Research in Ireland and the UK has shown that almost one third of companies generate their first export by chance as a result of an unsolicited inquiry.
The textbook will tell us that you should consider entering export markets to broaden your customer base, spreading overheads over an increased turnover or to reduce your dependencies on the domestic market.
So, regardless of whether you export by chance or in accordance with a plan you must have an export strategy and you must intend that exporting will become a profit contributor.
Your strategy must look to see where it is easiest to do business, culturally and linguistically and which markets offer you the best sales and profit opportunities. Clearly the size of your company will tell you if you need to:
a) establish a manufacturing plant in another country
b) appoint an agent / distributor or
c) operate from home base.
In all cases the business has to decide and the choice should consider the following three issues:
i) Business Risk taken by the Exporter
ii) Flexibility and
iii) The exporters management control of the market.
In the case of (a) above we have high Business Risk, strong control and limited flexibility.
In the case of (b) above we have shared Business Risk, the Agent has the Control and we have less flexibility.
In the case of (c) above we have Risk we can insure, we have limited visibility and control and we have good flexibility.
Each route has its place but clearly the level of resources available to exploit the market and the level of risk the exporter will take will decide which is more appropriate for their circumstances. For example the sheer size and strategic potential of the Chinese market may suggest that you make a direct investment, a near market like the UK could suggest a distributor method and a small market like Malta may best be served by exporting directly from head office.
Perhaps you should go and talk to Enterprise Ireland in the first place. They are a government funded agency tasked with supporting Irish exporters, through a range of services and they have offices in our main markets.
Profitable Product Line to start
All the textbooks will tell you that you should begin your export business with a tried and tested profitable product line. If the product line is not generating strong profit margins in your home market how can you expect it to be profitable abroad when you have increased transport costs, increased sales costs (as you may need to pay your agent a commission) and perhaps the bigger new market is more competitive. Please remember also to factor in the cost of your time.
Close to home
The next piece of advice is to stay close to home. Unless you are selling a niche product for a particular market the best advice is to take one step at a time and that could mean exporting to the UK. There are strong ties between the two countries; these are both personal and business ties. They also speak English and it is so easy to travel to the UK by plane or by car ferry to conduct your business and it is very easy to transport your goods and services there. Perhaps your next port of call should be the markets in the EU or North America.
Is your product export ready?
Do you need to adapt your product for the export market?. Is there strong local competition there?, should you talk to potential buyers and ask what they and their clients want. You also need to protect your brand and provide good quality and service to encourage new customers to buy your products and services.
Market research is vital. You must understand the culture and demographics of the country. Find out what sells locally, how is the product priced and what are its weaknesses?. How do you promote or market the product?.
If you are venturing further afield you also need to consider the political and economic situation in a market. Are they tariffs on your product to protect local industry, is there an availability of hard currency to ensure you are paid or is there government interference?, What is the Per Capita Income in the market ?, how can you sell luxury goods for example if only a small percentage of the population are wealthy.
Remember that you will need deeper pockets to begin exporting. You might source raw materials on credit terms of 30 days but you might have to wait 60/90 days before you are paid and please factor in the increased shipping costs.
When you are selling in your home market you will typically know your client very well and in certain cases you can easily arrange debtor insurance and invoice financing facilities. As you go further from home please consider if you can get insurance and invoice finance facilities. Please remember that certain markets have either exchange control regulations or import tariffs and you might need to consider using Letters of Credit.
Route to Market
Use the well knows four P’s:
What are you selling and how is it packaged ?, what warranties do you give?
How do you deliver the goods to your client and how quickly can you deliver?
What price are your competitors charging and what are your payment terms?
How do you get the customer to buy your product, do you advertise or use trade shows, do you use the internet, local sales agents or distributors?
Local Customs & Practice
Check local and national holiday dates and possibly school holiday dates. Remember not all markets operate on a Monday to Friday basis.
What is the local business and entertainment dress code?
What is the business etiquette on greetings and meetings!
Understand the politics in the country and more importantly be aware that discussions on politics in a market may not be similar to Ireland.
Remember that our informal manner is perhaps not understood or appreciated in many countries and may be misinterpreted as a lack of respect by your customer.
Gerry Ennis is Head of Global Trade Finance, Ulster Bank Ireland Ltd. If you have any questions email email@example.com or contact Gerry via Twitter @gerryennis