Business strategies for going global

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Writuparna Kakati | 19 Jan, 2009
So you want to take the plunge and go global with your product or service. How do you begin? In todayâs increasingly globalised world, exporting is crucial for a business' growth and competitiveness. Export business is exciting, adventurous, and financially rewarding but at the same it is full of challenges, risks and complexities.

Small and medium sized businesses (SMEs) which are new or early exporters often rush out the door to find an overseas buyer but fails to address the key issues that must be addressed if they want to be successful exporters. In order to successfully develop a export market, businesses must have an understanding of what is needed to succeed in exporting. They must be export ready rather than just 'export willing'. Without commitment, resources and capability no business can turn itself into a high export achiever.

Every year, many Indian SMEs enter into export business but most of them back to square one due to lack of proper strategy and preparation. Most businesses, for example, fail to understand that export should be planned keeping in mind long term growth strategies and consider exporting merely to dispose of surplus production or to provide quick cash flow during domestic market slumps. Such myopic approach can hardly make someone successful in the most competitive international business environment.

Businesses which aspire to gain ground in the global market need to follow a logical and planned approach to export development. In the real world, a business rarely follows a straight-path approach, neither there is a mathematical theory of success to excel in export business operations. But research have shown that there are some key factors for export success, such as management and company commitment to export, some lasting competitive strength for the company and internal capabilities to support exporting.

To export or not to export
Export development is a process and not an event. Most businesses fail to understand this. It is commonly recognized that a business needs a product or services which is in demand in overseas markets. But the fact that businesses need proper skills, resources, commitment and information to support sustained exporting activities over the longer term is often overlooked. Neglecting factors such as these can be a critical exporting barrier for small and medium-sized businesses. To benefit from export market opportunities, a business needs to make a sustained commitment in resources: effort, money and time. Before rushing out to export, a business needs to find out the right reason to export and test its export readiness.

Checking readiness
You have been successful in the domestic market and are now looking to export to overseas market. Naturally you very excited. But are you ready? There are a number of questions you will need to consider in terms of assessing market opportunities and your business' internal capabilities -

It will take more time, money and resources to establish your business in an overseas market than in a domestic one.
You will need to invest time and money before they see any return. You should have a long-range view.
As an exporter, you should be equipped with different skills such as finance, technical, marketing, administration and market experience.
You need to research the target market. It is also important to establish co-operative long term relationships with local partners.
Are your products ready for export? Have you analyzed your product's (or serviceâs) competitiveness? What are the advantages of your (or services) over other products already available in he target market in terms of quality, price and uniqueness ?

Make sure that your product is ready for export. Research why the product will attract sales in the destination market. Also analysis whether your company has the capacity to tailor it to the requirements of the target market?

Accessing capability
Another key test in determining your export capability is to analysis why your business is successful at the domestic level, what are your competitive advantages, and how these competitive advantages could help you in grabbing success in the international market as well. Try to draw a realistic picture of your business' strengths (factors such as uniqueness of product, competitive capabilities of your company or any other factor which is important to make your business competitive at international level) and weaknesses (such as lack of experience, lack of stuff or technology, inability to change product or packaging, lack of knowledge in marketing, etc.). It will help you to identify some fundamental success factors from both the customer and competitor perspective.

Considering trade barriers
The risks in exports are totally different from those encountered domestically, and they are unavoidable to some extent. But you can minimize them taking proper precautions. Find here some useful information regarding different export business risks-

1. Political risk: The country where your client is located may experience major political instability. Such instability could result in defaults on payments, confiscation of property, exchange transfer blockages, etc.

2. Legal risk: At domestic level, business are subject to a myriad of laws, regulations, restrictions. But internationally, there are much more complexities. International transactions are governed by unilateral measures, bilateral relationships, multilateral and regional agreements. This difference in law may have impact in such areas as taxation, currency dealings, property rights, employment practices, etc.

3. Credit related risk: While doing business internationally, trading can seem complicated and risky. Besides political, legal and other risks, the most common problem businesses face is the risk in the transaction. To overcome payment related risks, an exporter needs good understanding of different payment methods in international trade. Choose a payment method which provides you with some security. Try to avoid open account method, at least initially.

