Evaluating Your Export Potential
Published on 26th February 2019
Exporting: What's in it for you?
In developed countries exports and imports consistently account for a considerable amount of the country's gross domestic product (GDP). As the liberalization of global commerce continues, more and more companies are joining the international market every year.
Why would a company that's already doing well at home might consider becoming an exporter? There are several good reasons, including:
- Increased sales – if domestic sales are good, exporting is a way to expand your market, find foreign niche markets and take advantage of demand around the world.
- Higher profits – if you can cover fixed costs through domestic operations or other types of financing, your export profits can grow very quickly.
- Economies of scale – when you have a larger market base, you can produce on a scale that lets you make the most of your resources.
- Reduced vulnerability – if you diversify into international markets, you avoid depending on a single marketplace and suffering from a domestic downturn.
- New knowledge and experience – the global marketplace abounds with new ideas, approaches and marketing techniques that could also prove successful at home.
- Global competitiveness – the experience your company gains internationally will help keep you competitive in the global marketplace, and locally.
- Domestic competitiveness – if your company succeeds in the global marketplace, it will ensure your resilience when faced with foreign competition at home.
Exporting has many challenges, but you can surmount them through careful preparation and planning. Among these challenges are:
- Increased costs: you may have to modify packaging, or your products or services, and account for short-term costs such as extra travel, production of new marketing materials and additional staff to adapt to markets abroad.
- Level of commitment: it takes time, willingness, effort and resources to establish and maintain yourself in foreign markets.
- Staying in for the long haul: while exporting holds great economic promise for most companies, months or even several years can pass before you see a significant return on your export investment.
- Language and cultural differences: familiarize yourself with the differences in language, culture and business practices so you don't inadvertently offend your potential customer and lose a sale.
- Paperwork: there's no way around it, foreign governments require a lot of documentation from exporters of products and services.
- Accessibility: you have to be easily available to your foreign clients.
- Competition: you must be sure you're thoroughly familiar with the competition in your target market.
Source: Adapted from the Forum for International Trade Training, Going Global.
Are you ready?
An export-ready business is one that has the capacity, resources and management to deliver a marketable product or service on a global scale at a competitive price. The trick is to determine whether this is true of your company – and if it isn't, how to make it happen.
Your first step is to think about the resources and knowledge your business already has. Consider the following as a starting point.
a) Your expectations – do you have:
- Clear and achievable export objectives
- A realistic idea of what exporting entails and the timelines for results
- An openness to new ways of doing business
- An understanding of what is required to succeed in the international marketplace
b) HR requirements – do you have:
- The capacity to handle the extra demand associated with exporting
- Senior management committed to exporting
- Efficient ways of responding quickly to customer inquiries
- Personnel with culturally-sensitive marketing skills
- Ways of dealing with language barriers
c) Financial and legal resources. Can you:
- Obtain enough capital or lines of credit to produce the product or service
- Find ways to reduce the financial risks of international trade
- Find people to advise you on the legal and tax implications of exporting
- Deal effectively with different monetary systems and ensure protection of your intellectual property
d) Competitiveness. Do you have:
- A product or service that is potentially viable in your target market
- Resources to do market research on the exportability of your product or service
- Proven, sophisticated market-entry methods
e) Export Myth - I'm too small to be an exporter
No, you're not! To succeed in international markets, you don't have to be a big firm. Tens of thousands of small and medium-sized companies – with foreign sales of between $30,000 and $5 million – are currently exporting and are doing very well.
1.3 Evaluating your export potential
Can your product or service find a worthwhile market outside your country?
Answering this question is crucial. If there's no demand for what you're offering, it would be unwise to proceed.
Tip: Special events like seminars and business breakfasts can be excellent opportunities to profit from other people's experience with exporting.
Below are some considerations to take into account when analyzing the export potential of your products/goods or services.
- Who already uses your product or service?
- Is your product or service in broad general use or limited to a particular group?
- Is your product or service popular with a certain age group?
- Are there other significant demographic patterns to its use?
- What climatic or geographic factors affect the use of your product or service?
- Are modifications required to make your product appeal to foreign customers?
- What is the shelf life of your product? Will this be reduced by time in transit?
- Can the packaging be easily modified to satisfy the demands of foreign customers?
- Is special documentation required? Does your product have to meet any technical or regulatory requirements?
- How easily can your product be transported?
- Would transportation costs make competitive pricing a problem?
- Do you require a local representative for marketing efforts?
- Do products require professional assembly or other technical skills?
- Is after-sales service needed? If so, is it available locally or do you have to provide it? Do you have the resources to do this?
- Will you be able to serve both your existing domestic customers and your new foreign clients?
- If your domestic demand increases, will you still be able to look after your export customers and vice versa?
Export Quiz: Are you ready?
Is your business ready to start exporting? Take the quiz, check your score and be sure.
1. Is your management committed to sustaining your export effort?
2. Does your management have international business experience?
3. Have you undertaken any foreign market research?
4. Do you have the surplus production capacity or available specialists to meet increased demand for your product or service?
5. Do you have the financing required to adapt your product or service to suit your target market and to promote it?
6. Does your firm have a good track record of meeting deadlines?
7. Does your product or service have a distinct competitive advantage (quality, price, uniqueness, innovation) over your competition in your target market?
8. Have you adapted your packaging (labelling and/or promotional materials) for your target market?
9. Do you have the capacity and resources to provide after-sales support and service in your target market?
10. Is your promotional material available in the language of your target markets? (Business cards, brochures, websites)
11. Have you started marketing your product or service in your target market?
12. Have you engaged the services of a sales representative/distributor/agent, or partnered with a local firm?
13. Have you hired a freight forwarder or customs broker?
14. Do you have a Free on Board (FOB) or Cost, Insurance and Freight (CIF) price list for your product, or a rate list for your service?
15. Have you checked if you can sell or use the technology and trade name associated with your product in your target markets without infringing on existing intellectual property (IP) rights?
How did you score?
Export Promotion Organizations and Consultants can help you prepare for international markets and assess the market potential of your product/goods or service.
Courtesy: Africa trade portal