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15 Tips to Start Successful Export Business
By Joseph Zaritski. Copyright © 2003 Joseph Zaritski. 1. Where to start? 2. Go Online 3. Select And Evaluate Your Market 4. Understand that every market has different demands & changes every few years 5. Analyse, "Position" and Modify Your Products 6. If You Fail To Plan, You Are Planning To Fail 7. Build A Network 8. Develop "Export Inquiries Handling Rules" 9. Negotiating Is An Art 10. Be Aware Of Frauds 11. Be Market- And Customer - Focused 12. Be Prepared To Meet Growing Demand 13. Be Prepared To Spend Time And Money 14. Make Decisions On A Commercial Ground 15. Don't Try Too Much At The Beginning And Don't Grow Too Fast Legal Notice
Before You Export - Get Ready 1. Where to start? Build A Corporate International Image Your credibility is a key to your global success. Even if you run a small company, you should present yourself internationally as a solid and reliable potential partner. Some little changes and touches will add considerably to your global appearance. Adapt corporate stationery to your export activities - add international dial-up code and word "Australia" to contact details. Develop company logo Always sign out-coming correspondence indicating you job title, company name and contact details, for example: John Smith, Export Manager Australian Trading Company Pty. Ltd. 124 Deakin Avenue Mildura VIC 3502 Australia Phone: 61 3 502 6776 Facsimile: 61 3 502 7667 E-mail: export@export61.com.au Web: www.atc.com.au When talking to prospective buyers, don't say "I" - always say "We" and so on. Talk To Others Investigate if there is any government programs or other assistance available. Talk to regional Austrade and Victorian Business Centre representatives. Most likely, there are companies in your region, which sell similar (but not the same) products aboard. Do not hesitate to talk to them. Successful people are usually willing to share their knowledge and experience. Not only can they advise you on some important issues but also may be able to introduce you to key service providers and potential overseas buyers. Learn About Export/Import Regulations And Terms Of Trade
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Contact your industry association and relevant export authority and investigate if there are special requirements for your products to be exported. You may need a licence, export permit, veterinary or fito-sanitary certificate or have to meet some other export requirements. Austrade and other export bodies will be able to advise you on import requirements and regulations that the selected market may have. Contact the Consulate of the country you are going to export your products to and talk to the Trade Commissioner. Spend some time to learn about terms of trade and delivery, methods of international payments, International Trade ethics and so on. You should be able to select the most favourable terms and clearly understand the benefits of these terms. Hire experienced people or train your staff Everyone in your company must know that from now on you are a global company. All export inquiries must be referred to appropriate personnel. Do not allow your secretary or a production manager to run your exports and act on your behalf or on behalf of your export manager. Exporting is complex. It is essential that your staff know the difference between domestic and international sales and understand the rules and ethics of International Trade and most importantly terms of trade.
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2. Go Online Get a web site Nowadays, having a corporate web site is a "must" in International Trade. Nine out of ten of your potential buyers will try to learn about your company and products through the Internet prior to approaching you and if they can't find your web site, they may very well choose to deal with your competitors. Get an online product catalogue and indicate your general terms of trade to the web site. Provide visitors with direct contact details. Introduce a facility to receive export inquiries. Try to develop a web site, which will not only represent your company and products but also will save your time and money. Take advantage of the Internet There are numerous free online trade boards, import-export directories, forums, etc. Spend some time and post online offers on these sites. Not only it will increase your chances of being found by potential buyers but also will add value to your web site's Search Engine ranking.
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3. Select And Evaluate Your Market Data->Information->Knowledge->Wisdom Given the number of markets worldwide, which might be showing high potential, the question arises as to how to select this market smartly. Information is what you need to select an appropriate export market. And again, using Austrade, chamber of commerce, your industry association, relevant export authority and your colleagues might be of great assistance. Although nobody will give you direct advice, you can get much better knowledge of where to go global. Statistical data analysis is essential when selecting the market. You can obtain lots of useful details from the Australian Bureau of Statistics or from commercial companies, which specialise in collecting international trade data. Some companies will be also able to provide you with very specific export/import data about products similar to yours and about most popular markets. The Internet is a great source of information. Go online and browse the Internet. You wont find the exact answer, but I'm sure you'll get some good ideas. A good indication of the export opportunity is the number of inquiries from a particular market. If you receive significantly more inquiries from Korea than from any other market it may be a good sign that there is a significant demand for your products in Korea.
