For those who are looking to foreign markets for the first time or have only sporadically exported, there are many questions that may arise when deciding to take action with a systematic development program. A development abroad enters the company strategy. But where to start? And especially, how? A correct approach is to anticipate the action with business analysis and a planning job, divided into two phases:
- Check-up phase, which aims essentially to make, on the one hand, a snapshot of the current state of the company and its available resources, and on the other, an assessment of the currently used management tools;
- Strategy phase, aimed at defining the targeted market, assessing the logistics and certification process, in order to be able to draft the market entry strategy and the subsequent policy to manage the international clientele.
However, before to take into account an international development project and therefore to pass to the content of the following action plan, the entrepreneur should be fully aware that such program entails costs and investments, always occurring even if more or less heavy on the basis of the strategy eventually adopted. To avoid to leave unprepared in taking such a step.
GROWTH ABROAD MEANS TO INVEST, FIRST OF ALL
The entrepreneur who thinks that a foreign buyer simply engages with a company and makes an order is operating under a myth. If it is difficult to sell in the domestic market, it is even more so in the foreign market, at least initially. An outward looking company must overcome many obstacles and be able to adapt to the needs of international clients before getting results.
The company that sees foreign markets as a quick fix to its liquidity problems may put its financial equilibrium at risk. Depending on the strategy adopted (see Sales Approach under Strategy Phase), starting with an export or internationalization project entails many expenses (travel, demonstrations, sampling, meetings and invitations, adaptation of sales tools and / or product, etc.) before reaching goals, which can yield high returns if done correctly.
CHECK UP PHASE
Based on the experience gained over many years of action in the international markets, the following table lists the themes to be addressed in order to assess the preparation of the company in moving internationally. The various topics can be used as a useful list during an internal audit process.
| PRODUCT | MATCHING (Composition, Design, Packaging, Label): preliminary verification of the overall adequacy of the product in terms of quality, features, and its packaging and label design. This analysis will be completed once the strategy and the targeted market have been established (next step). SAMPLES: preparation to manage the samples of the product, where applicable. It’s possible to create a “demo” version? And take special care of packaging and packaging of these samples? What documents or specific authorizations are required to ship them? It is also useful to take action right away to define the best convenient way to deliver these products requested by the international partners. |
| ACCESSORIES | GUIDE / MANUAL: start with the translation of guides and manuals, such as operating instructions, answers to the most frequently asked questions, or provide a product with video tutorials |
| MARKETING | CONTENTS (Core-products, Clarity, Message, Media, Translation): analysis, preparation or adaptation to all current employed promotional material, making sure to highlight the history and distinctive products of the company. Use concise texts (leveraging as well info-graphic presentations) and messages focused to each commercial target (more targets often require differently fine-tuned presentations, delegating this task to external professional copywriters). It is wise afterwards to consider all means in use in the international communication: website, landing pages, brochures, catalogs, videos, etc. Finally yet importantly, do not forget the local language, (well) translated texts add significant value to the sales action. DESIGN: care of the design of the materials the communication tools that will be used: also paying attention to the cultural variable, in the use of names, images, messages. The design must meet the taste of the international target: captivating, in line with the prevailing aesthetic sense in the foreign market and with the expectations of local customers. PRICE LISTS: simple, simple, simple. The price lists must be easy to read and not differentiated by channel, but by quantity. It is needless to draw up the retail price list, the distributor price list, etc. Price multiplication blurs communication and later the management of the customer base. Better to have unique prices with progressive discounts based on ordered quantities. And make sure you have a perfect match between product prices listed on paper and online catalog. If the determination of the product price depends on the product customization (classic on products manufactured on demand), then it is useful to proceed with the elaboration of some concrete examples: it dramatically helps the buyers in their preliminary assessment of the company value proposition. Eventually, it is wise to indicate at least in terms of estimate, the prices CIF, including the shipment/customs additional costs, and not only ex-factory, drafting simulations upon different quantities. |
| TEAM | ALLOCATED HUMAN RESOURCES (Skills, Availability, Response time, Customer support): broad evaluation on the organization and management impact of the international project, according to the chosen sales plan which determine what part of its process is carried out by internal or outsourced activities (see Sales approach sub Strategy phase) .The impact must be assessed in all areas and functions of the company, and not only from the sales side: the incoming orders, as an example, have effects for example, in the manufacturing, financial and administrative departments. This analysis is not limited to the assessment of competences (managerial, technical, linguistic, etc) of the staff, but also to their availability: as a matter of fact, especially in the first stage (the care in the establishment of the relationship), the company should give full attention to potential international customers. This is even truer in the light of the communication barriers (the speed and accuracy of the responses are a critical element of the company reliability evaluation by potential foreign partners). This attention is then the key factor in consolidating the initial sales results: the customer support in the order, delivery and post-sale management phases, is critical to ensure export stability and to lay the foundations for its growth. |
STRATEGY PHASE
The assessment of the readiness of the company is followed by the phase of defining the final internationalization plan, in terms of target market, strategy and analysis of the operating factors to the execution and order management.
