Welcome to Why Export.
The decision to export proactively is a significant strategic step in the development of your business.
It will involve the allocation of time, effort and other resources and you will want to justify this before committing.
Think through some of the benefits and how they apply to you. You will probably discover some important ones you haven’t yet thought of.
There is a range of reasons for considering exporting, beyond the obvious ‘we want to grow’.
The decision to export proactively is a significant strategic step in the development of your business. It will almost certainly involve the allocation of time, effort, and other resources, and you will probably want to justify this before committing. It may be that you can build a more sustainable and scalable business model when trading overseas. Consider some of these benefits and how they may apply to you – if you are not sure ask yourself the questions posed after each reason:
Is your marketplace saturated with competition or your own product? – are you struggling to find ideal customers? There are many countries around the world where consumer bases are growing rapidly and offer real opportunities – especially for niche businesses.
- What do your ideal customers look like?
- Are your ideal customers based in the UK?
As a mature market the UK market is generally very competitive. Certain overseas markets may not be so mature and because not large enough to attract wide attention, they may be less crowded whilst still being quite sufficient to meet your immediate aspirations.
If your competitors are already trading in certain overseas markets and you are winning business over them in the UK you can probably do this overseas too.
More Receptive Markets
Is the UK marketplace ideal for your product or service, or would it be more suited to certain overseas markets?
Would the culture in an overseas market be more receptive to the benefits or the “fashion trend” offered by your products?
- Would the weather in an overseas market be more suited to the benefits offered by your products?
- Would the economy in an overseas market mean that your product is more affordable?
- Are their different market drivers in certain territories – for example, are there laws that would encourage the use of your products?
If the market is less mature would they be receptive to older designs/ technology? Could this be an opportunity to move yourself into pole position in some markets?
If your sales fluctuate seasonally you may be able to offset this by trading overseas. This will reduce the risk in your seasonal buying, and prevent you having to run “end of season sales” for surplus stocks giving you a higher return on your stock investment. If you only enjoy high sales in the UK in one or two seasons due to the weather, or specific festivals etc. you may be able to extend your trading period and sell over a full 12 month cycle – this will have the added benefit of allowing you to balance your resources all year round.
- What are the peak trading periods in your annual calendar?
- Could you smooth the effect of your annual trading cycle by finding a longer “season”?
- Could you smooth the effect of your annual trading cycle by offsetting your seasons with different countries ? (for example, could you have two summer seasons?)
Lack of cashflow can be a major barrier when a business is growing. In many circumstances it is quite acceptable for international business to be conducted without credit terms. Careful negotiation may help you preserve your cashflow and help finance your growth. In addition there are a number of credit facilities specific to Companies who are trading internationally offered by the banks and other organisations to improve levels of working capital.
- Will you run out of working capital as your business grows?
- How much resource do you put into managing cash and credit control?
- What effect would it have on your business if you got cash “up front” or “on delivery”.
Some British Companies re-position their products to a premium brand position in overseas markets creating the opportunity for premium pricing. This can still represent a good deal for the customer in countries where the standard of living is high or sales tax low.
Imaginative distribution may also improve profits – the introduction of licencing or core technology sales that add value to other products can return very lucrative revenue streams – often on a recurring basis.
- What do people really buy from you?
- Could you try it as a more premium brand in an overseas market? Does “Britishness” add to the perceived value?
- Do tax breaks enable you to improve margins?
By trading across a range of marketplaces you will reduce the risk of market conditions affecting your business.
In addition to this, the business may enjoy a wider base of revenue streams and profit centres through a wider product base designed to satisfy an international marketplace. This product base could include the development of products associated with business opportunities for partners.
Improve Residual Value of Business / Succession Strategy Options.
Businesses that trade in a range of marketplaces enjoy access to a wider customer base. Consequently the value of goodwill and IP residual on the balance sheet can often be higher.
Trading with overseas partners also gives a business owner more options for sale of the business.
- If you were an investor looking back at your own business, would it be more attractive if it was trading internationally – why?
Stay Ahead Of The Competition
Many more companies are looking to international markets and you may want to “stake your claim” to a marketplace before your competitors do. If foreign competition is coming into the UK you may want to compete with them in their own territory.
- Could you get a foothold as market leader, innovator, or higher brand loyalty in a developing or less mature marketplace?
Trading overseas will inevitably introduce you to a wide range of potential trading partners – where a strategic alliance is formed (i.e. where the parties add real value to each other’s offering) these relationships can often develop into effective global collaborations.
Well done! Click below to complete and record your progress - then choose another lesson.