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Australia's geographical location plays a certain role in exports. Asian markets are much more attractive in terms of transportation costs and time. Asian customers are familiar with Australian products and quite often it is easier to negotiate better deals with Asian buyers. Rapidly growing markets, such as China and India, are usually better targets for commencing export than developed countries. And so on. When selecting the market you should: Know the market's requirements Assess your target customers Examine your competitors Be prepared to compete against lower-cost, lower-price local companies Talk to Austrade's local office Austrade may assist you greatly in evaluating and entering the market. Do not ignore this option. When contacting Austrade's local office, do it in writing preferably by fax. Introduce your company, indicate your interest and be specific in your inquiry. Catch a plane! Go to a target market personally and get a feel for local conditions. Do your homework before the trip: Have a list of tasks you want to complete Arrange a meeting with the Australian Trade Commissioner and several meetings with prospective buyers Visit a few stores selling products similar to yours Review competitor's prices and analyse their pricing policy Know current affairs and a little history and geography Learn a little language
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4. Understand that every market has different demands and changes every few years I have deliberately emphasised this issue as a separate topic. To disregard it is one of the most common failures in International Trade. Your products may be highly demanded in one market and be absolutely unsaleable in another. The packaging you've introduced in US, most likely would be unattractive for Indonesians. Without an understanding of market trends and demands, its uniqueness, business traditions and people's mentality it is "mission impossible" to successfully develop the market. You also should understand that every market changes every few years. Technology, globalisation, privatisation, lifting of the trade barriers and softness in import/export regulations are the major factors, which affect International Trade. And while you might think that these factors are too global to bear in mind when considering your offshore activities, they will influence the market radically and you should adjust your marketing and export strategies according to the current situation.
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5. Analyse, "Position" and Modify Your Products Packaging optimisation for shipment There are two major objectives in packaging optimisation in regard to shipment: To reduce shipping costs and To ensure safety I used to export fruit juice to Moscow and had to allow up to 5% for damaged stock for each shipment. Because of several loadings/unloadings and temperature fluctuation, air penetrated the bottles and the juice was becoming spoiled.
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The problem disappeared when the manufacturer agreed to introduce a special membrane sealing the tops of the bottles. Packaging, Quality, Price Australian goods are generally dearer than local produce. On the other hand, the "green & clean" image of Australian products is a great competitive advantage. You'll be surprised that in International Trade the price is not really a decision making factor. If you sell FMCG, commonly packaging is the first priority, followed by quality and then price. Be prepared to customise your products to meet customers' needs Domestic success of your products doesn't ultimately mean global success. The major competitive advantage of Australian juice in Russia was the packaging - it was the only juice on the market packed in plastic bottles. However, after several months of sales I discovered that my target audience was very limited … due to the packaging. 90% of end-users simply could not afford to buy a 2L bottle. It took me almost a year to convince the manufacturer to launch 1L PET packaging, and after that my export sales increased by 80% within six months.
