Have you considered conducting business internationally by exporting merchandise from the United States?
If so, there are many factors you should take under consideration prior to engaging in an export transaction to ensure that the venture is a success rather than a failure.
Since international trade transactions have become quite involved in today’s world, this article outlines the steps that should be taken to successfully establish an export strategy.
Step 1: Determining Your Company’s Export Readiness
The first step to exporting involves determining your company’s export readiness. Since the international trade environment as we know it today is always in a constant state of change, it is vital that corporate officer's discuss their corporations' export readiness prior to engaging in export transactions.
You should consider the following questions carefully before proceeding:
- Does your company have a product that has been successfully marketed within the domestic marketplace?
- Does your company have an international export plan with predefined goals and strategies, or is your company in the process of creating an international export plan?
- Does your company have the production capacity necessary to sustain the domestic marketplace as well as the export market?
- Does your company have the financial resources to sustain marketing operations within the domestic marketplace as well as in the export market?
- Does your company have the necessary human resources dedicated to developing and maintaining an appropriate export market strategy?
- Does your company have the necessary human resources dedicated to providing adequate customer service to the domestic marketplace as well as the export market?
- Does your company have the necessary knowledge of foreign import regulations, food safety standards and cultural preferences to effectively modify product packaging and labeling?
- Does your company have the necessary human resources that possess knowledge of international shipping procedures and regulations?
- Does your company have the necessary human resources that possess knowledge of international payment mechanisms such as Letters of Credit?
Should you not be able to completely answer any of the questions presented above, you should consider conducting the research necessary to do so. Obtaining the appropriate information can mean the difference between success and failure!
Step 2: Gather Market Information
Once you have determined your company’s level of export readiness, you may then progress to the next stage of developing an effective export strategy by doing a little bit of research on your target market.
There are numerous companies of all sizes that have attempted to conduct business across international borders using the same methodologies that they used in the domestic marketplace. They have quickly found out that these same methodologies often do not provide the same level of return in the international marketplace.
In order to develop an effective export strategy, you must do your homework and cover all aspects of your proposed venture; otherwise you could quickly end up as a failure in the international marketplace and potentially damage yourself in the domestic marketplace as a result.
Which sources of information can a company tap into in order to obtain information about their proposed venture? There are many different sources that can provide this information including:
- Industry and trade associations,
- Financial institutions,
- Marketing organizations,
- International accounting and consulting firms,
- International corporate intelligence services,
- Local economic/industrial development agencies, Federal government departments and agencies, and
- State government departments and agencies.
Each of these sources may provide detailed information pertaining to certain aspects of your international business venture. The level of information that may be provided depends on the business venture of your company.
Once you have identified the sources that will provide the best information for your company, you should then consider exactly what information you wish to obtain.
What are some of the topics that a corporation should gather to develop an effective export strategy? There are many topics that should be researched such as the following:
- Are there any business practices that are unique to the target market that could hamper conducting business internationally?
- Are there any cultural differences that must be accommodated and, if so, what affect would they have on the corporation?
- Are there any aspects of the political environment of the target market that may hamper the conduct of business internationally?
- Are there unique aspects of the legal environment within the target market that may pose unique challenges for the company to overcome?
- How would the current production cycle be affected by conducting business internationally in the target market?
- How would the supply chain be affected by conducting business internationally in the target market as it would relate to potential regulatory restrictions on certain merchandise/materials?
- How would the distribution channels currently utilized be affected by conducting business internationally in the target market?
Perhaps the most important question of them all relates to risk. What is the risk involved in conducting business internationally and does it outweigh the possible benefits?
Step 3: Develop an Export Market Strategy
Once you have determined your company’s level of export readiness and have conducted the appropriate export market research, you may then proceed to the next stage of developing your export market strategy by composing a document that includes many details of your company’s intended operations strategy for exporting merchandise.
When attempting to venture into an export market, it is often an advantage to have a documented export market strategy available for review by any of the following:
- financial lenders,
- governmental agencies,
- internal managers/employees,
- strategic partners, and
Typically, an export market strategy, referred to by some as an international business plan, should clearly define the objectives of the company, as well as the manner in which the company will achieve its objectives. In addition, the export market strategy should include timely, accurate and relevant information to substantiate credibility of the company’s ideals.
In general, when preparing an export market strategy you should include the following elements:
A brief description of your company and your export market intentions with conclusions.
Detail the capabilities and history of your company.
Management and Human Resources
Detail the management philosophy and employee job classifications and applicable qualifications.
Target Market Profile
Detail the political stability, geographic issues, legal system, business customs and practices, religion and cultural issues, language and governmental structure of the target market.
Market Entry Strategy
Detail how your company will enter the foreign market.
Detail your company’s marketing plans including the product, price, place, promotion, people and after-sales service requirements.
Detail your company’s manufacturing production process.
Detail your company’s projected financial performance for at least three years ahead.
Detail any strategy put in place to minimize exposure to risks associated with the export venture.
A complete summary of your company’s desire to enter an export market, as well as any concluding remarks that recap some of the key points of the proposed venture.
When composing your export market strategy, it is important to include a provision that will allow for the constant monitoring of business operations since it may be necessary on occasion to deviate from your initial plans if they are not yielding the expected results.
Prior to engaging in a sustained export venture, you must do your homework and cover all aspects of your proposed venture; otherwise you could quickly end up as a failure in the international marketplace and potentially damage yourself in the domestic marketplace as a result.
The export planning process is not easy, so take your time and make sure that you cover every aspect in detail prior to engaging in an export venture so that you are as successful as possible!