Selecting a method of entry into foreign markets is as important as choosing the right partner in life. Both situations involve careful planning and strategic thinking as well as some intuition. For most of us, our first significant relationship with another person happens more by chance than by planning. Similarly, the first export venture of most companies is typically more the result of coincidence than of thoughtful planning and strategy. But it doesn't have to be that way. More likely than not there is a substantial foreign market for your product that warrants serious analysis and consideration for market entry. Here are some key aspects to keep in mind when choosing your export strategy.
Understand the different exporting options in existence. You can choose an indirect exporting method through an export trading company (ETC) or an export management corporation (EMC), or a more direct exporting approach through agents, distributors or a subsidiary. An ETC serves as an intermediary that buys your product and resells it in a foreign country. An EMC serves as a manufacturer's representative earning a commission on the sales. An alternative to exporting altogether is having production abroad, typically when manufacturing costs are lower abroad, and may include subcontracting, licensing or franchising.
Consider your company's unique characteristics. What is your company's size and production capacity? What is your desired level of involvement in sales abroad? Do you want to produce a top-of the line product or a product at the lowest cost possible? If your company does not have the capacity to fill orders abroad, your export strategy will not be successful. Similarly, when choosing your partner in life, think about how you both are able to think and process things. If you are an over-achiever a laid-back person may not be the right partner for you.
Consider logistics infrastructure. Have a clear understanding of the levels of infrastructure in the importing country. The existence and quality of the infrastructure and the way things work abroad will have an impact in your decision to export directly or indirectly. Analyze beforehand the available methods of communication and transportation including distribution channels, roads, public utilities, banking, the court system and the quality of intellectual property rights protection.
Evaluate the cultural characteristics of the country where you are exporting. Knowledge and respect for someone's cultural values and attitudes is fundamental for successful relationships both in life and in business. Does your buyer come from a culture where they value individualism or collectivism? Is verbal or non-verbal communication prominent? Is being on time interpreted rigidly or flexibly?
Finally, have standards when choosing who you work with. Choose manufacturers, suppliers, and buyers carefully. Treat this part as you would when hiring someone for a job. Ask questions. You would not just pick someone off the street to hire for a job. Trade consulting companies can help you make the right export strategy decision and select the right people to work with.