The first question most small businesses ask is why should we export? This is particularly true for those whose domestic sales are strong. It is a valid question given the costs, time and commitment required to be successful internationally.
Advantages of exporting
Exporting can help increase sales by extending your market base to overseas countries where you can find new customers and niche markets.
Despite the added costs of exporting, you can save costs by producing on a scale that makes better use of resources (economies of scale), leading to higher profit margins.
Selling in an overseas market can help your business grow at a faster rate than if you were confined to Belgian markets.
Reduced local market dependence
Selling in different countries diversifies risks. During a local economic downturn your overseas customers may be unaffected.
Exposure to new ideas, technology and processes can help you company develop innovative products and services.
Trading in the global marketplace increases your exposure to international best practice, ideas and alternative ways of doing business - improving your chances of competing at home and overseas.
Direct and indirect exporting
Direct exporting involves selling directly to your target customer in market. This could be from Brussels through the internet and regular trade visits, or by setting up a branch, office or company in the target country
Selling directly to customers prevents other businesses taking a share of your margin. However this approach requires a large commitment of financial and human resources. It takes time to make contacts and build relationships, negotiate deals, understand the market and carry out marketing.
Advantages of direct exporting
- You are in control of pricing.
- You are in full control of your brand.
- You get a direct understanding of buyers' or end users' needs and an ability to customise accordingly.
- You maintain the customer relationship.
- You are able to identify possible new opportunities.
- Your customers may prefer dealing directly with the producer.
Disadvantages of direct exporting
- It requires a lot of time, energy, staff resources and money.
- Competitors with a local presence will be perceived as lower risk to buy from.
- After-sales commissioning and service may require local language capability.
- Daily follow up of genuine leads in-market can come second to business based in Brussels
- Remote troubleshooting may not be possible, requiring additional visits.
- Growth will be slower - a commitment to an in-market presence will have to be made for the business continue to grow.
- Conduct market research and draw up a shortlist of pre-qualified customers in each target country.
- Plan your strategy; either to market from Brussels, or set up a local presence. Develop an export plan that outlines how you will successfully sell direct.
Selling to or through an intermediary is a relatively cheap and straightforward way to enter a new market. Intermediaries are typically agents or distributors based in your target export market who sell your products or services to end users.
A good intermediary will have in-market experience, reputation and contacts. Using them can be a quick way to get your products and services to the end user. They will generally require a level of support in the overseas marketing and selling of your product.
Some intermediaries can be based in your own country. Using a home based intermediary means you will not have to contend with international freighting and Customs issues.
The disadvantages of using an intermediary are:
- the intermediary takes a margin
- they still requires sales support
- you have no direct contact with the end customer
- there's less control over the actual final transaction
- fewer opportunities to learn about the other market, which could slow down longer term expansion plans.
Prepare to export
The question is: are you ready to do that? Develop a business plan that will help you identify where you are, where you’re going and how to get there. As you draft it, think about whether you can answer “yes” to the following questions.
Are you committed?
Developing a market can be costly in terms of time, money and resources. It requires regular visits to the market to develop relationships. Your entire business needs to be committed to this from the ground up.
Do you know your product or service?
It is important to know your product or service and its marketing advantages. Can it be tailored to suit a new market? You should know.
Do you have sufficient production capacity?
You need to be confident that your product or service is sufficiently proven and developed. If you’re manufacturing in Belgium, do you have the production capacity to meet market demands? If you are looking to manufacture offshore you need to factor in hidden costs such as greater management overheads, inflexible manufacturing schedules, quality management and cost issues.
Do you have enough market knowledge?
Marketing success can be mercurial in domestic markets, let alone foreign ones containing cultural and language differences. It is vital you have a strong understanding of your target markets and the influences that drive purchasing habits in them. If you don’t know who your target customers are and what motivates their purchases, and who your biggest competitors will be, find out – then go back to the drawing board.
Can you justify your market and pricing choices?
You need to have done the research and have solid figures in hand to validate both the potential and the investment. If not, book more flights, get your feet on the ground and talk to more people with knowledge of the market.
Does your company have sufficient management capacity?
Exporting requires considerable management time. To be successful you will need to at least consider hiring managers familiar with the export market.
Do you have the finance to export?
Does your company have the financial strength to commit the money and the time it may take to develop the market with no guarantee of a return on this investment? Breaking into an offshore market requires considerable funds for, among other things:
- Trade fairs
- Sales promotion
- New brochures
- Training of sales agents.
You also need to watch out for hidden costs relating to language and cultural issues, and the time you need to spend building relationships and intellectual property protection.