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6. If You Fail To Plan, You Are Planning To Fail Create unique marketing strategy Professor Michael Porter of Harvard University said that a company doesn't really have a strategy, if it performs the same activities as its competitors, only a little better. To be successful you should have a strategy, which has strong points of difference from your competitors' strategies. Develop a marketing plan for each market Marketing plans don't have to be a 100+ pages document with numerous tables and diagrams. Try to keep it brief and simple. At a minimum, every marketing plan should contain: Market analysis Marketing objectives and goals Marketing strategy Marketing action plan Marketing controls In other words, before entering a market you must clearly understand what has happened, what's going on, what do you want to achieve, what do you need to do to achieve it, how are you going to do that, and what might happen. It is essential to set up realistic market goals, distribute them to everyone within the company and constantly control the progress towards these goals. Develop an export plan for each market The common confusion within the business community is the view that marketing and selling are the same. That is not quite right. While selling is part of marketing, your export plan has different objectives and focuses on different tasks. The export plan should include: Export readiness analysis Market Research Product Development Trade Regulations and Barriers Assessment Export Strategy Pricing Terms of trade and payments Logistics and distribution Financing After-sale strategy Export sales forecast Implementation plan Set up export prices for each market There are no rules in setting up export prices and nobody can tell you what is the "right" price. Furthermore, the price for the same product may vary significantly in different markets and most likely you would have several prices for the
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same product depending on the following factors: Marketing strategy Product uniqueness, quality and brand recognition Quantity Market trends and demand Target customers and so on. How a product is priced is crucial in getting the buyer's attention, before the buyer becomes familiar with the quality of the product, delivery and service. Your goal in establishing export price is to be able to sell maximum quantity with maximum profit margin. SWOT analysis It is a good idea to start your planning with a SWOT (Strengths, Weaknesses, Opportunities and Threats) analysis. Having a list of SW and a list of OT would help you to understand which matters require attention. Develop a problem solving plan Delays, damages, quality complaints, stealing, non-payments sometimes happen in International Trade. A detailed problem-solving plan is a vital part of business planning.
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7. Build A Network Exporting is Teamwork You are not able to conduct an international transaction on your own. There are always several participants who play an important role in your export operations. You'll be surprised, but usually you can find all you need in your region. Write down a list of services you need to be provided for your global activities. This list as a matter of fact should be very close to your supply chain plan. Do you need to open a bank account in US dollars or are you going to receive payments under letters of credit? Then go and introduce your company and yourself to a local international banker. Extra Tip. It is not necessary to do international banking through the bank you are dealing with domestically. Select the bank with the greater international presence and with the wider network of corresponding foreign banks. The best-case scenario is when your bank has a corresponding bank in the country of your interest. Do your products require to be certified? Talk to the industry association; export authority or certification company representative and build a personal relationship. Need insurance cover? Major insurance companies deal through agents. Try to find an insurance broker, who deals with a reliable marine insurance underwriter, in your hometown and build a personal relationship. A responsible freight forwarder is a key player in your exports. Pay extra attention to selecting a shipper for your goods and again build a personal relationship. Never stop building your network. The more reliable business partners you get, the less troubles you will have. Do not concentrate on management only, but also on key personnel A small present to a secretary or to the employee, who is in charge of your bills of lading, may pay you back greatly and unexpectedly in the future.
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When You Export - Market From Strength 8. Develop "Export Inquiries Handling Rules"
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Respond in 48 hours You'll be surprised by your potential buyers expectations in regards to receiving replies to their inquiries. Especially when you are dealing with Asian or Middle Eastern customers. They send you an e-mail and then call you in a couple of hours later demanding a reply. We have recently received an inquiry from Kuwait. The initial e-mail came through on Sunday. On Monday morning I had a reminder, in the afternoon - a warning demanding an immediate respond and on Tuesday morning - a phone call from Kuwait. And if you think that that was an urgent matter, it wasn't. An advertising company acting on behalf of its client wanted to discuss the possibility to promote their business at Export61. Learn to recognise "genuine" inquiries and beware of the "dream" orders As a rule, a "genuine" inquiry has a brief introduction, is fairly specific and must have company name, contact name and contact details. If you clearly understand that an inquiry you received isn't worth an answer, just ignore it. For example, if you sell oranges and somebody ask you to provide an export quotation for bearings or if a foreign company is looking for a wide range of Australian food products without any further details, most likely these inquiries will take you nowhere. There are quite a few companies and individuals out there, who are just playing in International Trade. So if you received an inquiry for the supply of 50,000 tons of table grapes, you can simply throw it out and never reply. Check Your Counterpart Before any serious negotiations you should try to check your potential buyer. Go online and try to find some information on the Internet, again - contact Austrade's local office, ask for banking details and contact the foreign bank, ask for referrals and so on.
