Of the many ways to take a company global, exporting can be one of the more low-cost and straightforward options. But it can also have challenges and risks.
Starting a successful business can require a good product, a proven market, the right people, and the willingness to work hard to get it up and running. You can think about starting to export your product in much the same way – but with the added challenges that conducting business across borders can bring. Going global as a new-to-export (NTE) company can entail all of these steps, plus evaluating how your product will fit into a foreign marketplace, finding and vetting overseas partners, and determining how to deal with international sales, logistics, and shipping.
Examining the Opportunities and Risks of Going Global: 5 Questions to Ask
Before deciding to become an exporter, you can perform a comprehensive self-assessment. There are five key questions a business owner can answer first.
1. What is your level of commitment to exporting?
For exporters, going global is typically not a short-term proposition. The investment, research, and ongoing management required to successfully export a product to other countries can require a serious commitment to export markets and a willingness and ability to continually reassess and fine-tune your strategy. The most successful exporters often develop a business planning process that identifies potential constraints and identifies specific goals and objectives as milestones of success.
2. What is the export potential for your product(s)?
As a general rule of thumb, if a product is not selling in the domestic marketplace, it probably won't be a blockbuster overseas. Before you start dreaming of euros and yen flowing into your business, you can better understand what drives your sales at home. Then, you can conduct thorough market research to gain insights into cultural preferences, buying behaviors, and potential regulatory challenges in the target market. Knowledge of influentialmarket factorscan help you determine whether and how you might replicate success in the export markets you're considering. Then, you can develop a blueprint based on well-informed decisions about which markets to enter and when.
3. What is the best entry point for exporting?
There's an entire world of potential markets outside the U.S., but it’s advisable to pick one country as an overseas proving ground for exporting.Initially targeting countries with demographics or consumer behaviors similar to your home market can ease the transition, as you may not need to make as many cultural and consumer behavior adaptations.Industry trade shows can be a great place to learn about new markets andmake connectionswith international buyers and distributors.
4. How will you market and sell your product internationally?
Once you’ve determined your initial target export market, one of your first decisions can be whether you're going to sell directly to customers or through a distributor. You also can consider how you will support your product and ensure you have viable channels for communicating with both distributors and end-users – potentially in languages other than English.
While some companies may be able to market and sell their products direct to customers in international markets, most small and mid-size businesses recognize the advantages of working through intermediaries who can offer them additional support going global. These distributors often have expertise in specific markets as well as the ability to offer pre- and post-sales support services, which can make them a lower risk, cost-effective way into global marketplaces.
Entrepreneurs don't have to start from scratch when determining what the opportunities and risks are in taking a company global via exporting.
Still, it can be important to conduct due diligence into potential partners and take the time to select and develop a beneficial relationship with one that fits your exporting needs. The U.S. Commerce Department'soverseas trade specialistscan help evaluate the credibility of would-be partners. Once you’ve had some success working with a distributor in one market, they may be able to help you pivot and expand to others.
5. Do you have the infrastructure in place to support global sales and delivery?
Before they start selling and shipping products internationally, businesses seeking to expand globally through exporting secure their infrastructure. This includes financial, inventory, andsupply chain managementsystems, as well as crucial technological infrastructure like global e-commerce platforms, localized websites, and international payment processing systems. These can be key to effectively and efficiently handling transactions and customer interactions across different regions.
It’s also important to take the time to understand howinternational transactionswork. The costs of such transactions can vary wildly depending upon how they're set up, particularly as exchange rates fluctuate. Companies that plan to sell globally using letters of credit will likely work with an international banker.
Exporters can consider international shipping and logistics issues as well. Many decide to work with freight forwarders and customs brokers who understand how to navigate theglobal supply chain.There may also be local packaging and labeling requirements to consider, too, since exporters must comply with both U.S. export regulations and the laws of the other countries where they sell their products.
Take Advantage of Expert Exporting Insight
Entrepreneurs don't have to start from scratch when determining what the opportunities and risks are in taking a company global via exporting. In addition to considering the issues raised above, there are many excellent resources available for free online to help business owners make more informed decisions about going global and to guide them through the step-by-step process of becoming an exporter:
- The U.S. Small Business Administration (SBA)offers anexport planning guidethat includes information on business registration and research, finding international partners and customers, financing and insuring exports, protecting intellectual property abroad, conducting cross-border ecommerce and international shipping. Business leaders looking to take a company global can bookmark this web page for business case studies, checklists, hotlines, and trade organization contacts.
- TheInternational Trade Administration(ITA)is anotherU.S.government resource dedicated to helping businesses compete in the global marketplace. It has a guide todeveloping an export plan,including questions to ask before going global with exporting, key elements of an export plan, and tips for creating a flexible but detailed strategy.
- Michigan State University'sGlobalEdgeplatformincludes aself-diagnostic tool(free after registration) to gauge a company's readiness to expand its operations internationally and assess its ability to export a particular product.
Lastly, there can be local support. Business owners can also contact theirlocal Small Business Development Centeroffice or the nearestU.S. Export Assistance Center. Both offer no-cost advice from international trade specialists, which can be an invaluable asset to small businesses looking to go global.
The Takeaway
Taking a business global through exporting can be one of the more cost-effective methods for an entrepreneur to open up new opportunities for growth. Before making such a significant step to go global, it can be important to assess your product’s export potential and your company’s own export readiness. Considering the key questions outlined above can increase the likelihood for success whenexpanding into international markets.
A version of this article was originally published onFebruary 21, 2019.
Photo: Getty Images
