Numerous companies have increased profits by exporting their products and services abroad, by accessing lucrative markets beyond borders of their home countries. In many cases, exporting is the only way to achieve a profitable business by fully exploiting markets around the world. However, many companies wrongly assume that exporting their goods abroad will solve a slowdown in sales in their home market.
If managed properly, exporting can offer great business opportunities and turnover growth. Inadequate preparation and overnight decisions can ruin the whole business. Successful case studies are often backed by financial investments, human resources and detailed market studies. On the other hand, lack of local market knowledge, scarce financial, human and production resources will result in an international mission failure. The British Chambers of Commerce has revealed that more than two-thirds of companies are failing to export their goods abroad.
For example, in 2001 Sony exported their PlayStations with a market value of $162million to the Netherlands1. However, their lack of legislation knowledge resulted in disaster. Cables in their products contained 20 times more cadmium than was permitted. Replacing these cables and their safety validation cost Sony $110 million extra to enable these units to be sold in the Netherlands. This figure does not even account for lost sales.
Current situation for exporting is more challenging for both European and American companies. Slow down in Europe’s export growth suggests that popularity of European goods is slightly decreasing, which could be caused by high pricing and uncompetitive goods. A forecast recently released by OECD suggests that the Eurozone has already fallen into recession, which will also likely affect exports of US goods. US exports in Europe grew strongly in 2011, and accounted for 22% of total American goods exports2. Challenging situations require exporting companies to pay even more attention to preparation in order to secure a successful mission.
So how should one avoid an international mission failure? You need to consider all key success factors including:
- financial requirements,
- production capacity requirements (unsatisfied demand equals lost customers),
- human resources,
- legal issues (taxes, IP, CE, REACH certification…),
- logistics issues (the most efficient, financially convenient and reliable transportation),
- the right choice of reliable and trustworthy distributors and business partners (wrong distributor can ruin your brand image, or steal your customers),
- overcoming cultural differences and language barriers.
It is crucial to conduct a market study to find out if your market is not already saturated, if it offers multiple opportunities, which commerce channels are the most common ones, and who are your competitors. Keep in mind that big markets such as the EU are often diversified. As an example, the demand for your product can be zero in Italy, while very high in Germany.
There are many issues to consider and manage when planning to export goods and services. You either have to create a dedicated team that will carry out all of these tasks, or use the services of a consultant company specialized in international business that already possesses experience, knowledge, tools and resources you need to understand your targeted market/sector. The second option (that a lot of experienced and well-educated business leaders, researches, and professors recommend) might appear more costly from the beginning, but has a higher success rate and will save you more money in the long run by earning larger profits and doing the right decisions.
Data sources:
1) http://www.bomcheck.net/reach/reach-article-67-substance-restrictions
2) http://www.esa.doc.gov/Blog/2011/12/09/economic-indicator-foreign-trade-european-economy-and-us-exports-seasonally-adjusted