Steps to Exporting Step 1: Are You Ready to Export
You’ve achieved some success on the Irish market with your product or service, – but is it the right product for the export market? Can you sustain a competitive position in export markets with your existing offering? In other words, can your product or service “cut it” in the international arena? What level of adjustment or localisation is needed to your product or service to suit new, international markets and at what price? Have you considered the impact of local regulations, language and cultural issues, service expectations, local competition, income-levels, shipping time and costs and the effect of any tariffs or duties on affordability?
Your value proposition is quite simply what you offer your customers and why they would want to buy from you. It’s an expression of your unique value-add. It leaves your customers in no doubt as to whom they are dealing with and what exactly you have to offer. You need to consider how you can differentiate your company and your offering from competitors and how you can identify the proposition that resonates with your most valuable target customers.
A well-defined and concise value proposition should be honed and refined through continuous research and contact with customers. As a statement, it is at the very heart of your sales campaigns and should be at the forefront of your company’s blueprint for growth.
What customer groups are you targeting and why? How many potential clients exist in the new export market? A well-defined target market is the first element in developing your marketing strategy. Once you’ve defined who your target market is, your marketing strategy and plan should be primarily aimed at satisfying that market.
Routes to Market/Market Channels
Assuming you know the market you want to target and have a clear idea of its potential, you need to decide on the channel by which your product will reach your customers. How you enter a market is a strategic decision that will define the very nature of your business in overseas markets. The decision to either sell directly or partner with someone to sell on your behalf will be guided by resources, opportunity and the nature of your offering.
Finding the Right Partner
Research consistently indicates that the correct choice of partner in your overseas market is one of the most critical success factors for SMEs. Setting and agreeing expectations is the key to establishing a strong relationship with a partner from the outset. The types of details you may want to consider include sales objectives and shared marketing plans, exclusivity, pricing, margins, discounts and payment terms. It can also be wise to include a ‘get out’ clause if targets are not being met or the arrangement is not working.
Only when you have a good understanding of who your competitors are, at home and overseas and their strengths and weaknesses, can you identify your true competitive advantage. You need to know who else is competing for your market, their products and services, advantages and disadvantages of their offering and their market share.
Determining your competitive advantage is a key part of the strategic planning process. True competitive advantage is achieved when you can offer your customers greater value – either by providing them with greater benefits and service to justify higher prices or by offering them lower prices. You need to understand what’s innovative about your product or service and what differentiates it from others in the international marketplace, allowing you to charge a premium price while giving your customers clear reasons for choosing your product over your competitors’.
Implementing the right sales process is fundamental to the international success of your business. But first you need to understand what level of selling and sales capability the company has right now, how likely that capability can be transferred to export markets and how you can better use technology to bolster your sales and sales management capability.
Do you have the capability and resources to develop business overseas and do your staff have the required skills, knowledge and experience to implement your market-entry strategy? Depending on the market and the route you are taking, necessary skills may include language fluency, good understanding of cultural differences, ability to research and evaluate your target market, and experience of dealing with freight forwarders or customs agents. You will need to define the main stages, tasks and budgets required to implement your market-entry strategy. You will also need to consider training existing staff, employing new staff with the required skills and experience or using consultants to work with you in Ireland and/or overseas.
Does your company have the financial strength and senior management time to commit to developing an overseas market, with no guarantee of a return on your investment? For a small company, depending on the route you take, the costs can be considerable, and you will need access for cash to fund your export drive.
Planning Export Finance
Planning your export finance broadly revolves around the costs involved in setting up and running an export operation and the approach you need to take to managing payment risk. Credit management, export credit insurance, letters of credit, invoice discounting and factoring are just some of the issues to consider. You also need to consider the lead-time before receiving your first order and the length of your sales cycle, which can vary from market to market. For example, what are the cash implications for funding a sales cycle of 18to 24 months? Consult your financial advisor or bank for advice on this.
Pricing and Getting Paid
While you need to be price-competitive, your product or service should not compete solely on price. In setting your prices, you will need to consider your competitors’ prices, the level of existing competition in the market, your customers’ perception of the price/quality relationship, production and distribution costs and overheads and the extent to which your customers can afford the price.
Protecting against exchange rate fluctuations
Irish companies should also consider how to protect against exchange-rate fluctuations. Many Irish banks provide facilities such as
- setting up a foreign currency account in Ireland, with the money kept in that currency, allowing companies to receive and make payments without having to convert them into euro
- setting up a bank account in your target market’s country
- forward contracts, whereby the exporter agrees to purchase currency at an agreed rate for a fixed period of time
- options – similar to forward contracts – but where the exporter is not obliged to go ahead with the currency exchange.
It may also be possible to agree a euro price with your customers and suppliers.