Why Export and Are You Ready?
Companies wishing to export should have this planned as a growth stage in their Strategic Plan. Businesses starting up should ideally start supplying their local market, then nationally and only once they are a successful and established business in their domestic market should they consider exporting. In this way exporting is the logical next step to growth for companies and they are able to demonstrate success in their home market to buyers from overseas.Exporting opens up a whole new revenue stream for companies and if you just take markets such as the UK, the size of the opportunity can be significant e.g. there are over 8m people living in the London region alone, double the population of the Island of Ireland.
One of the other benefits of exporting is that it often leads to innovation and product development as you are exposed to new ideas and a wider competitor set. As a business you know you are ready to export when you are willing to commit proper time and resources to developing sales overseas.
Sometimes companies can start to export in response to an enquiry i.e. reactive exporting, this does not mean the business is ‘export ready’. To be successful, companies need to have a company-wide commitment to export, which is why it needs to be part of the strategy. The person who is tasked with driving export sales, needs to be given adequate time and budget to do the job properly, it is very difficult to achieve export sales quickly, particularly if exporting responsibility has been bolted onto an already busy ‘day job’. The business also needs to be willing to be flexible in terms of modifying products, packing etc for export markets.
As with all good business, start the process with a plan as this will help to ensure that you have considered all the key issues and have clear objectives and timescales that you are working to, it also sets out the importance of exporting to the rest of the business.
Identifying the Right MarketOne of the hardest decisions for companies to make is deciding which country or countries to start exporting to. There is no right or wrong answer to this but the key to reducing the risk of failure and increasing the likelihood of success is ensuring you have done your research and made your decision based on a clear understanding of the opportunities in one market versus another. It is sensible to start with countries which are geographically close eg UK and where there is a good cultural fit (language, food culture, trading terms etc). Smaller European countries such as Belgium, Netherlands and Scandinavia are also worth considering – assuming there is a demand for your product type. Other things that can make a market attractive are as follows:
- Economic trends – are income levels rising, which are forecast to grow further?
- Demographic trends – is it a young or ageing population, household sizes are they increasing or getting smaller (know which trends suit your products)?
- Food and Drink culture – are consumers open to foods from different countries/regions. Is there any religious barrier to your product eg certain types of meat, alcohol etc?
- Regulations and taxes – are there import restrictions (very unlikely within the EU), quotas, etc that may prove a barrier or increase the complexity of the task?
- The structure of your target channel eg retail/foodservice sector, is it dominated by large players or is the market fragmented which will give more opportunities but may be harder to supply from a logistics perspective
Identifying the Opportunity and Knowing Where You Fit in the MarketOnce you have decided which country/countries to target you need to ensure that you are clear where your product fits and who your target consumer is in that market. You will ultimately need to identify which retailer/foodservice operator offers the greatest opportunity for your business. To identify opportunities you need to segment the market based on consumer usage of your product category eg cheapest, feed the family, dinner party, health (diet, freefrom) and audit existing ranges in the market to identify where there is a gap. Visiting stores and undertaking audits are very important elements of your research stage. You need to understand the price range for your product type, promotional mechanics used in the market, packaging formats etc. This is best understood by walking stores or researching wholesalers catalogues, looking at menus etc if you are targeting the foodservice sector.
Other Things to Consider When ExportingThere are lots of things which need to be considered when deciding to export, which is why having an Export Plan is an important starting point. Key considerations beyond deciding on the target countries include:
- Can you adapt your product if the market requires it
- Ensuring you have built in all additional costs into your pricing eg new packaging (dual language will be required for non-English speaking markets), transportation, currency fluctuations, promotional costs, costs of serving the market eg market visits, taxes etc.
- Payment terms – ensure these won’t have a negative impact on cash flow
- Route to market – will you send direct to depot, use an agent or distributor, backhaul with domestic customers
- How will you manage business ongoing – will you be able to manage from home market or will you need to consider setting up a local office