Is your business ready for international expansion? How can you recognise the stage in your development when you’re ready to think about tapping into a new market? What do you still need to work on in order to be multi market ready?
Table of Contents
Why export anyway?
You can find more detail in my previous post on why I believe that small companies should export but just briefly, these are the main points:
- to increase sales and more importantly profits
- increased business exposure across a variety of markets forces companies to become more competitive.
- reducing reliance on a single market spreads the risk.
It’s rare that the whole world is in the same level of recession at the same time – even in 2020 that wasn’t the case, as countries like China, Vietnam, Nigeria and New Zealand still delivered some good results.
- extend and broaden the consumer base (this can be especially important for very niche products)
- reduce seasonal fluctuation effects, helping to even out production and sales eg ice cream or sports clothing
- leverage any competitive advantage you might have based on your home market
- drives growth & employment
- accelerates innovation. When companies learn from best practices and new ideas in other markets.
- leverage niche opportunities and innovation
- agility: smaller companies can usually react more quickly to market developments
- if you’re selling online, you can compete on a more level playing field
- adding say $1 million in export business to your balance sheet increases your company value significantly more than growing your domestic business by the same amount
How can you evaluate if you are export ready?
There are 2 broad questions you need to answer with yes before you should make concrete plans for tapping into a new market.
- Does the product or service that you are offering have potential in other markets?
- Is your company prepared for what it means to expand beyond your own borders?
To decide “is your business ready for international expansion” then you need to be able to answer yes to both of those.
Analysing your product’s potential is a key factor to be multi market ready
To have export potential, your product just needs to have customer interest & be competitive in one of the almost 200 other countries out there. Easy right? Whilst it’s not quite that simple, those two points are at the foundation of your product evaluation.
I’ve assumed for the purpose of this post that there are no legal barriers to either the export from your home market or import in your target market for your products. This point should be clarified up front as the law isn’t only about sanctions, weapons and dual usage products, but also different food ingredients or cosmetic ingredients are approved in different countries for example.
Let’s look at some of the indicators that what you have to offer may have export demand:
A certain level of domestic sales
If you are selling already in your home market, then probably you can sell your products in foreign markets too. Chances are that some of the competitors are the same in at least a few countries.
Even if things are not so rosy on the home front, it doesn’t mean your product isn’t ready for export. As I mentioned above, your home market might be in recession but it’s rare that the whole world is at the same time. Or even if your product is too cutting edge or too outdated to have much demand in your home market, there could well be a requirement in other regions of the world.
Your product compares favourably with your domestic and international competition
You’ll have a range of competitors in most categories differing from premium down to “cheaper”. They will all have differing features and benefits, however to compete internationally, you will need to be able to stand out in some way.
This could be because of the uniqueness of your product features, the quality of your product, a specific innovation or it could be a really strong price position for the level of quality that you are offering.
Doing a price analysis is an important way to check where you stand here for export markets. At some point you need to talk about price and in an export market, you will need to be able to compete with other imported products of similar quality. Unless you are sure that your are coming from a low cost country and can compete with the domestic products on price, it’s generally better to position yourself via other features and product USPs.
This kind of product is already being exported
Looking to see what your competitors are doing internationally is one of the best ways to see if there’s potential as you already know their strengths and weaknesses. If you are able to compete with them domestically and they are successfully exporting, then you can be sure that there is also an opportunity for your products.
Foreign Trade in your category of products is increasing
Check the statistics from the UN/International Trade Centre Website – this will help you to establish not only whether your kind of product is trending, but also which are the preferred countries of origin and which countries are importing the most right now.
You receive enquiries from overseas
This can be a tricky one to give weight to… Do you receive enquiries from foreign companies who appear serious and who have experience in doing international business? If yes, this is a clear sign that there is potential for your products (it doesn’t mean automatically that those companies are the right partners for you though).
If the enquiries you receive from overseas are from small companies, it also signifies there’s demand, but you might need to do further research as to the levels and the suitable markets.
And even if you never received any such inquiries, it doesn’t mean your product isn’t export ready, it just demonstrates a lack of awareness internationally about what you are doing.
Flexibility and willingness to adjust as required
Are you able and willing to adjust your product or packaging for the markets that you are targeting? Will product and packaging modifications be essential before your product complies with the legal requirements and appeals to the consumers in your targeted market?
Are you ready to export as a company?
There are a number of challenges that arise in export that you don’t have in your domestic business so your company needs to be ready.
First and foremost, the top management need to be on board with the idea. Export certainly isn’t a get rich quick plan so everyone needs to be behind the plan.
You need to have some kind of budget available and be financially fairly stable. Export can be a strain on your cashflow.
