It’s that time of year again where companies start thinking about their upcoming planning. If you want to expand abroad in the coming year then you need to know how to make an export plan to form a solid basis of an international expansion strategy.
I’ll go through the elements of such a framework below and my next post for you to use as a guideline. I won’t go into each point in depth as most would be sufficiently meaty to warrant a whole post of their own.
Whilst you need to have an international expansion strategy framework for yourselves, knowing how to make an export plan is key if you will require a bank loan to help finance your venture.
Table of Contents
Whilst I’m a firm believer in the idea that exporting shouldn’t be limited to larger companies, but is also a great way for small and medium companies to grow profitably, that doesn’t mean that every company is ready to export NOW. Or you may be ready to export, but only to certain specific markets.
Before you set out on your exporting journey, you need to do an honest audit of your company’s abilities and resources (this is a service that I offer for clients, so reach out if you need help with this).
- Is your product or service at a suitable stage of maturity with signs of international demand?
- do you know you can satisfy a need in a specific market
- do you get international enquiries?
- do your website statistics show international visitors looking at your offering?
- do you have a functioning business model in your domestic market?
- are you aware of the implications for your company in terms of
- Capacity (both production and human)
- Risk tolerance
Most importantly there needs to be the commitment from the top management and/or owners to having an international expansion strategy, because there’s no point investing time and energy learning how to make an export plan if your company is not committed to doing what it takes to succeed.
What are your internal goals for the export side of your business? How will success look?
Research and Analyse the Background Situation
There are various schools of thought about which order you should take these steps, however often they need to take place in parallel as you discover a new fact that means you need to loop back to other aspects of your groundwork.
Assuming that you have established that you have the capacity, resources, risk tolerance and management commitment for exporting then for me personally, the next step is to look at which markets come into question – and then decide what you need to do or know internally to make that possible.
This research phase is key to reducing/limiting your risks and improving your chances of success.
Whilst a lot of research can be done these days from the rather boring confines of your desk, nothing beats getting out there for a field visit, so if you have the opportunity to visit your market up front during the planning phase then I’d thoroughly recommend it.
Select the market
If you’re completely new to exporting, you shouldn’t be trying to go into more than 1 new market at once, and giving laser focus to that market to build success. It could be argued that you should NEVER go into more than one new market at any time, however with increased experience and sufficient resources it may make sense with smaller markets to select 2 or perhaps maximum 3 …but that’s a discussion for another day.
In order to reach the decision which market will be your point of focus, you need to identify which markets may come into question, evaluate their various merits and then make your selection based on OBJECTIVE MEASURABLE CRITERIA. That means, not because you think Spain is a great golf destination or you fancy a shopping trip to Paris but because there is demonstrable potential there for your specific product or services.
You can read in detail about a methodology for selecting markets in my free ebook.
Once your market has been decided upon then you also need to include the basic market statistics (the CIA World Factbook is great for this kind of data, although it’s not always 100% up to date), the background facts relevant to your exports and an evaluation of the competitive landscape.
Products or Services
Depending on what you offer, you may not want (or be able) to offer the full range in your targeted export market. You need to give some thought and do some research about what is possible and what you would like to sell there.
Usually the final decision will be some kind of compromise between what you believe the top seller would be based on your research, products with great margins, what is possible given the regulatory environment you plan to enter. Remember this isn’t cast in stone at this stage – it’s just a plan.
I’d recommend that you plan several phases of range expansion over the first 3 years – it’s better to go into a new market with a small range of best sellers and be able to add products as required than to damage your reputation by bringing a huge range when you are not really sure that they will all be popular. It’s also less expensive and risky.
Some markets like to have frequent new product intros and others are not so keen, so keeping some things back for later can be a great strategy.
Licences and Export Control Compliance
Does your product require an export licence? What about an import licence in your target market? If an import licence is required, can you apply for that yourself or does it have to be a company with a legal entity in the market (that might impact your go to market distribution route).
How about control compliance – are your products subject to any export limitations (many industrial products that could have a secondary use for say arms production or nuclear facilities are subject to these kinds of controls)? What about sanctions?
If you need licences or compliance certificates of any kind then you need to also plan the time and budget to obtain them in your project timeline. This can really become a make or break criteria when entering new markets.
Free Trade Agreements (FTA)
If your home market has any FTAs with your target market then you should check whether your products fall under this, as such agreements can really make life easier and cheaper. Whilst you’re making an export plan you should consider this point, but in reality you need to monitor this constantly as the conditions of such agreements are often implemented over a decade.
In order to check this, you probably need to know the HS Code (harmonised system classifying basically all products) for the items you are thinking of selling. A seemingly simple difference such as the % of sugar contained can mean a different HS code and % payable of customs duty.
