Exporting - First Steps
Selling globally is an excellent way for companies to both expand their business as well as to mitigate the risks posed by the ups and downs of the local economy, since it is unusual for all parts of the world to experience downturns in their economies at the same time. That is not to say that going international is for everyone, as there are a number of factors that you have to consider. For example, the additional capital required, logistical and legal issues, currency risks, the time from first contact to first delivery, and most importantly the aspect of language and culture. All of these factors can be mitigated by doing your homework and making use of the resources available to help you.
The following outlines an Alberta company’s first steps into the international market place.
Some time ago I was approached by a Canadian Oil and Gas Service company, that also designed and manufactured the equipment they used, to help them take their business into international markets. They were very successful in Canada and were well funded but they were becoming tired of the boom bust cycle endemic in the Alberta Oil and Gas Industry. Following the launch of their website they had been getting periodic enquiries from companies outside of Canada but, not being sure how to handle these enquiries, they had ignored them. These enquiries started to become more common and they did sell some equipment to Nigeria but ran into problems getting paid. Realising that they needed help they started to look into resources that were available to assist them in making international sales an active part of their business. They had heard about the Canadian Trade Commissioners’ Service and how they assist Canadian companies interested in conducting business internationally and decided to get in touch with them. After carefully reviewing their situation, the Trade Commissioner advised them, that in his view while they had a viable service and product for export, they were not export ready. His decision was primarily based on the fact that they did not have clear objectives or plans for entering a foreign market place nor did they have a country in mind. His advice was to work on these aspects and then to come back. This brings us to my first point.
Point 1 - To be successful, you need to have a clear objective in mind as to what you want to achieve with the export of your product or service. Wherever possible this should be quantifiable. You should also have a limited number of target countries in mind, as most Small and Medium sized businesses do not have the resources in either personnel or money to chase multiple targets. This means choosing the markets that offer the best possibility of success for your company. It also makes you more creditable since you present the impression of being focused and organised to the Government Officials to whom you turn for help.
It was at this point that I became involved with the company. The first step was to look at the company and evaluate the resources that they had to devote to this project. Manufacturing capacity was not an issue, as they had sufficient capacity to cover both their domestic and potential international sales. They were well funded so financing the expansion was not an issue. It was also determined that due to the nature of their products and services that no adjustments to them would be required to enable them to be used in the international arena. The next step was to establish the criteria that the chosen market should meet. This included the level of oil and gas activity, potential partners, attitude to Canadian companies, access to the resources the company required and several other things of importance to the principals. The company was now ready to choose a market. Their first choice was China but discussion with provincial trade representatives advised against it due to the size of the company and their ability to legally protect the product should someone copy the tools. Their second choice was Nigeria. They hadreceived several enquiries from this country and had actually shipped product there albeit that they were still trying to get paid. Initial indications were that, despite Nigeria not being the easiest country to crack, there was an opportunity for the company there. At this point a full business plan was drawn up targeting Nigeria. This business plan included a full environmental scan of the country including the political situation, laws and regulations relating to Canadian companies both selling and operating in the country, operational requirements, communications and logistical requirements and many other pertinent factors. A preliminary marketing plan and budget was also included. By developing these tools, it allowed the company to go back to the Canadian Trade Commissioners service for assistance, which was helpful given the limited personnel resources the company had.
Point 2 - Preparing the business plan not only helps the company develop objectives and a strategy for entering the chosen country, it also highlights additional information that the company needs before committing resources to the venture. It can also help to eliminate countries that might not meet the company’s criteria.
The local Trade Commissioner introduced the company to one of the Trade Commissioners in Lagos and this person subsequently became integral to the company’s activities in Nigeria. The company was able to get many of its questions answered by this person. The Trade Commissioner in Lagos advised us of a Trade Mission being organised to attend the Nigerian Oil And Gas Show being held in Abuja by the Province and CCAfrica. The company signed up for the mission and myself and one other member of the company went. Prior to going we worked out what we needed to find out such as the availability of spare parts, secure compounds, customs requirements etc. We also wanted to confirm first hand the research we had already done as well as to learn more about the way business was done locally and finally to meet potential partners. Through the networking events lined up for us, we were able to meet potential partners and people who could provide the services we would need. The trip was a complete business success and prior to returning to Canada we had made arrangements to meet in Canada with a potential partner. As an added bonus, I was also able to meet with the company that had not paid for the shipment that they received from Canada and got payment.
Point 3 - There are many resources available to help new exporters and companies are encouraged to make use of them as it can save a lot of money in the long run to do the necessary due diligence before entering the overseas market rather than trying to fix things later. It is also highly recommended that companies participate in trade missions, which are a very good way of learning about your chosen market first hand, as the reality is often very different to what you read in the press.
If you follow a stepped process such as that outlined and make use of the experienced, professional resources available to you, there is no reason to fear taking a company international. The above is by no means all you need to know but it will get you started on the right track.