If you are serious about exporting, it’s important to take the right steps in the right order. It beginswith research, develops into a plan, and gets off the ground with help from various sources. Charisse Gray considers the crucial steps and looks at the help on offer.
If you’re preparing to enter the export arena for the first time there are certain strategies you must undertake to improve your chances of success.
The processes involved in getting into export can prove costly in terms of time, money, and resources so thorough preparation for entering the overseas market is essential, as rushed decisions and arrangements can be expensive mistakes.
Ian Bennett, TradeStart manager at Australian Business Limited (ABL), says the five most common mistakes businesses make when entering the overseas trade market are: failure to obtain professional advice; inability to balance domestic and export markets; assumption that all markets are the same; lack of follow-up service/support; and lack of commitment from top management. An unwillingness to modify products to meet regulations or cultural preferences of other countries is another mistake to avoid.
Planning is crucial; you must be absolutely sure your company is capable and ready to export, with the production capacity to meet the demand from new markets and sustain an offshore trade program. Can you expand this capacity quickly if and when you need to, and deliver on time?
You must be sure this is the right time to export, and have total commitment from the boardroom to the shop floor. Is your personnel able to service export markets? Good customer service is critical in the highly competitive international marketplace. You must be able to service a customer’s needs quickly and efficiently.
You and your staff may need to travel overseas. Face-to-face meetings are often necessary not only in establishing business but also in maintaining relationships. Can you and your staff afford to be out of your office for an extended period of time?
You need to have sound marketing knowledge to be able to develop a product overseas, and your marketing plan may need to be altered to take into account different cultures and customs. Do you or your staff have a reasonable command of the language required? Don’t assume English works everywhere.
The majority of successful exporters have already developed their market in Australia before going offshore. When choosing a market you should have a market entry strategy. Research is absolutely essential. Any move into offshore markets must initially involve a thorough analysis of the chosen offshore market, incorporating the size, distribution capabilities, and competition for your particular goods or services in that country.
Points of Difference
"You must consider carefully and be able to explain clearly why you think your product or service can be successfully exported: what makes it different; what makes it competitive; and what needs or functions does it serve? It is important to have a unique selling proposition," Bennett explains. "Don’t ever consider exporting products that are produced successfully in every country, no matter how solid your domestic sales are."
He also recommends designing a model of who you would like as your business partner and representative in your selected overseas market. "Look no further than your own backyard," he says, "for successful examples."
True ‘beginners’ are advised to investigate markets like New Zealand, Singapore, and the Pacific Islands. These countries are English-speaking, have very similar legal and financial structures, share similar time zones and are relatively small markets, with populations under four million.
Identify whether your company has the financial ability to commit to developing a new overseas market. Breaking into any new export area requires considerable funds for a variety of expenses. These financial burdens can be translated into real business risks. Discuss your proposed export plans with your financial institution’s international department.
Bennett says expenses can fall into a diverse range of areas such as market research, research and development, airfares, accommodation, car hire, visas, advertising, sales promotion, new brochures, training overseas sales agents, setting up joint servicing offices, exhibition costs, translators and insurance.
Costs will relate to how far you want to drill down into a market. For instance, you may need to consider costs involved with government regulations, import barriers, competitive analysis, and supply chains.
Other financial considerations can include the margin structures around wholesaler/distributor/retailer arrangements; and the possibility that you may need to upgrade your production capabilities to cope with international growth.
Talk to your bank about international payment methods and become familiar with international trade terminology. You will also need to develop an international price list in order to develop appropriate and competitive pricing. Bennett also suggests talking to your accountant about marginal costing and what tax concessions are available.
The international growth specialists at ABL recommend doing your research carefully and assessing each country wisely. The country you finally choose will affect your future profitability. Factors you must take into account include import duties on the product; local taxes, such as sales tax; frequency and cost of shipping or airfreight; foreign market regulations, such as quarantine and labelling standards; consumer protection rules; product standards; and current selling prices.
For exporters, an equally important consideration will be how compatible, easy and legally fair the country will be to work with.
Your market research should also identify who your potential agents, distributors or partners are. Try putting together profiles of your main competitors so you know who and what you are up against. "When you have a country in mind, read up on its economic and social profile, so you have a good feel for the marketplace," Bennett adds. "And if you can visit the country and study its special characteristics, examine the opportunities and identify the competition first hand, do so."
This will also help you decide which methods of selling and distribution to use: whether to sell through a distributor, your own foreign office or a joint venture. This is an important consideration because it determines the risks you take and the amount of investment you expose yourself to.
A critical tool, your exporting plan draws together your findings related to the analysis of export opportunities, the determination of your export capability, your market research, target market decision and strategy development.
This working document plan will help you focus activities to ensure you achieve defined objectives. A well-prepared export plan is the formal record of this business growth process and may also assist in getting finance from your bank if this proves necessary.
* Charisse Gray is senior business writer for Australian Business Limited, phone 132 696 or visit www.australianbusiness.com.au
Don’t Go It Alone
Organisations such as Austrade (www.austrade.gov.au) and ABL (www.australianbusiness.com.au) provide comprehensive advice, information and programs for first time Australian exporters.
Further industry and sector-specific help is also available but any first time exporter should take full advantage of the New Exporter Development Program as well as the Export Market Development Grant (EMDG).
Austrade and TradeStart offer a package of free services designed to assist SMEs in developing their business overseas and make their first export sale. Their packages have been designed to give Australian business the best possible start to exporting via a range of free services incorporating advice and information on export development, coaching, review of export capability and evaluation of export r
eadiness, identification of suitable target markets, and guidance with international marketing strategies and business plans.
Once a market has been selected, services include briefings on local practice and business culture, appointments with appropriate business contacts, help with participation at international exhibitions and trade fairs, and assistance on the ground in foreign markets.
The EMDG is provided by the federal government to assist small and medium businesses with their export marketing and promotional costs. Up to $150.4 million is provided annually and it has been estimated that an additional $12 in exports is generated for every grant dollar.
To be eligible, a company must have maximum income for the grant year of no more than $30 million and pass a low-level grants entry test that determines a company’s exporting readiness. It’s a retrospective reimbursement program which refunds a company up to 50 percent of their export marketing and promotional costs, over $15,000. A company is eligible for up to seven grants, which don’t have to be consecutive, and this flexibility takes into account fluctuating conditions, like the SARS outbreak in South East Asia.
As more grants are paid, the reimbursement percentage falls but by the time a company is applying for its second last or last grant, they should be exporting very successfully.
Marketing and promotional costs, over the first $15,000, which can be claimed via the EMDG include overseas representative and marketing consultant expenses, marketing visit costs (airfares and an overseas visit daily allowance), production of printed and online promotional material, communication expenses, and costs for bringing overseas buyers and clients to Australia.
Tradex is a scheme that provides relief to people or organisations via an up-front exemption from customs duty and GST on imported goods intended for re-export or to be used as inputs to exports. For more information on the scheme visit www.ausindustry.gov.au and go to the A to Z index.
Export Concessions—Duty Drawback: this is designed to assist exporters to obtain a refund of customs duty paid on imported goods that are subsequently exported.
Export Market Development Grant: you may be eligible to be reimbursed for some expenses incurred in promoting your export.
New Exporter Development Program (NEDP): a package of free services, through Austrade and TradeStart, designed to help you develop your businesses overseas.
Export Finance and Insurance Corporation (EFIC): as an export credit agency, EFIC provides a number of products and services specifically for SMEs including their latest, EFIC Headway. For more information check the EFIC website (www.efic.gov.au) or call 1800 887 588.
State and territory governments also have financial assistance schemes for exporters.