External Resources you may need when making an export plan
What external resources can you leverage to assist you achieve your international expansion strategy?
On the government side, there may be a trade commissioner in your target market who has a lot of information and contacts at his fingertips. Are there trade fairs, missions or other events that you could attend in market to learn more about your customers there, gauge their reaction to your product or service and start to build your network.
Are there subsidies available? These might be for consulting services, localising your marketing, being global digitally or attending a trade fair. In Austria for example smaller exporters can get subsidies for the costs involved in entering new markets.
What about working with private consultants who may have more specific and specialised knowledge of your industry than a trade commissioner who helps all industries?
Which parts of the export process might you need to outsource because you don’t have the capability in-house?
Which specialists might you require assistance from? eg Chamber or Commerce, notary, language service providers, marketing agencies
Who else do you know eg other non-competing companies in a similar industry who already export to your market?
What experience, knowledge and skills do you already have in house?
Does anyone have language skills?
Do your product team have any international experience, especially of the expansion phase (not just maintaining what someone else has already built)?
How does it look with intercultural skills in the sales and marketing teams?
Has your finance team ever dealt with foreign transfers or currency risk?
Is there anyone who know how to prepare export documentation in the admin team?
Don’t underestimate the importance of culture and language when entering new markets
One of the reasons I’ve always enjoyed working internationally is that it offers me the opportunity to learn about so many different cultures. I love the challenge of working out how I need to behave or react in Lithuania vs a similar situation in Vietnam.
Whilst nobody is going to expect any one person to be fluently multi-lingual it’s essential to ensure that all of your end customer facing materials are well localised. Whoever is going to be responsible for the export market should at least learn a few words to be polite in the local language and the more relevant vocab for your industry.
On the other hand, I’d argue that mindset and being open to understand the culture are more important, and this attitude needs to be present across the team. It’s no good the sales and marketing team being extremely international if the production block them at every opportunity because they perceive the client in France to be difficult and cause them unnecessary extra work.
Make sure you get the whole team on board up front as having the right attitude will help solve many of the issues that inevitably arise along the way.
Uphold your values
If you are a values driven company then your chosen market has to align with those principles. That is perhaps not immediately visible on most balance sheets but is increasingly important to consumers that the companies they buy from uphold their stated values wherever in the world they do business.
There are so many countries in the world – don’t choose one diametrically opposite to your world view to start your exporting journey in. Exporting can be stressful enough when entering new markets.
A field trip can be extremely valuable when making an export plan
If you have the option, make sure to visit the market you have selected during the research phase. This will allow you to get a much deeper understanding of the competitive and retail landscape as well as which marketing activities are likely to have success. It will give you deeper insights that will be extremely valuable for an international expansion strategy.
How to make an export plan – doing the foundational work
In essence making an export plan for entering new markets is a relatively simple framework, but it has a lot of moving pieces. Building the right foundation is essential for a long term flourishing export business.
- Is your company ready to export? Do you have the right attitude and mindset as well as the commitment?
- ensure you have the relevant education and training in place
- Select an appropriate market
- Do all the background research
The last 2 points will be dealt with in the 2nd part of this post
- create a business plan taking also the cultural aspects into account
- have a method of checking progress & be committed to implement changes as necessary
Yes, exporting needs resources and yes, exporting involves risks but these can be outweighed by the potential benefits, and with a little forethought and preplanning you can reduce many of the risks.
One final thought, the world is not black and white and each decision that we make has consequences. In export there are considerably more shades of grey between the “right” & “wrong” decisions than might be the case in your domestic environment. That makes it more vital than ever to weigh up all the options and scenarios in the research phase. In the end, we’re talking here about making an export plan that can be changed as you go along and learn more or the market evolves. So make the best decisions for you based on the information available right now and accept that some will turn out to have been mistakes.
The goal here is to create a foundation that can be profitably built upon for many years to come.
You can find the second part of this post here: How to Make an Export Plan Part 2
Thinking that working with a consultant would accelerate your international expansion?
If you’d like to learn more about working with me for support on your internationalisation projects or personal export knowledge, you can book a 30 minute international clarity call here.
If you haven’t already signed up for my free e-book about how to select which international market to enter next, you can do so here, or using the form below.
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If you are interested in working with distribution partners in your export markets, you might find these posts also interesting:
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- Advantages of Working with a Distributor in Export Markets
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- Store Checks in International Sales: a Retail Audit Example
- How to Make an Export Plan Part 1
- How to Make an Export Plan Part 2
- Starting to Think About Your International Distribution Agreement
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- A Distributor Contracts Checklist Part 2
- The Legal Requirements in an International Contract 3
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- Why and How should you Enhance Distributor Loyalty in Export Markets?