You need to have the capacity both in terms of production and within the team to take on the additional work. Or you need to be able to expand to manage that, perhaps also using external resources.
Do you have team members who have export experience or knowledge, or can you obtain this? Tapping into a new market takes the whole team out of their comfort zone so having more experience not only avoids mistakes but also reduces friction and stress.
Management commitment to export
This is something that you have to do systematically if you want to build solid foundations for the long term. It’s no good getting all excited about that guy from Japan who visited your trade show stand, if your technical process uses ingredients that aren’t allowed in Japan, or thinking that you’ll start your exports with that email enquiry from Cambodia, if your strategy is to focus on Scandinavia this year.
There has to be acceptance of the fact that it’s not a get rich quick process – indeed I’ve heard from many people that it takes on average 2-4 times longer to gain traction when tapping into a new market abroad. Exporting can be lucrative but you need to be committed to staying the course.
Can you finance at least a small budget?
Of course these days you can get huge amounts of data from the web for free, but it’s not all reliable and if you’re new to this exporting game then you might not know what is reliable and what not. So it pays to at least invest some money in market research to check you’re targeting the right markets.
There may be subsidies available in your country for exporting, or subsidised consulting so make sure you look around to see what might help you.
You may need working capital to produce orders for an export market or to localise your website or other marketing materials. for sure, you’ll need at least some budget to raise awareness of your brand and company in the market you are targeting. Later on you may need to also offer credit terms to your international clients which also puts pressure on your cash flow.
Are you working systematically in your home market?
Basically speaking, the same principles apply to export as to your domestic sales – it’s just that if you make errors in a market on the other side of the world, they tend to be more expensive… So if you want to be multi market ready, you need to do your due diligence.
You need to make data based decisions but at the same time adapt to the methods of the country you are trying to enter. Is your business ready for international expansion if you are only prepared to stick rigidly to the exact methods you use at home? No, certainly not!
The methods of market entry will probably be different in the country you are targeting as well as the most effective marketing strategies. In the end, this boils down to identifying the need that your potential consumers in that market have for your product (reasons for buying vary from one country to the next) and working out how to communicate in a way that resonates.
However you add some additional layers of difficulty onto all your general knowledge about marketing and sales of your products because:
- the country is further away from what you’re familiar with and time zone differences can complicate day to day business
- the culture is different and you need to learn to work with that in an empathetic way
- the language is different (even if on paper it’s the same language, there will be nuanced differences)
- the legal and regulatory landscape is different (don’t underestimate this one as it can cause you real headaches!)
- you need to get the export pricing right
- the documentation is more complex
All of those points mean that having working processes in place are even more important for your export business than in your home market. Probably you have a system for your business development at home, so don’t forget to apply the skeleton of that for your overseas business too.
Do your team members have the necessary export hard & soft skills for tapping into a new market?
These can be learnt – many countries have a local organisation who offer training mostly in the “hard skills” such as choosing a payment term or dealing with documentation. You can also outsource this or hire new team members.
Two of the most important skills are flexibility and agility as doing international business will challenge any organisation, even if this is their specialty.
Can you quickly fulfill orders?
Having the necessary production capacity is vital at all stages of your international expansion – you don’t want to give that new importer a bad impression of you right at the beginning. It can be a tricky balance to get right though between not tying up your cash flow in a pile of stock you’re not sure you’ll need and making the new client wait for ages whilst you source a specific raw material.
This isn’t just a question at the beginning either – it’s an ongoing process that you need to manage. eg with systems such as integrated business planning. It’s awful to be left sitting on a huge pile of stock (especially if that is time sensitive such as in the food or cosmetics industries) but equally horrible to not be able to deliver for weeks or even months if sales pick up suddenly or you get a new listing.
So you need to consider this in your company’s long term strategic planning – will the overall capability both of the factory and the team be sufficient for your expansion plans?
Is your business ready for international expansion?
It sounds a lot, but then there are a lot of moving pieces to the question are you export ready.
You need to have also:
- a clear and reasonable export plan and targets, including timelines and budgets
- the willingness to learn and openness to change
- an understanding of what it means to do daily business with other countries and their cultures
- a plan about how to enter into those new exciting markets and how to connect with the right people there
- thought about how you can mitigate financial and intellectual property risks
Additionally you need to think about:
- a clear customer profile adjusted for the geography in question
- how to manage customer service and after sales questions
- whether there are additional transport or storage challenges posed by the target market climate
Exporting is complex but the nuts and bolts of it are not so difficult. It’s “just” a series of processes that you need to go through in order to sell overseas. The more challenging part is managing your overseas relationships with all of the relevant stakeholders in order to build a business on strong foundations for your long term success.
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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