EXPORTING – WHICH COUNTRY FIRST?

ABS

As we mentioned in an earlier post about exporting, an issue that crops up for a company looking at exporting for the first time is which territories to research for your first export target market.

Sometimes the choice of territory is a “no-brainer” but what if it’s not so obvious?

In this case, here are just a few suggestions to help you decide which countries to research to sell into:

Which are the easiest?

When you’re starting out in exporting, easiest means “low risk”.

From Ireland, in many cases the UK would be at the top of the list, given its ease of access from here, no language issues, market size, and broadly similar ways of doing business.

It’s usually the first one for market research unless you already have clear reasons why the country isn’t viable for your product or service. Alternatively you might want to consider the Netherlands and Belgium which, except for being smaller markets, generally tick the same boxes in most industries.

Where are your competitors operating?

Do you know where your local or regional competition is selling? You have a choice of what to do. You could join in and compete in the territory. To do this, do you have adequate differentials to stand apart or will you be just a “me-too” follower?

If your competition’s been established in the country a long time, you could for ever be seen as the number 2 or 3 or more. In which case to help make a decision, key market information is needed such as the overall size of the market (is there enough for a number of players?), sustainable growth rates and trends, and for example niche sector opportunities appropriate for your goods.

The alternative is to avoid the region like to plague because life with all this competition might be too difficult.

One company, an Irish leader in its field, did exactly this. They were dismayed by what they’d seen of competitive activity and low margins in mainland Europe. Instead they started researching other territories and found good opportunities in specific parts of Africa.

The territories are more difficult to get around, but competition is minimal, payment terms have been sorted, and better margins are enjoyed. This might be a risk too far for new exporters, in which case it might be a tactic worth looking at for future territories to target.

Where are the biggest opportunities?

Where are your biggest market opportunities? Would they be established developed countries such as the US, or one of the rapidly developing BRIC countries? Are the markets there big enough to take another competitor and do you have sufficient differentials in your product to stand out above the others?

Remember that this would be a much higher risk initial strategy and you’d need to have good commercial reasons to proceed with it – and ensure you’re going to get paid. The costs of doing business would be much higher and you’d need to visit the market at some time and meet potential business partners.

An engineering company with a state-of-the-art new product is doing this in China. The risks are high but they have very sound strategic reasons why they want to capture some of the Chinese market.

Their approach to researching and developing the market is simple, step-by-step and with caution all the way!

Can your product or service solve region specific problems?

Even if it’s not seen as the main feature of your product or service, does it have the ability to solve unique problems experienced in certain regions?

This is another way of looking at niche market sectors in some countries where your company could command a prominent place.

One Irish company has a product usually used in large capacity power generating plants. In India, they found that the product worked well in a different application in tea plantations where they went on to gain good market share.

Fit with strategy

Opportunities can sometimes appear well off-strategy at first. In a technology start-up with which I’m involved, our plan was to establish ourselves in Europe first before expanding further.

Some time ago, I got an email from a Japanese reseller interested in marketing our analytical equipment. After very carefully checking them out, we agreed for them to assess the market on our behalf. After all, the reseller had already perceived an opportunity. A few visits later, we are establishing a good relationship with the distributor partner and the sizeable market.

When starting out in exporting, the perceived range of choices of countries to target is often wide.

Only after carefully checking out the choices can you decide on the best to target for returns vs acceptable timescales vs minimised risks.

Happy exporting!

 

STARTING EXPORTING – PLANNING IT OUT

Exporting

We’re aiming to do a series of articles on the topic of exporting. Instead of working through the process sequentially, we’ll just hop around various topics of interest in the export space and even come back to some for more viewpoints.

So here we go then – this first article is about planning for first time exporters. And as you can’t have planning without market research (MR), we’re including that too.

Planning for exporting isn’t really much different to business planning for the start-up. Some owner/managers argue that you can’t really plan a business strategy until the company has already got some hard trading experience behind it. This may have merit.

However, the flaw is that sound business planning is done on a foundation of diligent MR which if done properly, uncovers important facts about what pitfalls and risks to avoid in a venture as much as opportunities to exploit. It’s like arranging a car vacation to mainland Europe country you’ve never visited before.

First you need to research what the country is worth visiting for such as culture, countryside, coast, food specialities etc. Otherwise you could be unaware of all these tourism opportunities, at best coming across them by chance. Then you would plan out where you are going to visit, which route you will take, and where to stay.

As best you can, you’d maximise the best use of your resources – mainly your quality time and money for an enjoyable vacation. With no planning you might go nowhere of particular interest and pay a lot for mediocre hotels etc. See any analogies with business planning?

Simply put, with export planning you’re still looking at selling products or services into markets and territories, taking into account all the resources needed, calculating the financial impact for commercial viability, and addressing risk. If export planning wasn’t already part of your original start-up and ongoing business planning, then there are quite a few additional things to consider.

Some of these points are mentioned below. It sounds a bit dramatic to say ignoring them is at your own peril – that might be a “worst scenario” situation, but there is some truth in the statement. Realistically exporting can be fun (if you like travelling and experiencing different cultures!). It also has to be lucrative so it helps if a bit of common sense and good MR and planning is employed at the start to mitigate potentially costly risks.

Risks can usually be reduced and costs minimised if a few general things are observed in the export initiation process. A few suggestions are:
Do your research diligently. You don’t even need to leave your desk to collect a lot of usable MR information. All you need is online access and a telephone.

Supports may be available from Enterprise Ireland, County and City Enterprise Boards, and other agencies to assist with export preparation.

Exploratory visits to the selected country will be essential as part of the initiation process and even before selling starts properly. This could be for visits to potential end-users for validating the product or service, meetings with future sales partners, or research at local exhibitions.

Differences in cultures (= the way we do things) may mean your existing products/services aren’t quite right – or even could be downright inappropriate for some countries! Apart from such as the UK or Benelux, it’s almost certain you will come across this issue at some time so it does need checking out very carefully before selling starts.

Different ways of doing business in different countries can impact on things like debtor days, how your goods are sold such as needing field trials beforehand, and the extent of shared responsibilities with in-country partners such as paying for certain marketing outlays.

Be cautious about proliferating the number of countries you try to sell to when you start exporting. This especially applies to the small business with limited external sales resource – often the owner/manager him/herself.

Are you personally geared up for exporting? Often, unsociable travel times and lugging suit cases around required a certain level of fitness. Spending time away regularly can also impact on family relationships. All this needs taking into account time because different people react to this in different ways. Do you need to carefully schedule time away or should you consider recruiting a sales person – even part time if you can afford it?

Last but not least, be careful not to take your eye off the ball with your established domestic customer base while you’re preparing for export activities.

One other issue we come across is which territories you should consider researching as your first export target. Sometimes it’s obvious but there are some pointers which help you to decide which we will talk about in a future article.

Happy exporting!

Stuart Allcock