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Determining how much you can afford to invest in your international expansion efforts can be a tricky proposition....
Many people ask me: "Will it be based on ten percent of my domestic business profits or on a pay-as-I-can-afford process?" That’s an excellent question. And my answer is: It depends. If we lived in a perfect world, here’s how your initial export effort might pan out:
Your company manufactures hammers in Rockford, Illinois. Your chummy neighbor down the street produces screwdrivers and you are quite aware she has been selling them to a customer in Oman for years. One morning, you stop in for your usual cup of Starbucks coffee and there sits your neighbor reading the daily newspaper.
You casually bring up your interest in expanding your business internationally and she responds by sharing her export success story on shipping screwdrivers to a customer in Oman. You ask, “Do you mind if I try to sell my hammers to your customer? I don’t see any conflict of interest.”
She answers, “Not at all. I’ll get you his name and email address this afternoon. Keep me posted on progress.”
It can be that simple. Non-competing products can be sold to the same customer and through the same distribution channel.
You then contact the customer. He replies asking for samples and pricing. You send them off. Two weeks later, you have an order. You ship and earn a U.S. $20,000 profit on the transaction. You are well on your way to increasing sales, yielding greater profits and building a global empire. A dream come true -- yes -- but most of us realize we don’t live in a perfect world.
Realistically, developing export sales can take anywhere from a couple of weeks to several years depending upon the nature of the product, its competitive position, your experience, the economic climate, pricing and worldwide demand. I anticipate though that if you have a long-term outlook, it might take from 3 to 5 years to build a permanent overseas market position. If your vision is shorter, then sales can take place immediately.
In terms of money, it’s hard to say how much you will spend. A good way to estimate is to use your domestic operation as a mirror on how well you might perform internationally.
For example, if you have achieved success capturing a local share of market, then you will most likely achieve similar success in the global marketplace provided you target your market and select the right product for export. As a quick mental exercise, think back to when you first started selling your product. Did you have an action-oriented plan in place to cover progress made no more than 12 to 18 months down the road? Did it work for you? How much money did you spend? Then think along the same lines when you begin to export but double the amount of time and money expended.
If you are new at selling, I caution you to allow a couple of years to get established on an export-only-basis. Before you begin your journey, develop a simple strategy with a realistic timetable for each action. The shorter the timetable, the better your chance of making adjustments along the way. Your focus should be on what you are going to export, where you are going to export to, and by what date. Risks are greater for overseas orders than for similar orders from a local market.
Don’t think for a minute that jumping into the export market is a sure ticket to sales success. But if you develop an international action-plan and cultivate one other fundamental competency – “stick-to-itiveness” -- before you go global, your chances for success overseas will certainly improve.
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Comments
Laurel, excellent advice, even for those of us who sell services.
Although it's very wise to exercise caution and to be very strategic about going global, I think the better question is: "Can you afford NOT to?"
There are several emerging nations--Brazil, China, India among them-- whose economies are growing at dizzying rates. Such economic activity does not come around often; we are living in an exciting, unique time full of great risk, yes, but also full of great opportunity.
Although I am a solo practitioner providing marketing strategy and communications to (currently) US businesses, I've been thinking, "I want a piece of the action, so let's explore. Why not me?" As I begin thinking in this direction, keeping my eyes open, I've found some marvelous opportunities, practical opportunities that need further exploration.
Ya just never know where it all might lead.
Posted by: Sandra Eggers | 05.05.06
I would like to add a couple of things
-there is no question "Can you afford not to?" You can't! Most of the domestic product markets are saturated, so the firm that is dedicated to a strategic development should dedicate resource to an international development.
-in order to be succesfull internationally, firm got to be dedicated to it, as in hiring a person responsible for that and setting a budget
-international business doesn't stop on export, there are many ways of increasing international presense (licensing, franchising, wholy owned subsidiary, partnership etc.)
-anybody who wants to export products made in USA should investigate Export-Import bank. They basically give insurance and money for exporters almost for free, so if deal does go wrong exporter will be responsible for 5% loss
Posted by: Roman | 05.05.06
Hi, Sandra and Roman ~ Thanks for your comments and I agree with you both! But I'm just tired of the same old, same old with the "Can you afford not to?" question. Hence, the "Can you afford it?" is a much more direct and practical approach.
There is no future in the world for companies who don't go global and by global I mean importing, exporting, outsourcing, offshoring, insourcing and so forth. And yes -- setting up a franchise in another part of the world is also considered global. But the point is you just can't sit still with a business and think you'll survive over the long run. It's just not going to happen. To thrive, you have to do business with the world.
And Roman, in addition to Export-Import Bank, take a look at OPIC
(http://www.opic.com). They are good for overseas investments too and only fund opportunitites that increase jobs in the U.S.A.
Sandra, not sure about your marketing strategy tactics but let's say you provide great content for American companies. Have you thought about outsourcing (India or China) the design work to become the queen of global marketing strategy? That tactic will give you a competitive advantage in the United States.
Best,
Laurel
Posted by: Laurel Delaney | 05.08.06
Should be http://www.opic.gov (not .com) on the OPIC.
Posted by: Laurel Delaney | 05.08.06
Thanks for the resource, will add to my databank when advising the clients!
Posted by: Roman | 05.09.06
My pleasure!
Posted by: Laurel Delaney | 05.09.06
Nice article. We specializing in marketing and sales of US products to Japanese market. Many American people thinks Japan being unique market and difficult to sell their products. However, it may take time, but it certainly is a big opportunity, once you start exporting to Japan. We buy and export. We are a distributor. Who would of thought we would sell over 150,000 units of portable toilets to Japan.
Posted by: shin kishioka | 12.02.06
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