EXPANDING THROUGH FOREIGN MARKETS

In our ninth series on starting your own business our attention turns to foreign markets and how to determine the best options for your business.

TOWARDS FAR HORIZONS...

Brian O’Kane explains how to expand your business internationally

There has been much talk in recent years about the strength of the Irish economy, how easy it is to set up a business and, generally, how wonderful it is to be an entrepreneur today. And although all of this true, Irish Entrepreneur readers will recognise that it’s not quite as simple as that.

Despite the growth in population that the 2006 Census will confirm, the Irish market for almost any product or service is so small that, if you want to grow a business of any significant scale, you need to look for markets and customers outside Ireland. Not only is this much more difficult than finding similar markets and customers within Ireland, but Irish companies tend (of necessity) to do this at a much earlier, and thus more vulnerable, stage of their development. Much is made of the US and other multi-nationals that bring foreign direct investment into Ireland – compare their size and strength against the typical first-time Irish exporting company! But enough of the difficulties! How to do it?

Steps In Exporting

In this article, I’m using exporting as a shorthand for all the many different ways of expanding your businesses outside Ireland, from selling direct to end-users in other countries, to servicing foreign customers’ needs through distributors or agents, to setting up a joint venture, branch office or subsidiary.

As always, I consider the WHY to be more important than the HOW. So, the first step is to look to your strategy. Why are you considering exporting or expanding outside Ireland? Clearly, in almost every case, the answer will be increased sales, but remember, increased sales, whether in Ireland or elsewhere, are not an end in themselves. Increased profits is a much better goal.

How specific are your plans? Are they an integral part of your business plan and strategy for the business? Or are they simply a reaction to an unexpected order or inquiry? Unless you have fully thought-through an export strategy, you are unlikely to succeed. There are just too many pitfalls to be able to skate over them all. The one thing that all the experts on exporting agree on is that exporting requires long-term commitment.

Then consider which products or services you want to export? Which countries do you want to export to, and in what order of priority? What are your target markets/segments within the market? All these questions go to the core of understanding your customer – the key to marketing. Often in Ireland, perhaps you can overlook these questions or make broad assumptions about the answers based on your own personal knowledge, but, outside Ireland, you need more information and hard facts. Have you done desk research on your potential export markets? Do you know about the size, makeup and strength of the economy, the way the market is structured, how to access it, the demographics, etc, etc? Have you actually visited the countries involved? Do you have sales experience in your proposed export markets? Do you have the language skills needed? If the answers to these questions is “No”, then you should be considering an agency or distributor arrangement to start with.

Then comes the nitty-gritty, which can make or break your export success. Have you organised your administration for foreign payments and customs or excise regulations? Are you familiar with and do you comply with the regulations relating to your products or services in your proposed export markets? Does your product or service need adjustment – for safety, environment, quality, packaging, taste, fashion, culture or language? Are your terms and conditions, contracts and quotes translated and adjusted to the requirements of your proposed export markets?

A key question is your prices, after calculation of the extra costs involved in exporting, are you still competitive? If not, stop now. Then look internally at your own operation. Who will be responsible for marketing and sales abroad? Is your organisation, from telephonist to after sales, ready and prepared for export and dealing internationally? Can your business cope with the demands of foreign markets - delivery times, transport and quantities? What are your turnover targets, per country, per market, per segment? Are these reasonable – high enough to justify your upfront investment, low enough to be achievable?

Choosing The Right Supplier

Next, you need to consider logistics and freight, as well as all the documentation that accompanies these. Choosing the right supplier here can save you time, hassle and money as they help you navigate. Better still, do it for you – the maze of Customs and import-related regulations in the countries you plan to sell to.

And payment of course is essential. There is no point in doing all this work, making your product, sending it off on the high seas to be received gratefully and enjoyed by happy customers, if you don’t get paid. Talk to your bank about export credit financing and insurance. It’s a specialist area and you need good advice. You also may need advice on intellectual property. A trademark on your product or service name may only apply in Ireland unless you registered a Community trademark. You may need to register locally in your planed export markets to protect your investment.

And, of course, you don’t even have to leave home in order to be involved in international selling, that’s what the Internet is for. An ecommerce-enabled website allows you to reach customers in countries where you might not yet have sufficient market to establish a physical presence. It’s a good strategy – research the demand for your product or service by responding initially to overseas customers’ orders placed on your website, then actively seek out more web customers in specific markets and test your offerings to them, and, finally, when you are ready and have planned your approach, market entry to your chosen target markets.