Entering into Export Trade

A Hot Tip about Imports/Exports in Canada

Posted on: 25 Jul 2012

Some Useful Tips before Entering into Export Trade

Some Useful Tips before Entering into Export Trade STRATEGY AND PREPARATION FOR EXPORT MARKETING When a enterprise decides to enter into export, It is necessary to formulate an export strategy. Strategy formulation is the core of any business activity. It tells the exporting firm where it is going and how it should get there. Marketing strategy is often defined as the selection of a target market and the determination of the product price, promotion and distribution policies that the enterprise must implement. A company strategy is in effect a blueprint for competing on target export markets. An explicit export strategy provides a unified sense of purpose to which the staff of the enterprise can relate. To implement a strategy, an Export Marketing Plan is required. Export Marketing Plan An Export Marketing plan is a step-by-step guide to strategy implementation. It addresses strategic issues and outlines the corresponding operational actions to be taken. It specifies target dates and provides detailed budgets for each step. The plan should answer all questions on how the company's export strategy is to be implemented and direct the enterprise in attaining the strategic objective. A company's marketing plan and its export strategy are therefore closely interrelated. As the various steps in the plan are put into action, interaction between the two should be continuous. The development of an export marketing plan requires decisions on the role that exporting is to play in the company's growth, the scope and nature of the firm's product lines and markets abroad, precise export performance goals and the level of management commitment to the export venture. A plan is only as good as the quality of the basic data gathered and the analysis undertaken during the planning process. It is important to obtain the participation of all levels of management in this process and to impress upon them that, to succeed, company-wide commitment to export goals is essential. A typical export marketing plan must focuses on marketing objectives, market segmentation and positioning, market research, characteristics of the product line, export printing, distribution channels and promotional strategies. The plan should outline the actions required in sufficient detail: It should set out export targets, budgets and activity schedules as well as assign responsibilities for its implementation. Marketing Objectives The first step in designing an effective export-marketing plan is to establish export- marketing objectives. These objectives, which should be attainable, realistic and clear, should be communicated throughout the company. Since they will determine the Company's direction and its activities, management will have to devote considerable time and effort to setting them. An analysis of the company's strengths, weaknesses, opportunities and threats, or a "SWOT" analysis in short, can provide a guide to management for developing effective and realistic objectives. A SWOT analysis aims to reveal the competitive advantages of the company as well as to analyze its prospects for sales and profitability. It is usually based on a evaluation of facts and assumptions about the Company and on market research. A company's strengths are its competitive advantages that will give it an edge on export markets. Its weakness is its' constraints, which may inhibit marketing activities in certain directions. For example, a company lacking readily available funds cannot undertake a large-scale promotional campaign. The assessment of a company's strengths and weaknesses in relation to the competition is essential for competitive positioning. This assessment from the point of view of the competition should consider: • Technology in use • Design, styling and trademarks • Product quality, quality control and the product's life cycle • Completeness of the product line • Customer service • Raw material supplies • Distribution structure and cost The review of opportunities and threats in the market should compliment the analysis of the company's strengths and weaknesses. The aim is to identify the best business opportunities and directions of growth. A company's opportunities on possible markets can be evaluated in terms of the firm's export customers, competing suppliers. Such an evaluation may reveal complementarily between the company's strengths and market opportunities. Finally, management should examine the so-called marketing threats on the markets being considered. These should include import rules and regulations relating to tariffs, quotas, non-tariff measures and so on. Management should also determine whether the markets under assessment are mature markets that is are already well supplied and do not therefore provide a readily identifiable niche for the company's products. Market Segmentation An export-marketing plan is not complete until the company has identified its target segment in the export market. Any large market has a variety of market segments that differ substantially. Different consumer groups exist according to income level, age, lifestyle, occupation and education. A crucial element of the export-marketing plan is to identify the segment that the company intends to reach. In making this choice, the company should answer the following questions: • Who will buy its products in the export market? • Why will they buy these products? • Where are these customers located? • What are their characteristics? In this exercise it will be helpful to concentrate on within-segment similarities and between segment differences. The company should choose the segment with the requirements that fit its product specification best. For example, if it produces high-quality premium priced crystal ware, its target segment is likely to be high-income, well educated young consumers. A target market segment should be large enough to be profitable. An assessment of the size of the segment should therefore be made before a final decision is taken to include it in the marketing plan. Market Research To succeed in exporting, a company must identify attractive export markets and estimate the export potential for its products in them as accurately as possible. Market research and forecasting are there fore of great importance. Factors to be evaluated include the size of the market the characteristics of demand in it, consumer requirements, trade channels, and the cultural and social differences that may affect the company's way of doing business with the market. A small producer contemplating entering export trade may not be willing or able to allocate resources to expensive data collection methods. Companies in that situation can use published data to assess the market or take assistance of professional international marketing companies. Product Characteristic The company should next consider the product that it has to offer. An analysis should be made of any modifications required in the products, packaging changes needed, labeling requirements, brand name and after-sales services expected. Many products must undergo significant modifications if they are to satisfy customer and market requirements abroad. Other products require changes, at the discretion of the producer only to enhance their appeal on export markets. Export Pricing In setting an export price, the company should consider additional costs that do not enter into pricing for the domestic market. These include such items as international freight and insurance charges, product adaptation costs, import duties, commissions for import agents and foreign exchange risk coverage. Export pricing analysis should begin with these questions: • What value does the target market segment' place on the company product? • How do differences in this product add to, or detract from, its market value? In practice; these are difficult questions to research but