Five Typical Errors in Export – and How You Can Avoid Them
Are you and your company planning to expand into a new export market – perhaps even for the first time? Find out what you should be aware of and how you can successfully overcome typical hurdles.
1. Expanding into the Blue
Exporting abroad sounds very tempting. What works at home would certainly spark interest in other markets – or at least that's the idea. Maybe you already have an initial business contact abroad? Great! Nevertheless, you should still do your homework. Find out how the sector in the target country has developed over the last five years and which trends are expected for the next five years.
Before starting the project, you should ask yourself practical questions: How high should your product's pricing be in the export country? Which logistics and distribution costs will you have to cover? Legal factors in particular, such as registrations, import taxes, and product requirements can be the deciding factors as to whether the project is a success or a failure. "I recommend creating a business plan with clear milestones and setting only truly realistic goals," says Stefan Gerig, Head of Export Finance at Credit Suisse.
2. Underestimating the Competition
Your business plan should also take the competitive situation into account. The Swiss often have superior products. However, ensuring the service needed after a purchase in a more distant market can be challenging. Therefore, it is important to not only know the competitive situation for the product itself, but also to know which services the competition offers. You should never underestimate the providers already established in the target market.
Have a plan B for the event that it doesn't work out with your partner or your partner abandons ship.
Stefan Gerig, Head of Export Finance at Credit Suisse
3. Choosing Partners Poorly
Most small and medium-sized businesses have to rely on a local partner in order to tap into a new market. A good local partner can help gain initial experience, establish contact with clients, and set up your business in the export country. But to do so, both sides have to work together.
For one thing, interests have to align. At the same time, there needs to be mutual trust and understanding as well as a clear agreement about the partnership – particularly about the roles and responsibilities. For instance, in the US and China, business relationships are maintained differently than in Switzerland. Stefan Gerig also recommends that you "have a plan B for the event that it doesn't work out with your partner or your partner abandons ship."
4. Neglecting Personal Contact
Personal business relationships are important. Unlike in Switzerland, in other regions – like Eastern Europe, China, Brazil, and the Gulf States – it's customary to meet potential partners, clients or government officials for a round of golf or a meal. It's where projects are discussed or contracts are concluded. Few Swiss companies are used to this.
If you want to tap into new markets, you should be prepared to do a lot of traveling. Plan to have several face-to-face meetings each year. "Language barriers should not be underestimated," says Stefan Gerig. "For example, in Russia and China, very few people speak English reasonably well."
5. Ignoring your Gut Feeling
Is the business plan ready? Have you calculated expenses and revenues? Now the moment has come to take a brief pause. What does your gut feeling say about the move to expand? Do you personally feel comfortable in the country? Even if the market looks promising and you have a good partner to rely on, there can be reasons why it's better to cancel plans to export. Maybe you don't understand the mentality of the locals, or maybe you just don't like the cuisine. Then it might be better to look for another export market, because you will need to spend a lot of time in the country in order to establish a network and your business.
It is also important to periodically review accomplishments after entering the market and compare them with the budget. If the goals aren't being achieved, consider aborting the adventure before the costs become too great. Or as Stefan Gerig says: "Don't throw good money after bad."