; so build some ‘haggle' into the end price. Join in with local customs and you'll find yourself more readily accepted - find out what is acceptable behaviour in their business environment and work in that style.
While British companies are well placed to maximise the opportunities global markets offer, far too many fail to put all the necessary processes in place. By utilising the power of the internet, partnering with local suppliers and researching local customs, small businesses can reduce risk and increase opportunity.
For more information please visit www.export.org.uk