analyzing the prices and product characteristics of existing competitive products may reveal critical information. The analysis may show that it is not the cost of materials that determines the product's value, but rather the customer's perception of that value. Distribution Channels A potential exporter should consider the following distribution options: Exporting through domestic exporting firm that will take over full responsibility for finding sales outlets abroad. • Setting up its own export organization • Selling through representatives abroad. • Using warehouses abroad. • Establishing a wholly owned sale subsidiary The choice of distribution channel will depend on the company's export strategy, financial resources and the export market. If the company intends, to export a product that has a specific feature that should be a good selling point to a market segment that is already well supplied, it may need to create greater awareness of product through an appropriate promotional strategy. In this case it may be better to appoint an agent who does not handle many products and can allocate the time needed to promote that product. Distribution channels should be chosen well and efforts should be made to maintain good relations between the parties concerned. Promotion The export marketing plan should provide details on the following aspects of the promotional strategy: publicity methods; advertising (who will be responsible for it and how much the company can allocate to it) trade mission; buyers' visits; other promotional activities (which methods to use, how much to allocate); and assistance from consultants/professionals, etc., An export effort will be successful to the extent that the company provides effective customer support. An exporter should remember that even the best product might fail without company support to trade intermediaries and the end-user. In addition, customer support creates good will and loyalty to the exporter. Budget and Timetable A budget must be established for the export-marketing plan. This should cover such basic aspects as sources of financing, use of the financial resources and a forecast of the export venture's financial position after three to five years. A detailed timetable of activities must also be drawn up. A Working Document An export-marketing plan should not be considered as a final piece of work to be filed away and forgotten. It is a dynamic working document that should be constantly reviewed and revised as the company acquires more experience data and feedback from the export market. Constant attention to export planning is more important than the plan document itself. Lessons to be learned from actual cases. From series of export marketing case studies of companies in developing countries using experiences of real firms. Certain Key lessons emerge from those cases that may be useful to export companies in other developing countries in preparing their export marketing strategies and plans • No enterprises should seek entry into the international market until it is ready. Any attempt at exporting without experience in domestic marketing is bound to fail. Enterprises can gain important marketing skills, knowledge and confidence at home, which often prove beneficial in the export market as well. • Exporting requires technical expertise, in addition to careful planning and suitable products. Managers sometimes under estimate the complexity of exporting tasks, the risks involved and the consequences of failure. A realistic understanding of the commitment required to succeed in an export venture is essential. • Exporters should know why they want to export and set their goals at the outset. Hopefully the export venture will contribute to both their profit" seeking and market expansion objectives. • Planning and strategy development are essential. The long-term nature of export market development efforts, together with the risks assumed, necessitates a planned approach to exporting. To reduce uncertainty and risks, an exporter must set objectives, analyze strategic alternatives, formulate action plans, and allocate resources, set timetables and monitor performance. Without such a formal approach, an enterprise cannot sustain exporting on a profitable basis. • Exporters should choose their markets carefully. The selection of a market can make the difference between success and failure in exporting. • Exporters should study their market options and identify the ones that offer the best prospects, which they have a competitive advantage. • Exporters should adopt strategies that add value to their products. Product differentiation, branding, distinctive styling, durable packaging, outstanding customer service and so on can provide comparative advantages on the export market and therefore eliminate the need to compete solely on the basis of price. • Market "niching" may be the exporter's best option. Developing country exporters of manufactured products rarely occupy a dominant position of international markets. The exporter should therefore aim at a specific, well-defined opening in the market rather than the mass market. One advantage of this approach is that it does not require elaborate and expensive research before market entry; a simple study of potential customer groups maybe adequate. • Exporters should know the key buyers in the target market. Successful exporting often results from selecting a foreign partner with access to distribution, channels in the export market. This intermediary may be an importer, a broker, a trading company, a distributor or an agent. Forming a business alliance with a reputable partner who can channel export products to appropriate distribution points is one of the most important tasks in exporting. • Exporters should be creative. Many of the case studies suggest that developing country exporters sometimes have to carry out their business under conditions of considerable constraints. For instance, imported raw materials for export goods may be difficult to obtain, the flow of these supplies may be uncertain or the transport infrastructure may not be fully developed. • The responsibility for a company's export effort should be assigned to a key staff member. Experience shows that an export venture is more likely to succeed when this approach is taken. The person selected can play a combination of roles including resource person, organizer and motivator. • Exporters should consider export market development as a long-term investment. Learning export techniques requires time, as does becoming familiar with export markets. Business relationships also evolved and are strengthened over time. Sustained efforts are therefore essential in export marketing. HINTS FOR NEW EXPORTERS • Prepare for international marketing through business in the local market to Acquire the required technical expertise before venturing into exporting. • Know why the company should enter the export market and what its international marketing goals are. • Develop formal export marketing plans and strategies. • Choose export products and markets carefully • Adopt marketing strategies that add value to the company's products in the target market. • Find good sales agents/distributors in target market(s). • Price your products carefully. Don't load it too much. • Be creative in finding solutions to marketing bottlenecks. • Assign a key company officer to oversee export operations. • Look upon exporting as a long-term investment for the company. • Remember it is difficult to enter export business without adequate resources in men and material. • Take assistance of Professionals before entering into export. Happy Exporting!!! Article submitted by Shalishkumar International Business Coordinator World Trade Connections 2nd Floor, B-166, Shrenikpark, Opp. Akota Stadium, Productivity Road, VADODARA-390020 [GUJ] INDIA Tel: +91 265 2342148/2325355 Fax: +91 265 2342148 e-mail: wtcindia@gmail.com
Posted: 25 July 2012

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