| TARGETED MARKET | MARKET CHOICE (Objective factors, Focus): the choice of the target market must derive from a careful analysis based on objective factors and not on occasional motivations. It is recurring the case of the company addressing its efforts to one specific market simply leveraging the presence of a personal contact, the experience of another entrepreneur, or the opinions randomly collected. A similar choice must start instead from the comparison of different markets on the basis of the following factors: – Economy (spending power, consumer trends, local customs, logistics convenience, standard payment terms) – Politics (customs barriers, government stability, legislative simplicity, intellectual property protection, judicial system, bilateral trade agreements) – Finance (currency trends, local banking system) The focus towards a market allows concentrating the company efforts, maximizing the invested resources and speeding the acquisition of knowledge and experience of the foreign market. |
| TIME FRAME | TIME AND GOALS (Horizon, Phases, Objectives): although many times strategy and action times may change in the face of opportunities or emerging obstacles, it is critical that the company define a timeframe goal for its plan. The breakdown of the project into phases is in fact very useful for the effective monitoring of the invested resources versus the achieved progressing results. |
| SALES APPROACH | ACTION APPROACH (Entry strategy, Sales Team): the company must decide what specific action to perform in order to introduce its products on the international market. There are many ways, and to name a few: participate in a trade show, join events of own trade association, leverage existing contacts and local relationships, seek assistance by local Chambers of Commerce, hire an international agency or consulting firm, etc.. In the assessment of the alternatives, the analysis should not be focused on the price competiveness of the options, being not necessarily the most effective parameter. Actually, it is necessary to interrelate either the time estimated to achieve the first results (and therefore the intensity of action), or its sunk costs (such as the effort and time invested by the entire organization). |
| POSITION IN THE VALUE CHAIN | MARKET GUARD (Channels, Agreements, Partnership): key element in the definition of the development strategy, the company must decide how much intends to get closer to customers (end users) of its products and thus mediate its offer. The use of sales intermediaries entails a number of advantages, such as shortening the time of the internationalization process, the reduction of direct investments, and the simplification of the trade relations. However, it endorses altogether its disadvantages, such as a weak presence in the market or the lack of any advertising of its brand (see The Choice of a Supply Chain in an Export Project). In relation to the targeted channel, and therefore its underlying trade agreement, care must be followed in setting up the agreement (regarding clauses such exclusive, breaching clauses, brand rights, etc.). With the genuine spirit to promote a full cooperation and trust between the parties, critical to establish a long-term commercial relationship. |
| CERTIFICATIONS | CERTIFICATION (Kinds, Agencies): An analysis of the necessary certifications enabling the export or the international development of the company is perhaps one of the most sensitive issues. This investigation is crucial to the success of the project, and must be extended to the understanding of the certificates characteristics (duration, nominee, voluntary, etc.). If the company is not easily able to apply directly, care should be taken to select the agencies that can assist the process, comparing their references, expertise, estimated time and cost. |
| LOGISTICS | LOGISTICS ANALYSIS (Solutions, Composition, Revision): the logistics analysis is another key factor in the evaluation of the company competitiveness, validating the sales potential of the chosen country. The company might assess possible shipment alternatives, identifying players who can centralize all stages (possibly including the customs), comparing the logistic quotations in all their components. With the wisdom to carry out a periodic update of the assessment, in order to check the market conditions of the current employed logistics solutions. |
| PAYMENT | FINANCIAL TRANSACTION (Terms, Tools, Guarantees): it is a good initiative to seek immediately information on standard commercial conditions currently adopted in a foreign market (within the sector or target channel). This practice prevent the company from starting lengthy negotiations on price, quantity and all terms of the agreement and then to understand at last that the payment terms are not acceptable or involve excessive risks. In fact there are tools or policies that allow the businesses to get closer or solve their gap on trade credit terms: letters of credit (although often complex and expensive), public or private insurance, advanced payments covering the industrial costs of the seller, etc. Therefore, it is better to discuss in early stage all these terms to grant time to the company to study possible financial or commercial solutions. |
| POST-SALE ASSISTANCE | POST SALES ACTIVITIES (Documentation, Training, Maintenance, Product warranties): a company facing the foreign markets has to be aware of the commitment following the sale of a product or service. For example, to manage the new customers providing full start-up support (with training sessions and useful documentation, such as manuals or tutorials), maintenance assistance or product warranty policies (activities usually delegated to local partners), etc. These associated costs must be considered well in advance while drafting the initial pricing and terms of service to be inserted in the distribution contracts. |
| PERFORMANCE AUDIT | PERFORMANCE EVALUATION: in dealing with the foreign market, the company must not only try to achieve results, but we can measure the progress of its action on the market. In other words, to foresee communication tools and processes enabling the company to get feedback from customers. Through a constant flow of information, in fact, the managers are able to improve the offer and to anticipate new customer needs (see point Positioning in the value chain). |
