Export market entry stratergy!

Each target market needs it’s own market entry strategy. Foreign markets can differ in many ways -- in income levels, standards, climates, sizes of people and space, language, religion, cultural preferences and taboos, business practices, etc. Without a “market-conducive” entry strategy, you will not be able to use the full market potential; or worse, you could make costly mistakes.

The biggest mistake than many exporters make, is to assume that all markets can be approached in the same way. DO NOT, make this mistake!

In its simplest form, market entry plan should address 4 key points:

Distribution
Promotion
Pricing
Localization

Distribution Strategy

The main options you have for product distribution are, are to:

Sell directly to end users in the market
Sell through agents or distributors in the market
Hire overseas sales staff to cover the market
Establish overseas sales offices in the market
Establish overseas joint ventures or subsidiaries

The right approach depends on how much control you want over the process, the expected volume of sales, the openness of the market, and what is customary in each market.

Most exporting is done through “local agents” or “distributors”, or “directly”.

Overseas sales offices, joint ventures and subsidiaries are last-resort options. When the volume being exported is high then such methods are used. Only with such high volumes, can the high cost of setting up the “sales offices” be reasonable.

Joint ventures and subsidiaries may also become necessary if imports are subject to 'prohibitive import duties' or other restrictions.

Here we have talked about “local agents & distributors”, or “direct selling” since this is the method that will be used to most of our readers.

Selling through overseas agents and distributors

Exporting through local agents or distributors is the norm in most countries and also the most effective. As market "insiders," they speak the language, understand how business is done, and know who the customers are and how to reach them. The end-users generally prefer to deal with local agents and distributors, rather than buy direct from foreign suppliers.

Overseas “agents” act as your representatives in the market. They develop and send sales orders, arrange payment, prepare all required import documents, and clear the goods through customs. They normally work on a commission basis and don't take title to the goods.

Overseas “distributors”, in addition to representation functions, generally purchase the goods and resell them at a profit. Many are equipped to stock, install and service the goods. In large, developed markets, agents and distributors often specialize by industry. In smaller, less developed markets, they're more likely to carry many different types of products.

Selling direct to foreign end users

Direct selling avoids intermediary costs and offers more control over price, service and level of effort. It is an option in markets with “only a few buyers”, or when you or the end users can “easily find each other”.

Direct selling is particularly used for mail order sales and now for Web-based Business-to-Consumer (B2C) and Business-to-Business (B2B) trade. An intermediary is not needed in these situations.

Promotion Strategy

You will need some promotion in target markets to make your products known. The options abroad are generally the same as domestically – a Company Webpage, direct mail (regular or e-mail), telemarketing, press releases, paid ads, trade shows, and sales trips. Most countries have adequate media and can support any of these methods. However, some techniques may work better than others in particular markets. Costs could also affect the approach.

Certain promotions clearly cost more if done from India, such as direct regular mail, telemarketing, and business travel. If you want to promote using these techniques, let the overseas rep., distributor or agent.

Pricing Strategy

Ideally, the price at which you sell in the export markets, should cover all costs, be competitive, attract buyers, and still make a profit! The "optimum" price in one market may not work in other markets.

Whatever the market, price planning must start with the “product’s baseline unit costs”. Pricing below cost is economically unwise.

Calculating baseline export costs

Baseline export costs include:

Fixed costs to produce the product
Variable costs to market and deliver the product abroad.

Variable export costs might include any or all of the following:

Market Research
Postage
Overseas phone/fax calls
Promotion
Travel
Translations
Consultant/legal fees
Export documentation
Any special packaging, labeling, freight forwarding fees
Transportation to destination
Cargo insurance
Agent/distributor commissions
Training
Warehousing
Product warranties
Service contracts
Banking fees
Credit insurance or credit carrying costs.

Determining what the market will bear

Once you determine your baseline costs, your price above that can be whatever the market will accept. This generally depends upon the market demand, ability to pay, the competition, and your product's particular attributes (new or unique, superior quality, brand recognition).

Price flexibility is important. You might go for volume discounts or “low introductory pricing” to gain a foothold in the market. You might also offer delayed payments or credits. These concessions, of course, will lower your profit margins, at least in the short run.

Localization Strategy

Most countries have different languages, cultural values, tastes, business practices, income levels, environmental conditions, product standards, legal requirements, etc.

These all have important sales implications. To be successful in different markets you need to "localize" your approach.

For example, sales won't do well if:

The product is incompatible with local health, electrical and technical standards.
The product is unaffordable for buyers.
The product needs added protections against abnormal climates, pestilence, pollutants, etc.
The product requires downsizing to fit smaller people, homes, streets, etc.
The product or packaging uses colors, shapes, words or symbols that offend or appear foolish to target customers.
The sales literature and user manuals need translation to be understood.

Increase Market Exposure Abroad

If you're not already known abroad, you'll need to promote your company and products. Overseas promotion is a must. You won't sell much if the buyers don't know who you are. Generally, the more you promote, the greater the impact. You can best increase your overseas market exposure through a combination of “broadcast” and “targeted” techniques.

Here are some broadcast techniques worth a try:

Company Web site:
Your own company Web site can potentially be "seen" by anyone in the world at any given moment. You can design it as a company/product catalog, with text, images, price sheets, order forms and anything else you wish. You can track and collect data on site visitors, and incorporate automatic e-mail responses to orders and inquires. Web Page set-up costs are fairly low. Be sure to include your Web “URL” address on your business card and other promotional literature.

Export Directories:
Unlike directories of manufacturers, export directories only list companies actually engaged or interested in exporting. Since many manufacturers do not export, foreign buyers will more likely look in an export directory to find potential suppliers. It's to your advantage to be listed in export directories, particularly those with worldwide Internet outreach.

There are two types of export directories -- company-specific and product-specific.

An export company directory essentially lists the companies by name and industry category.

An export product directory lists the products each company offers for export, often with detailed descriptions and images.

However, since foreign buyers primarily look for products, not companies, you may get better promotional results from listings in export product directories.

Export "sell" offers

You can post your own "offers to sell" in a number of different electronic trade lead websites. It's best to provide as much information as possible in your offer, to reassure potential respondents that you are a serious and reliable supplier.

When posting a trade lead, you must specifically in describe:

Your export product (specifications, uses, benefits),
Quantity available
Price and delivery options
And what you would like to know from respondents

Targeted Promotion

Here your promotion reaches just the “targeted market or audience”. Your message can be more detailed and personalized. Your objective is high-quality, high-impact exposure. The costs are higher, but so are the rewards. If you have foreign representatives, they can do some or all of the targeted promotion in their areas, usually on a cost-sharing basis. Consider these targeted promotion techniques:

Overseas Business Trips:
Face-to-face promotion can be very persuasive. The key is to know whom to see before you get there. Don't waste precious time looking after you arrive.

Overseas trade shows and Expos:
They're costly, but a trade show puts you face-to-face with many potential customers at once, all able to see you and your products first hand. You can talk face-to face, book orders, and perhaps even sell off the floor.

Trade show opportunities exist all over the world. Every country has at least one major annual trade show. Many countries have shows throughout the year, often on specific industry themes.

Domestic trade shows and Expos:
Some domestic trade shows attract large numbers of foreign buyers. They're serious buyers, because they've come a long way to see “what's new”.

Domestic trade shows are also a good way to meet EMC’s and other export intermediate players who you can get to represent you abroad.

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