Going Global The right strategy, partners and export team will help your company achieve success in international markets.
By Gabe DiGiorgio
Your company has developed a product line that is doing well domestically. Your products are considered to be innovations of the industry. Domestic sales are up and things are going great. So great in fact that you have recently developed a Web site that promotes your product and allows you to collect sales leads and possibly even orders. Then you get your first international order. Now what?
International business is a different animal than what you are used to domestically. The rules are different, and so should be your expectations. There are three important considerations when going international: export strategy, trading partners and your export-readiness team. Export Strategy To be successful in exporting, you must first assess your company’s export strategy. Is exporting consistent with your company’s goals? Exporting places a demand on a company’s resources in terms of management, personnel, production capacity and finance. You must determine whether the benefit of exporting is worth the cost.
It is important to develop a plan when considering exporting. Determine which products in your line will do well internationally. If necessary, plan to make adjustments for the overseas market.
Start by targeting only a few markets and develop marketing and distribution channels for each. Investigate these markets for challenges, such as competition, cultural differences and import controls.
Due to the cost of exporting, determine whether special export pricing is necessary to cover the costs involved in getting the product to market, and make sure you are still competitive. You must be prepared to commit the personnel and resources to the international business. “Part-timing” it will not work.
You will determine your success in your targeted markets. Develop ways to measure success and evaluate your results. Profits in the first year may not be possible, so have a practical timeline that meets your company’s goals in this endeavor. Trading Partners A good way to break into a market is by employing a trading partner that is on the ground in the market you wish your product to reach. There are several options: agents, representatives or dealers/distributors.
An agent has the authority to make commitments on behalf of the company they represent. Be sure to carefully screen such parties to ensure they don’t make promises you cannot keep.
A representative usually works on a commission basis and will be paid based on the sales generated. Again, it is important to gain a level of trust with a representative to ensure a win/win situation for the parties involved.
A dealer/distributor will purchase the product from the exporter and will resell for a profit. The dealer/distributor also acts as support and service for the product. A dealer or distributor is essentially the end user for you, as you will get payment from them as shipments are made.
Not included in the list above is the end-user of the product. If you are making a sale directly to the user of the product, the options listed above are not necessary; however, in all cases, communication and the proper agreements are very important. Your Export Readiness Team Your company must be willing to devote the time and resources necessary to make exporting a successful part of the business. However, there is only so much your company can do before the help of service providers is needed. There are service providers who can help facilitate the processes of moving your freight and making sure you are paid in a timely fashion, including freight forwarders and international bankers.
Freight forwarders are like travel agents for freight, making it possible to move freight from your door to your customer’s door. Both the International Air Transportation Association and the Federal Maritime Commission license these providers. Freight forwarders not only can help with the movement of freight, but also can assist in the proper classification of your freight for export, as well as prepare the necessary documentation for your shipment.
To feel comfortable exporting, you must feel that you will be paid for the products you are shipping. Whether using letters of credit, documentary collections, open account or cash in advance to receive payment, your international banker can help ensure that the right methods of payment are being used for the type of business you are doing. Be sure to compare fees and service levels of local providers with local service to larger banks that have central processing centers.
The service providers you decide to work with should have all of the necessary tools to accomplish your goals. Make sure when deciding on your providers that they give you the long-term commitment and the counseling you need to be successful.
Gabe DiGiorgio is a trade service representative at First National Bank. He can be reached at (913) 266-9327 or .
