Chapter 2: DEVELOPING AN EXPORT STRATEGY
In This Chapter:
- Is your company ready to export?
- How will exporting affect your company?
- How do you create an export plan?
Determining your Products’ Export Potential
There are several ways to evaluate the export potential of your products and services in overseas markets. The most common approach is to examine the domestic sales of your products. If your company is successful in the U.S. market, there is a good chance that it will also sell in markets abroad, at least in those markets where similar needs and conditions exist.
Another way to assess your company’s potential in exporting is by examining the unique or important features of your product. If those features are hard to duplicate abroad, then it’s likely that your product will be successful overseas. A unique product may have little competition; thus, demand for it may be quite high.
Finally, your product may have export potential even if sales are declining in the U.S. market. Sizable export markets may still exist, especially if the product once did well here but is now losing market share to more technically advanced products. Other countries may not need state-of-the-art technology and may be unable to afford the most sophisticated and expensive products.
FACT: Many companies assume that they can’t compete overseas.
INSIGHT: Even if your product or service has no obvious foreign market yet, the world is a big place with many needs and appetites. Remember, price isn’t the only selling point. Other factors, such as need, utility, quality, innovation, service, and consumer taste, can make your company competitive.
Assessing Your Company’s Export Readiness
As Box 2.1 suggests, export-ready companies possess certain qualities that increase the likelihood that their exporting efforts will be successful. Answering these important questions about how exporting will enhance your company’s goals will help determine your company’s readiness to export:
- What does your company want to gain from exporting?
- Is exporting consistent with other company goals?
- What demands will exporting place on your company’s key resources, management and personnel, production capacity, and financing, and how will these demands be met?
- Are the expected benefits worth the costs, or would company resources be better used for developing new domestic business?
For a more in-depth assessment of whether your company is ready to export, it’s a good idea to take the export readiness assessment. Your company can use an interactive version, which can be found at www.citd.org/startupkit/eras/index.cfm. Among the issues you’ll be asked to consider are your company’s current operations, attitudes, and products.
For a more theoretical assessment, it is helpful to examine some of the motivational and organizational factors behind your company’s decision to export. Thinking about these factors will help you decide if your company and your product are ready to export.
Motivational factors include the following:
- Long-term expansion. Building an exporting plan takes time, so it is important to focus on expanding your business over the long term and not to look for immediate returns.
- Increased competitiveness. By selling internationally, your company can gain insights into different ways of doing business.
- Exploitation of unique technology and expertise. If your product quality or expertise is superior, you’ll have a competitive edge in the international marketplace.
- Improved return on investment. Your company should seek multiple benefits from exporting, such as expanded customer networks and exposure to new ideas and technology.
- Increased capabilities. You’ll develop better products and services, acquire better leadership abilities, and collaborate better with customers and suppliers.
FACT: Many companies never explore the possibility of exporting because they think that they are too small.
INSIGHT: Nearly 97 percent of U.S. exporters are small and medium-sized companies.
Organizational factors include the following:
- Management commitment. Total backing from management is the number one determining factor of export success.
- Funding support. Management must be willing to allocate sufficient time, enough resources, and an adequate budget for export activities.
- Personal expertise and commitment. Having staff members with international experience or having employees learn about your target market’s language and culture will help you enter the international marketplace.
- Product capabilities. Your company must possess the space and equipment needed to manufacture for the specific countries you are selling to (each of which will have its own product standards and regulations).
- Company’s exporting goals. Whatever your goal, consider whether the expected benefits outweigh the costs.
Is your product ready to export? To determine export readiness, consider these additional factors:
- Selling points. If your product is a success domestically, the next step is to identify why it sells or has sold so well here, keeping in mind that conditions abroad may be somewhere between slightly and significantly different (socially, culturally, economically, politically, and environmentally).
- Modifications. You may sell your product without modifications to international markets, as long as it meets the standards and regulations set by the respective countries. Some countries have strict governmental regulations that require special testing, safety, quality, and technical conformity measures.
- Product licensing. Some classifications of products require special approval from the U.S.
- Department of Commerce before you export and some of those products require export licenses.
- Required training. Products that require training to operate place a greater responsibility on your company and distributor or agent, and you must decide how to support that training.
- After-sales service. Products that require considerable after-sales support must be handled by a distributor or agent who is well positioned to provide such a service.
- Product distinctiveness. Products that have unique features enjoy a competitive advantage and better reception in foreign markets. Such unique features include patents, superior quality, cutting-edge technology, and adaptability.
For a more comprehensive list of factors and questions your company should consider, visit Pennsylvania’s Department of Community & Economic Development “Export Basics”.
FACT: Depending on the target market, it can take months, sometimes even several years, before an exporting company begins to see a return on investment of time and money.
INSIGHT: Written plans provide a clear understanding of your long-term exporting objectives and ensure that management is committed to achieving them.
FACT: Many companies begin export activities haphazardly and are unsuccessful in their early efforts because of poor or no planning, which often leads them to abandon exporting altogether.
INSIGHT: Formulating an export strategy that is based on good information and proper assessment increases the chances that the best options will be chosen, that resources will be used effectively, and that efforts will be carried through to success.
Developing an Export Plan
Once you’ve decided to sell your products abroad, you’ll need to develop an export plan.
A crucial first step in planning is to develop broad consensus among key management personnel on the company’s goals, objectives, capabilities, and constraints. In addition, because they will ultimately be responsible for its successful implementation and execution, the personnel involved in the exporting process should agree on all aspects of an export plan.
The purposes of the export plan are (a) to assemble facts, constraints, and goals and (b) to create an action statement that takes all of those elements into account. The plan includes specific objectives, sets forth time schedules for implementation, and marks milestones so that the degree of success can be measured and motivate personnel.
The following 10 questions should ultimately be addressed:
1. Which products are selected for export development, and what modifications, if any, must be made to adapt them for overseas markets?
2. Which countries are targeted for sales development?
3. In each country, what are the basic customer profile, and what marketing and distribution channels should be used to reach customers?
4. What special challenges pertain to each market (for example, competition, cultural differences, and import controls), and what strategy will be used to address them?
5. How will your product’s export sales price be determined?
6. What specific operational steps must be taken and when?
7. What will be the time frame for implementing each element of the plan?
8. What personnel and company resources will be dedicated to exporting?
9. What will be the cost in time and money for each element?
10. How will results be evaluated and used to modify the plan?
The first time an export plan is developed, it should be kept simple. It need be only a few pages long because important market data and planning elements may not yet be available.
The initial planning effort itself gradually generates more information and insight. As you learn more about exporting and your company’s competitive position, the export plan will become more detailed and complete.
From the start, your plan should be written and viewed as a flexible management tool, not as a static document. Objectives in the plan should be compared with actual results to measure the success of different strategies. Your company should not hesitate to modify the plan and make it more specific as new information and experience are gained.
A detailed plan is recommended for companies that intend to export directly. Companies that choose indirect export methods may use much simpler plans. For more information on different approaches to exporting and their advantages and disadvantages, see Chapter 5.