4. Internet frauds: Like in any other place, the Internet is not free from scammers and frauds. These people are are very cunning and being smart it is not enough to protect yourself from them. It is not only individuals who are targets for a variety of illegal schemes but also small as well as large business organizations.

5. Quarantine compliance: Many countries (especially the European countries) have strict quarantine requirements to prevent the spread of contagious disease. Before sending a shipment, ensure that your products are allowed to be exported to the destination country.

Besides the above mentioned risks, there may be some tariff barriers which exporters often have to face. For example, many governments impose high import taxes on certain products to discourages a foreign company's market entry and to provides some competitive edge to the local providers.

Considering Intellectual Property Rights (IPR)
While dealing with overseas clients, one of the most important, and often most neglected, issue is Intellectual Property Rights (IPR). Several researches have revealed that businesses that dedicate time and resources to protecting their intellectual property assets can increase their competitiveness in a variety of ways. Therefore, it is very important for a would-be exporter to identify himself/herself to different intellectual property categories; they are -

1. Copyrights: Copyright acts protect a creator from having his creation (literary work, dramatic work, musical work, artistic work, cinematographic film, sound recording, etc.) copied or exploited by someone without the creator's permission.

2. Trade marks: In simple term, a trade mark (or brand name) is nothing but a visual symbol or sign such as signature, name, device, label, numerals, etc. which distinguishes the creator's goods or services or other articles from other similar goods or services created by others.

3. Patents: Patents allow the inventor of an invention to exert monopoly of the invention and thus to fetch adequate commercial value for a period of 20 years. To gain patent, an invention must be new, inventive and capable of industrial application.

4. Geographical indications: The term 'geographical indication' (in relation to goods) means an indication which identifies goods as originating, or manufactured in the territory of a country, or a region or locality in that territory, where a given quality, reputation or other characteristic of such goods is essentially attributable to its geographical origin.

5. Industrial designs: The term 'design' is defined as "only the features of shape, configuration, pattern, ornament or composition of lines or colours applied to any article whether in two dimensional or three dimensional or in both forms, by any industrial process or means, whether manual, mechanical or chemical, separate or combined, which in the finished article appeal to and are judged solely by the eye.

6. Trade secrets or know hows: Trade Secrets or Know Hows are confidential information which may be commercially or technically valuable, and therefore, they need protection.

Financing your venture
To grab success in export business, it usually requires a financial commitment over a long period until one's export venture is paid off. Besides initial investments, exporters also need to offer credit to win overseas customers. Hence, you must pay careful attention to cashflow management before or even after starting your export business.

In theses days, all the major banks have specialist lenders who work with business at international level. In addition, a number of government agencies also offer specialist finance and insurance services to exporters. But obtaining financing from such banks and agencies can be very difficult for small and medium sized firms. You need to provide convince them in a lot of way and only then they may consider financing your export venture. Let's have a look what you may need to convince about -

Your business plan and export marketing plan.
Your business' financial history and few years audited financial statements.
Your business's track record and credit history
The period of finance required, the method of payment you are going to use.
Whether you have obtained trade credit insurance cover.
Your experience with export, with the product or service you are going to deal in, and with the target market, etc.

In addition, it is also important to ensure that the chosen bank has a branch in the destination market and open an account with the bank. Commercial services may differ from country to country, and, as a result, you might face some bitter problems unless the chosen bank does not have an efficient international department serving in your destination market.

A few words about shipping
Shipping is one of the elements of utmost importance in export business. To meet customer expectations, exporter must ensure reliability of the delivery of products on time, in good condition and at proper destination. New exporter often fall into the trap of not insuring their goods and take a major risk by doing so. Climate and humidity, corrosion damage, shifting of cargo or load movement - all these are some of the few things that could cause damage to your goods while transporting. It is therefore advisable to insure your goods from a company that specializes in marine or air cargo insurance.

That's it - all about what you need to get into export and leap frog your way into overseas markets. World trade barriers are coming down in these days, and, as a result, the opportunity to succeed in international business are increasing everyday. But at the same time, the world has become a single market giving birth to fierce competition among businesses. It is therefore very important for exporters to develop an international perspective and plan carefully before keeping their first step into the world of exports.