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9. Negotiating Is An Art Make allowances Your buyers will be pleased if they manage to negotiate considerable discounts. Don't disappoint them. Include at least 10% in your export price list for negotiations. By discounting the price you'll be able to gain better terms. However, you have to be careful with allowances. If the price is too high you may never get a buyer at all. Learn about cultural differences You may offend your potential buyers if you fail to learn about cultural differences especially in the Middle East and Asia. For example, you wouldn't ask about your host's wife if you have been invited to visit your counterpart's home in the Middle East. In Asia, if you are invited to a business lunch you should be prepared for a 1-2 hours conversation, which has nothing to do with your prospective deal. You'll be asked about your family, childhood, hobbies, favourite food, etc. and you should react accordingly. Asian people want to know whom they are dealing with before any business discussion. All oral agreements must be confirmed in writing This has to be one of the "golden rules" of your operations. You must have a written confirmation of agreed terms on hand before you act. A promise "to send you a written confirmation tomorrow" is not good enough. Exclusivity is possible but not before you know your buyer Lots of potential buyers will ask you for the exclusive rights to represent your products or company in a particular market before they start trading with you. Don't decline this possibility, declare that you are open for a discussion but also get to know each other, establish a relationship, test the market and so on. When you agree to provide exclusive rights to a foreign company, you should consider which conditions are to be included in the exclusivity agreement. First of all, do not sign such agreements for longer than a year. If you are happy with your sales, you can always prolong it.
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You should require that a certain quantity of your goods would be sold in a certain period of time, say 4 to 6 months, with the possibility to terminate the agreement if the buyer is not able to meet this condition. The value of the first order is another issue to consider when negotiating exclusivity. 20% of the agreed yearly quantity prepaid is considered to be a fair deal. If you need a translator - get a good one Sometimes buyers may require signing a bi-lingual contract. In this case, the accuracy of business translation is crucial. Varied use of terminology in different countries can have an entirely different meaning and cause costly disputes.
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10. Be Aware Of Frauds Some people in International Trade are making a living out of frauds. The most known schemes are non-payments, samples and complaints. You may very well secure the payment for your products if you do your homework and select the right terms of payments, but it's much harder to protect your business from the other two. A good indication that something is not quite right is a request for samples in the very first inquiry. The quantity of samples is another issue to consider. If somebody asks you to send 2 cartons of wine as a sample, it just doesn't sound right, does it? False complaints are common and very hard to recognise as scams. The best way to protect your company against these problems is to include a very detailed "complaint clause" in the contract.
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After You Export - Add Value 11. Be Market- And Customer- Focused Build a strong business relationship This is a cliché. Everyone says that, because you cannot avoid it in your business operations. I just want to add a suggestion of not ignoring small issues in building business relationships. Believe me that if you send a postcard or even an e-mail on major national holydays and on key personnel birthdays, that adds considerably to the relationship. Win buyers through better service Remember that the key attributes of every service are Speed Cordiality Knowledge and Problem solving Win buyers through exceeding expectations Philip Kotler, the author of several well known marketing books said: "Meeting customer expectations will only satisfy customers; exceeding their expectation will delight them". However, there is a pitfall that the better you act, the higher expectations your customer has and one day you find that the task of exceeding the expectation is too difficult and too costly. You should decide where to draw the line between exceeding the expectation and making profit.
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12. Be Prepared To Meet Growing Demand
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If you take into account all the above issues than most likely your products will be successful internationally and the demand for them will be increasing. If you can't meet the demand you risk losing the whole market. People are not interested in dealing with you if there is no future growth. Be ready to increase production or to outsource similar products elsewhere.
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Always 13. Be Prepared To Spend Time And Money Generally, investments in international markets are greater than domestic investments. Furthermore, exploring foreign markets can take longer and cost more than expected.
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14. Make Decisions On A Commercial Ground Making decisions on a commercial ground does not necessarily mean that your profit has to be the only element to consider. However, you should clearly understand what benefits you get by reducing your profit margin or spending all profit on offshore marketing.
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15. Don't Try Too Much At The Beginning And Don't Grow Too Fast Concentrate on one market at a time, moving on to the next only after succeeding in the last. Wait until cash flow is good enough to justify your expansion.
Top of Page Legal Notice This tutorial has been developed for information purposes only and shall not be construed, implicitly or explicitly, as containing any commercial or financial solutions to risks associated with international payments. Under no circumstances shall the author, Newsta Pty. Ltd. or its directors, employees, shareholders or affiliates be liable for any direct, indirect, incidental, special or consequential damages.
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