Deciding where and when to do business overseas is a big step for a growing company, so it’s important to get the groundwork right.
Taking your business to the next level can be difficult, particularly if it involves beginning to trade overseas. There are many factors to consider before taking your first steps into the international arena, so it’s important to tread carefully.
First of all, there are many emerging markets out there – which countries should you do business with? Richard Sainter, client development manager at Food from Britain (FFB), the international market development network which helps some 700 British food and drink companies each year to build their international business, says: “Current areas of focus for us as development markets are Central Europe and Russia, the Gulf States and Asia Pacific and we are currently exploring expanding our activities in India. However, the EU still remains the UK’s largest training partner: Ireland and France are our first and second largest export destinations respectively.”
Sainter said food and drink exports hit a record £10.5 billion in 2006. Last year’s figures are not fully compiled but look set to reach an even higher mark thanks to the reputation British food and drink manufacturers have for leading the world in convenience food, healthy ranges and own-brand products.
Perfect timing
Secondly, when is the right time for your business to begin trading overseas? Ciaran Crowley, marketing director of Directa (UK) Limited, a distributor of industrial products such as safety signs, tapes and adhesives, decided 18 months ago to expand the Essex-based business which employs 60 people. Following a strategic review that led the company to reassess its business model, it branched out from a catalogue-only supplier into a multi-channel sales operation.
When asked whether he would have done anything differently, Crowley advises: “Put checks in place for overseas customers. While the online sales channel opened up growth opportunities in new geographical areas, we got stung in the early days with a bad debt. We’re now more cautious about vetting overseas customers and we insist on being paid by bank draft.”
Gareth Williams, one of the three co-founders of flight search engine Skyscanner.net, was not fazed by setting up his web-based company during the dotcom bust in 2001 or by growing his business overseas.
“A recession may reduce demand, but four billion flight tickets being sold is such a big market that a slight downturn does not restrict us,” says Williams. “Our business was designed from the outset
to be international. As a web company, and because we show flights that cross borders, this was a natural approach for us.”
BEFORE TRADING ABROAD
Evaluate the business
Assess the options
Make sure you go for the right sort of growth at the right time
Perform a SWOT analysis:Strengths, Weaknesses, Opportunities, Threats
Implement the growth strategy
Be prepared
Williams believes the best route for global expansion is knowing your product. “If we become more popular than say, Expedia in the UK, we can be confident that we have a chance in other countries too. The web helps hugely here in lowering the barriers to competing for overseas visitors.” Points to consider include:
Research local product requirements – It is important to find out about customer preferences, standards and product regulations in different countries. You might even need to change the product’s appearance or design if it doesn’t fit in with certain customs or traditions. Sainter from FFB says: “Working in global markets requires a clear knowledge of the local culture, in addition to the essential knowledge of legal requirements governing labelling and ingredients. We have a network of local offices and associates that work with British companies to plan market-entry strategies and ongoing product management to ensure our products are correctly ‘translated’ for the relevant market.”
Be culturally aware and know local commercial practice – Making the assumption that overseas business people operate in the same way as in the UK could cause offence. For example some countries might see a written contract as a key part of an agreement, others might interpret a handshake as a done deal. If you go to Japan and exchange business cards with people, make sure you study the business card carefully before putting it in your pocket. If you don’t, you may be seen as being rude.
Investigate how products are marketed and sold – Identify major contacts with whom you need to build relationships, for instance customers or suppliers, agents, trade organisations and government departments. International business takes time and investment, and international customers have the same concerns as those in the home market: availability, flexibility and pricing.
Sainter advises: “Ensure you have the resources in place to make your international strategies work. FFB works closely with British food and drink companies to ensure that they have the capacity – both in terms of production and management resource – to grow their business overseas and ensure that international customers are given the same priority as home-based ones. The most successful exporters, in our experience, think of themselves as food exporting companies, not food manufacturers who export.”
Build relationships with UK organisations overseas – The British embassy in your target market is a good start as is that country’s embassy or other organisations in the UK. Consider taking consultancy advice if your budget will allow it.
The British Chamber of Commerce offers a review of how to deal with overseas communications and also makes practical recommendations for improvements.
Do the paperwork – Make sure you have a clear agreement that is internationally recognised and have effective transport arrangements, as logistical problems could create friction. Neil Refson, managing director of Exakt Precision Tools, a power tool manufacturer for the DIY and professional markets, says: “It is important to get your goods quality checked before they are shipped. If they are faulty when shipped you will have to wait for more goods to be shipped and send the others back. This means paying for the shipping three times and you risk letting customers down. The quality checker can either be your own employee or an agent. You also need to visit at least every few months, not just for quality control but to maintain relationships.”
Communicate regularly – Attending trade fairs and exhibitions is a good way of meeting new and existing customers. UK Trade & Investment has a Passport to Export programme that your business can participate in.