Whether this is your first export venture or your 21st, the steps to success are the same.
By now you should have analysed your readiness to export and have done some market research. Now it’s time to explore your competitive advantages and set your export objectives.
Increasing your export market advantage comes down to the five Cs: company, country, customer, contact and competitor, according to the government’s Winning Exports: A Planning Guide. By working through each of these areas, we’ll work step-by-step to help develop and refine your export objectives, so you can be better prepared to compete for export markets.
Your export readiness and potential export success will build from your domestic operations and position in the market. As a starting point, develop a corporate profile of your business. This document will outline your business functions, products or services, capabilities, and will be useful when introducing the business to potential customers, distributors, finance providers, and employees during your export development. It will also become a valuable part of your export plan.
The corporate profile should include:
• company particulars, credentials, history, contact information;
• a description of your product or service, its features and benefits, users, price stability (all emphasising your competitive advantages);
• marketing and growth strategies—target markets, current market position, the marketing variables for your product or service and how you compare with the competition, packaging and promotional methods, and how you intend to use these in selected overseas markets;
• your current export objectives—export potential, product availability, preferred distribution, any product adaptations, and freight specifications.
Choosing your export markets will involve extensive market research in order to assess the best options and reduce risk. As well as your own market research, Austrade, state government trade departments, industry associations and market research companies can help with this. And actually visiting your chosen markets is also a likely option (see Step 4, Visiting Your Market in our upcoming May issue).
Ultimately you will want to identify one or two suitable overseas markets that have the potential to be developed quickly, and select initial markets with low risk and relative ease of entry.
Determining ease of entry will depend on a company’s individual situation, but there are some general characteristics which deem a country more ‘easy’ or ‘difficult’ to enter. Easier markets tend to be similar to your domestic market in terms of language, culture or business practices; are geographically close; have a familiar banking system; and similar rules, regulations and laws. More difficult markets tend to be further away, are large or complex, have a high level of regulation and complex import requirements or may be a relatively undeveloped market.
An important consideration when selecting your target market is the advantage offered by any particular export market for your product or service. You will need to consider whether your local competitive advantages will be sustained in your proposed export market, whether, through exporting, you can extend the life of a product that has already reached saturation point domestically, and if you can achieve economies of scale or improve return on investment by extending sales in a larger market.
When choosing your export markets you will need to balance ease of entry with these market opportunities and establish which countries best match your business based on your research. You can determine the best match by considering the fit between your company and the market in terms of contacts, comfort levels, riskiness, development costs and your interest in the market.
Products and Services
When choosing the products or services to offer in a new export market, it’s important to have a clear idea of what drives customers to buy your products or services.
Your customers may have varying reasons for purchasing your product so it’s worth breaking down your customers into subgroups, based on their different requirements, in order to understand their needs, expectations and buying patterns.
The key to your success will be to identify and meet the needs of these subgroups whose needs aren’t met by others in the marketplace—this is your competitive advantage. Your competitive advantages can be based on cost, the quality or value to customers of your product or service, your ability to respond quickly to customers, and your relationship with them and others in the industry.
You will need to determine whether your existing competitive advantage(s) can be transferred to your chosen export market. Generally speaking, entering the export market will require some modifications to be made to your business to compete successfully overseas.
Choosing the best distribution channel for your exports will depend on your product/service, the local conditions in the overseas market and the long-term cost-effectiveness and returns from each option.
There are several different distribution options:
• Indirect exporting involves relying on a third party within Australia, and isn’t necessarily the result of a planned export approach. Examples of this type of arrangement include overseas buyers visiting Australia, selling to Australian-based trading houses or intermediaries, subcontracting products/services for an offshore project and appointing an Australian-based consultant or commission agent.
• A distributor is a company or other entity, usually based in your export market, that buys your goods and sells them to the local market. Distributors are also responsible for marketing products, which can have a significant impact on your export sales.
• A representative agent is a sales agent, based in the export market, to sell one or more related products. They are paid by commission and usually organise the warranty and product service. Agents may work exclusively for your company, or on a non-exclusive basis.
• Manufacturing under licence (MUL) is an agreement in which an exporter licenses its intellectual property to an overseas company, who then manufactures the goods or delivers the services as if they were their own, for a set fee or royalty.
• Franchising involves an Australian franchisor entering an agreement with a franchisee overseas to use a developed business package.
• Joint venture is a joint ownership arrangement between you and an entity overseas in which the partners’ shares can vary from 50-50 to a combination in which one partner is virtually a silent participant.
• Direct exporting involves selling your products/services directly into the export market and dealing directly with your customers from an Australian base.
• One hundred percent offshore ownership can involve either establishing an overseas branch office or making a greenfield investment. A greenfield investment implies setting up a business from scratch and requires the exporter to establish all the infrastructure necessary to operate the business.
Bear in mind that you can use a combination of distribution options, even within one country. A strong distribution strategy will encompass several alternatives in the one market. This will ensure short-term, low-risk cash flow is available for longer-term growth.
Your export success will be largely determined by the market strength of your competitors, as well as your point of difference.
In assessing the market strength of your competition, ask yourself how many direct competitors there are for your product or service; who are these competitors, how big are they and what is their market share; are there alternative products or services competing with yours; and are there barriers to entry, which will impact on your success?
Then, to determine point of difference, ask yourself what are the benefits offered to customers by your competitors; how well do your competitors meet the needs of customers and to what extent are customers currently satisfied; and do you currently understand customer buying patterns which may impact on your success?
Once you’ve answered these questions, you can deal with the outcomes by undertaking a competitive SWOT analysis. Through brainstorming with management and key staff, analyse your business’s strengths, weaknesses, opportunities and threats, and compare them with those of your competitors.
While doing this, also think of how your company appears in the eyes of your export customers, compared with your competitors.
After identifying the five Cs and establishing your export objectives, you will be able to incorporate these into an export statement. This will explain why you intend to export, how you will go about it, and what you hope to achieve.
Your statement should be between one and three pages long and briefly cover the company’s export objectives, the key reasons for exporting, what you are planning to export, target country and future target countries, target customers, competitors and your competitive advantages, and your initial distribution intentions.
As you continue through the export process you will continually refine both your export objectives and your corporate profile, and amend your export statement accordingly. Your export statement will become a critical part of your export plan.