How can I be sure exporting is right for my business?
I own and manage a company that produces high-quality furniture. I have thought about exporting and expanding to foreign markets, but recent international trade disputes have made me think twice. How can I be sure that exporting or expanding abroad is the right choice for my company?
A. Jim Rogers at Grant Thornton writes:
Despite all the publicity over the recent ‘bra war’, trade barriers have actually been coming down over recent years, which coupled with improvements in technology and communications, have made it much easier to operate in the global market.
Exporting can be a valuable means of expanding a business, but care should be exercised to avoid problems. The first step should be a thorough analysis of whether the growth is really in line with your goals and objectives.
You should then consider which markets have the greatest potential. Do not assume foreign markets will mirror the current domestic market. Look at the extent of the competition, taking into account barriers to entry and therefore the threat of new competitors, sellers’ and buyers’ respective bargaining power and any threat from substitutes and alternatives.
Thirdly, you need to ask yourself what is your sustainable advantage? Analyse your core competency – is it transferable to a foreign market? Your core competence should link to all the key activities of the business and be done better than your rivals. Finally, which products and markets should you concentrate on? Planning needs to take into account the considerable management time required for such a venture. You must ask – can you afford to take time away from the core business in your home market or will you be spreading the business and yourself too thin? The temptation of increasing profile and profits abroad can see domestic performance suffer. Exporting needs to fit into your overall strategy and not be a tacked-on extra.
Proper research will show how suitable your products are for overseas markets and whether there are any legal or technical constraints to consider. There may also be market restrictions such as a poorly skilled local workforce or high transport costs. The success of expansion overseas is based on detailed knowledge and needs to be properly planned. You also need to know whether the product can be successfully marketed overseas.
You must fully explore all the risks to ensure that you do not damage your current business, seek independent advice and proceed cautiously.