Export Ready: What Does It Really Mean?
If you have made the decision to export and you are consulting with government officials or finance people about the help they can provide to assist you meet your goals, you need to prepare for a discussion as to your business’ export readiness. True, there are many templates that you can work through to assess the export readiness of your business but what are they really assessing and how will they impact your future success in international markets. The following is what export readiness means to me and why I think that a proper understanding of it is critical to your future international success.
For me export readiness can be broken down into the following key components;
Owner and Management commitment to the decision to take the business international as well as the processes required to action it,
The recognition and allocation of the resources that will be required to support the internationalisation of the product or service,
A clear focus on a specific market as well as the product or service offering that will be successful there,
And all wrapped up in a well thought out, concise written business plan on how the company will make this happen.
You may not have all the answers as this point in time but based on your research at this point in time you have at least worked out the key questions you need answered before making you final decision. Let’s look at these points in more detail.
Going international as a planned strategy requires an understanding that only rarely is it an overnight success. Typically, entry into a new market can take anywhere from six months to two years or even longer in some cases. This requires ownership and management to have the patience to recognise that this is a long-term process and that will not produce financial returns in the near future. They have to go against their instincts, which are to evaluate performance on a quarterly basis in many instances, and persevere even though during the initial phases most international ventures see money flow one way – out. It is surprising how fast these costs such as market research, in country visits, legal fees, marketing materials etc., can mount up. It takes a lot of courage and foresight for business owners and managers to make this type of commitment. Too often projects are abandoned just as they are about to achieve success. In the case of multiple owners, it is essential that they all buy into the process and agree to make the long-term commitment. If they don’t the probability is that the project will not be successful.
To me and the majority of the professionals to whom you will speak, management commitment is one of the most important, if not the most important component, of being export ready.
Once I am sure of the commitment of the owners and management, I look into whether or not the business has the resources to succeed in its goal of securing an international market. These resources are not just financial but also human and production capacity. When evaluating these aspects of the business, the key question is “what impact will the business’ plans to export have on the domestic customer base”. Since it is likely that the domestic market will be providing the resources for you to pursue the international market it is critical that you protect this base. This means that not only must the cash flow be sufficient to provide for both the existing business but also the international expansion. The key question regarding production capacity is whether or not it is able to support both the international expansion and the domestic market. If the capacity is limited and the excess arises from slow downs in the local market place, then it is likely that if the local market turns around the business will drop the international market it has been pursuing and concentrate on its domestic market. As such it is usually seen as a lack of long term commitment to internationalising your product. The human resources evaluation is just an early inventory on the skills available within the company to support the business’ plans for globalising.
Being able to prove that you have or can acquire the necessary resources is yet another key component in proving that you are export ready.
Another aspect of demonstrating that you are export ready that I look for is that you have a clear idea of the country that you want to focus on and can clearly explain your rationale for choosing it. Having multiple targets is usually a clear indication of the fact that the business is not export ready. You should have done at least some preliminary research on your target market, have some idea as to why your product or service will be successful, who you competitors are likely to be, and some ideas as to your market entry strategy. These can all be refined as you do more research. These facts will help you determine what changes, if any, will be required in your product or service to be successful in your chosen market.
As a tip, your market readiness will be taken more seriously if you have already visited your target market. Visits such as this are also valuable for letting you know what you don’t know.
The final piece of the puzzle is to gather all of this information into a concise business plan that outlines your current and planned activities for entering the market of your choice. While this document will, of necessity, keep evolving as you do more research its existence is an indication of your commitment to the project and seen as such by the professionals.
My experience is that businesses that do the work and are export ready are significantly more successful than those who don’t. They may not have all the answers they need but at least they know what they don’t know and are better prepared to cope with any surprises in their target market.
One final point. Everything you say, do, or present becomes part of the evaluation of your businesses’ commitment to the project. Just remember the professionals you talk to are approached by many businesses and only have a limited amount of time to allocate. You want to make sure that you are one of the businesses they choose.