We live in a global world now. Research shows that companies that export are more profitable than those that don’t.
To the uninitiated, trading outside the UK appears complex and fraught with danger. However if your foray into international markets is approached correctly then it can become a rewarding part of your business. Expansion into foreign markets needs to be done cautiously -the more research that you carry out before entering a new market the greater the chances of a successful outcome.
So what should you consider?:
Does your business currently have the financial resource and personnel commitment to start exporting? Without sufficient resource there is a risk that the focus on your current domestic market becomes diluted. A comprehensive review of your existing strengths and weaknesses together with an understanding of the potential rewards should be undertaken as a first step.
Which market(s) you are going to target is a crucial decision and will generally be influenced by the products or services you offer. Many developing markets in Asia such as China and India are seeing huge growth as their populations become more affluent and these markets are proving fruitful for many UK companies. It is imperative that on-the-ground visits to these areas to assess the potential market are carried out. A quick “flying visit” is not going to achieve what you need to know – plan your visit carefully and visit with a clearly defined set of objectives.
Research your Market
Under no circumstances should you consider exporting without fully researching the market. Remember you will be going up against established companies with home advantage and they will already have brand recognition and customer loyalty. Your company will be completely unknown and untested so you are at an immediate disadvantage.
Sales and Marketing Study
At the heart of the venture is an absolute need to focus of the services or products that you are offering. How do they compare in terms of cost, features and benefits compared to local products? How much advertising will be needed and at what cost? How will you clearly differentiate your product from the competition?
Route to Market
Although dependant to some extent on what your products or services are it is important to understand the distribution network in the markets you are considering. Starting a new subsidiary company in the country is a major investment and a full business plan for the venture is imperative to understand and quantify the potential risks.
Not surprisingly most companies opt for the distributor route. If your organisation has already been approached by a potential distributor in the target market, then it is often the case that both companies will share the cost of producing the business plan. Whilst choosing a distributor partner who has a sound financial footing it is as important to ensure that the cultural fit between the two businesses is right. Whilst the way business is conducted in Anglo-Saxon countries is broadly similar to the UK it should be borne in mind that there are many markets where the ways of doing business differ greatly from our own.
A comprehensive understanding of the import procedures for the target market is essential. Every country has its own importing rules and it should be borne in mind that sometimes these are essentially trade barriers designed to protect the interests of home-based companies. As members of the EU the exporting of goods and services to Member Countries has become a much simpler process.
Payments, Terms and Conditions
It is imperative that this is clearly defined and you should seek specialist help in defining payment terms and T&C’s to avoid costly disputes.
Without doubt entering new markets will involve sometimes considerable additional short-term expenditure before the long-term financial benefits materialise. A full cashflow analysis is an essential part of the decision making process.
Signa can advise on all aspects if international trade Our experienced advisors have extensive experience of exporting, importing, forming and managing overseas companies and will work with you to produce the correct business plan to ensure the success of the venture.
If you would like more information on how Signa can help please call us on 01494 562738 or send us a message.