|
How to Plan Your Exporting
for Maximum Results
by Christine Harvey
Yes, selling into foreign markets can be extremely lucrative. Some
companies even sell exclusively to export markets. If they can sell all of
their goods abroad, it stands to reason that most of us can sell some of our
goods abroad.
The question is how to enter as profitably as possible, with as few mistakes
as possible. And competition is growing. As of this writing, the State of
California alone placed fifth in world trade, taking over that position from
the UK. Think of the potential there is for other American companies to
start exporting!
Waste No Time
There's no time to waste. Competition is increasing. If we don't learn to
meet the competitors head on in overseas markets, we'll be facing them in
our own markets as they start to import.
Two companies were recently featured on television. Both made the same
product. One had outdated production and management techniques. It was
losing ground rapidly to the Korean imports. The other company had developed
high productivity by investing in machinery and by putting management
controls and incentives into place. They were selling successfully against
the Koreans on the Koreans' home ground with the identical product!
The first company complained that, "Our problem is lack of government
intervention. We want protection against imports." The second company knew
that reliance on government policy was not the solution. They took
responsibility for their own future and planned a success strategy that
would work--with or without government intervention.
Regardless of what we believe about protection from imports, the fact is
that we can not predict government policy. If we are to profit, we have to
develop our own ways to succeed.
Whether we export or not, we need to understand foreign products and
marketing. We'll be faced with these, here and abroad. The sooner we grasp
the differences, the sooner we'll succeed.
Getting into foreign markets profitably is a three-step process. One is the
plan, two is the implementation, three is the follow-up. Where many
companies go wrong is with the plan; then the implementation and follow-up
are worthless. It becomes an exercise of throwing good money after bad.
The answer is to look at all the alternatives for entering the market. Will
you sell direct, work through a distributor, or perhaps sell your
technology? Only after considering your alternatives, can you can decide
which is most lucrative as part of your planning process.
First, Plan Carefully
One company came to us and asked us to find and appoint distributors for
them in overseas markets. They had already rejected setting up their own
premises. They thought that selling through distributors was the only
alternative. But the exchange rate had turned against them.
After investigating the market, we were attracted to another option. What if
they were to have heir product manufactured abroad under license? By
licensing they could sell their technology and in return get a front-end fee
and royalties. They stood to gain more that way than they would by direct
sales.
They would derive three benefits. First, they would have a yearly income
from royalties with an agreed minimum guarantee. Second, they would have
less management and staff involvement, meaning that they could use their
time for other expansion activities. And third, they would not have to
finance any expansion of their manufacturing facility. That is certainly a
lucrative alternative to consider.
Explore Profitable Alternatives
Look at your alternatives in depth. Don't have blinder vision, don't
restrict your opportunities to what works in other places. A foreign market
is indeed foreign. The culture is different and so are the opportunities.
When you're planning your market entry, be sure to look at all alternatives.
It takes a little more time and a little more ingenuity, but the results pay
off.
The opportunity to ‘license’ was often thought of as relating to developing
countries. But that's not the case. It works well between or within any set
of countries because the buyers may find it cheaper to purchase your
expertise than to develop their own. For you, the seller, a know-how fee
plus ongoing royalties may prove to be more profitable than selling the
product direct.
A large investment bank we worked with wanted to fund a textile factory that
would produce $13,000,000 worth of clothing each year. They could have drawn
upon local expertise to set up the factory and the product line, but they
didn't.
They knew from previous experience that buying the know-how for the
production and product line would save time. Because of buying the
technology, several of their previous factory start-ups showed profits
within one year of incorporation. We worked with them to find a licenser.
What's Right for You?
The point is, you need to choose the method that is right for you and the
best option in the country being considered. Don't go for convenience.
Cutting the plan short will lead to disaster in the implementation and
follow-up stages. You'll spend time and money trying to make something out
of nothing.
A common error companies make is to appoint agents they meet during an
exhibition or tradeshow. They may seem right at the time, but further
investigation proves they don't have the right sales contacts, service
capability, and so on. A trip to the country saves you from throwing good
money after bad.
What's right for your competitors or right for you five years from now may
not be right today. When it comes to acquisitions, joint ventures, and
setting up premises, you need to proceed with caution. Be sure you know the
culture and the marketplace.
Bill tells the story of two different companies--one company American and
one British--trying to get into each other's markets.
The British company bought out an American company and afterwards discovered
that the salaries of the American staff members were much higher than those
of the British counterparts. So they reduced the salaries of the American
executives, and then wondered why they weren't content to stay! They thought
the Americans would stay because the bigger parent company would offer more
career opportunities. They were wrong. They found themselves trying to run a
new company in a country they knew nothing about, with no experienced
executives!
In the other story, an American company was new to foreign marketing and
decided incorrectly that they would set up premises in Europe. They would
have one location in England to serve Norway, France, Sweden, and England,
with no local support in the other three countries. Their idea that they
could sell direct, without agents and without people who spoke the language
and knew the culture, brought them disastrous results. Had they examined
their options, such as appointing local agents and distributors, they would
have achieved better results.
Although both companies did well in their own markets, they failed to choose
the right options when their companies entered overseas markets.
Options like licensing look complicated to some companies on the surface,
but when they dig deeper into it, they see it can be less complicated than
taking an obvious route like the two companies above. All options should be
considered if you want to maximize your success.
Don't take what looks like an easy route and then find out, halfway down the
road, that it's the wrong choice.
