Considering global expansion? You might be ready to export if…

12/05/2017

Business people meeting in lounge

Business people meeting in lounge

Characteristics of Export-Ready Organizations

Organizations need to ask themselves, “Are we in it for the long run?” It can take time to develop trust between the two or more business parties involved in a new initiative. Organizations looking to export internationally for the first time should consider some of the characteristics successful exporting organizations share:

  • Their products and/or services are successful domestically.
  • They have a solid domestic business plan with proven effectiveness.
  • They have specific advantages over the competition.
  • Their products and/or services are unique in one or more ways.
  • Their products and/or services are competitively priced.
  • They are willing to invest resources of time, people and capital without return for a period of time. Entry into new markets may require two or three years of effort before showing a profit.
  • They are sensitive to and aware of the cultural differences of doing business in other countries.

If an organization does not have a solid domestic business plan, is struggling in its existing markets, is producing and selling an ordinary product that is readily available, and has limited financial, human and production resources, it is not in a good position to begin exporting.

Assessing Current State

There are several areas organizations need to assess before launching into a new international trade venture. The depth of the current state analysis will depend upon whether an organization has operated internationally in previous ventures. Those who are completely new to importing or exporting will need to perform a much more in-depth analysis than those who already have some experience in international trade.

Human Resources

An organization appointed the next senior manager in line for a promotion to handle the company’s entry into international trade ventures without assessing the person’s skills and abilities in international trade. As this individual was just the most senior person ready to be promoted, rather than the right person for the job, the project was mishandled and entry into the foreign market was delayed by a year. The company finally did an internal and external search and found an appropriate candidate for the position. This delay meant the company fell behind its competitors in market share.

Organizations may have human and managerial resources adequate for its domestic needs, but can they support business operations that may be on the other side of the world? Of importance are:

  • A management team capable of developing a comprehensive export plan
  • A management team committed to pursuing export markets and willing to dedicate time, personnel and funds to its export program
  • Adequate personnel to meet increased demand or the capacity to hire/ contract staff to meet needs
  • Trained marketing staff, or the ability to hire qualified people, with experience in buying or selling products or services abroad (an alternative is to use intermediaries with the required expertise, such as agents, distributors or trading organizations)

Financial Resources

A Canadian manufacturing company specializing in customized automation for the auto industry has 20 employees and annual sales of CAD 2.5 million. The company attempted to export to Mexico with limited financial resources, expecting government programs to contribute further resources. This assumption was not based on solid research about the programs or the criteria for accessing them.

Organizations will likely have the financial capacity needed to operate abroad if they have (or can acquire):

  • The financial resources to support marketing products in overseas markets
  • A strong, dependable cash flow
  • The financial strength to compete with foreign products and services in terms of quality and price
  • Enough cash, savings, and access to financing (such as increased operating lines of credit or term loans for capital expenditures) to support production and marketing for at least two years without making much profit
  • Adequate knowledge of export payment mechanisms, such as letters of credit and open accounts

Production Resources/Capacity

One sure way to fail internationally is to secure a large contract and then be unable to fill it. Organizations can avoid this difficulty by:

  • Ensuring suppliers can provide the raw materials and components needed to meet commitments
  • Ensuring there is enough spare capacity, or that it can be created quickly, to meet unexpected large foreign demand
  • Being prepared to modify and manufacture versions of products and services to meet the cultural, regulatory and certification standards of a foreign market

Logistics Resources

Being able to fulfill an order or a contract is only half the job—buyers still have to receive goods or services on time and in the expected condition. Organizations should ensure:

  • They have, or can acquire, an adequate knowledge of how products or services should be shipped or delivered abroad.
  • Their staff is, or can be, trained in export logistics.
  • Their staff is, or can be, trained to troubleshoot problems quickly and efficiently.

Holding quarterly or monthly meetings with foreign-trade experienced guest speakers can help organizations focus their efforts and generate excitement over new international initiatives.

Having outside experts help train and educate employees demonstrates organizations are moving in the right direction and develops employee confidence.

Using Change Readiness Tools

A number of change readiness tools specific to international trade are available for use. Both paper-based and online tools are available to organizations, often at no cost, through regional, national and international organizations. These tools guide organizations through a process to identify their current strengths and weaknesses. Most of these readiness tools are focused on organizations intending to export products or services.

Organizations should contact their local and national business centres and associations to learn which change readiness tools may be available to them; for example:

 

This content is an excerpt from the FITTskills Feasibility of International Trade textbook. Enhance your knowledge and credibility with the leading international trade training and certification experts.

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About the author

Pamela Hyatt

Author: Pamela Hyatt

I am a Content Marketing Specialist for the Forum for International Trade Training (FITT). You can find some of my work on TradeReady.ca. My background is in copywriting, journalism and social media. My passion lies in connecting people to the stories that are most important to them.

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