Second, Implement the Plan
When you're getting into a market, put your best foot forward. Present
yourself properly. Don't send the wrong person or the wrong literature.
Don't go unprepared. Believe it or not, we've seen heads of companies go
abroad with no literature, no photographs, no samples – even no business
cards! They're too pressed for time and so unprepared that they throw away
their opportunity.
If you don't know the market, don't try to make decisions without local
expertise. Dealing in foreign markets is like working your way through a
maze in the shortest possible time. To get guidance through the maze, you
would choose an expert to show you through--someone with proven ability, not
a man on the street who's never been through it before.
Use Local Consultants for Creative Solutions
At the implementation stage, you'll find obstacles. You need people who can
overcome the obstacles.
We had a client company in textile supplies wanting to sell into a
developing country. But their product was on the restricted list. So they
thought they would have to set up a local operation to either produce or
package the product there. But our consultant, who knew the governmental
decision-making process, had more insight. He was able to link the company
up with a local manufacturer who could import the product because he had the
authority to veto import restrictions on his product group. This
manufacturer was able to sell his own product and our client's product
through his already established network. The problem was solved quickly and
profitably. Without the local consultant, the picture would have been
different..
Another company, one in pharmaceuticals, wanted to export to a Middle East
country. They heard that committee approval of their product was required.
This would supposedly take two years. We shortened the cycle to two months
instead of two years by having consultants assist.
Here's what we did. Prominent doctors in the country were visited by our
consultant and told about the product. Then we sent government committee
members carefully prepared information packages with all the material needed
for approval. This included product data sheets, packaging, and so on.
Before the committee was due to meet, we asked if our client company could
send a representative to attend the meetings.
The committee received the representative and listened to his presentation.
They were delighted that the company cared enough to show such interest. The
approval cycle then took its normal channel with one exception. The
consultancy intervention moved the file from the bottom to the top of the
pile for consideration. It not only assured consideration, it cut a two year
waiting list.
Use Determination to Overcome Roadblocks
Use determination as we did with this company. Even on the smallest issue,
when encountering roadblocks, look for alternatives.
Don't give up. Otherwise little obstacles lead to bigger ones. Remember the
textile company that overcame import restrictions. Remember the
pharmaceutical company that overcame the two-year wait on committee
approval. If there's a will, there's a way. Keeping your sales growth target
in mind helps to increase your determination.
If you know the market potential--if you know what results you're aiming
for--your priority will remain high. So will the company commitment to the
project. This will carry you through the difficult times and keep you from
abandoning the effort midstream.
Third, Follow It Up As If It Were Your Only
Market
This is the most common and the most heartbreaking of all reasons for
failure. After thousands of dollars are spent on a trip abroad and after
endless hours of preparation, the executive arrives home to a full desk of
paperwork.
Unfortunately, the follow-up that needs to be done on the foreign market
often loses out to other pressures. You can understand that the people
overseas, not receiving the appropriate follow-up, presume interest has
died. Then their interest and enthusiasm start to fade. If you want to
succeed in starting up a foreign market, you might try mentally treating it
as your only market. Give it the attention it deserves.
"Out of sight, out of mind" applies to exporting more than most other
things. No matter what country you're dealing in, give it continuous
attention.
Having local support of some kind has always proved to increase sales.
Regardless of your industry or the country, you can engage local people cost
effectively to keep things moving, to alert you to problems, and to save you
trips to the marketplace. The extra effort pays valuable dividends. There
are many consultants like ourselves and others who can help you to motivate
agents and keep your project alive.
Remember the Human Factor
Don't forget the human factor when you're dealing overseas. People in some
countries expect to get to know you and need to be entertained. In other
countries a straightforward, direct approach is the only way to succeed.
Whether you're choosing an agent or acquiring a company, the human factor is
critical. Whoever you're sending abroad to follow up on business needs to be
the type who can adapt to each situation. The dynamic sales and marketing
director of a large company might be perfect for large-scale negotiations.
Yet someone else could be more effective in smaller developing countries.
Yet another personality could be needed to interface with entrepreneurs
during acquisition discussions. Put the right person on the right job.
The points we've discussed here are sensible, workable principles. But as
Samuel Coleridge said, "Common sense in an uncommon degree is what the world
calls wisdom." Foreign marketing requires greater wisdom because of the
greater parameters involved. If you want to add markets profitably, we
suggest you get a start, work aggressively, and follow up closely. And more
than every other factor, don't neglect making the right plan, the rest is
fruitless.
Remember to succeed in
overseas markets:
Consider all options, then give it undying determination
ACTION SHEET
Ideas for Development:
1. Think about all your alternatives such as selling direct, selling through
agents
and distributors, setting up premises or selling your technology so that
your
product is manufactured abroad under license.
2. When appointing an agent, do a thorough search and resist the
temptation to
appoint people you’ve met at trade shows. Convenience now will be
costly later.
3. Don’t assume that salaries and practices are the same abroad as they are
at
home. Research everything.
4. Use local consultants to help you through the maze and find angles for
profitable market entry.
5. Follow up quickly with needed and promised actions.
6. List other points here:
7.
Of the above ideas, which one is likely to yield the best results?
What percentage of sales (or performance) increase could realistically be
expected?
How long would it take: to develop the idea? to get results?
Who would have to be involved?
What date should we start?
What is the first step I should take?
Want to learn
more on this topic? Christine Harvey has written six books in 25 language
that cover many of the concepts found here.
You can get your own copy by
clicking here or visiting our eShop.
|
