Are You Ready to Export?
As the sun began to set on the heyday of domestic U.S. environmental
industry growth, many U.S. environmental product and service providers could
be found gazing longingly at the relatively unformed, but rapidly evolving
environmental markets of the world�s less-developed economies. The
double-digit growth that seemed to define U.S. environmental markets during
the 1980s, was giving way to intense competition (both domestic and from
abroad), consolidation, and, in many cases, despair. "Overseas markets will
save us!" became the hopeful rallying cry for an increasing number of
environmental firms whose tremendous environmental expertise would surely be
in great demand as the rest of the world began to confront its mounting
environmental challenges.
Nowhere was the promise of burgeoning environmental markets more alluring
than in Asia. Sustained doubled-digit economic growth (until recently)
fueled by direct foreign investment and export demand has created a growing
middle class demanding environmental improvement for many of the countries
in Southeast Asia. This demand for a cleaner environment has been met with
greater government spending and increased regulation, which has catalyzed
the development of Asian environmental markets. However, U.S. companies have
been slow to penetrate these markets. Today, U.S. environmental companies
(excluding instrument manufacturers) earn, on average, less than 8 percent
of their revenues by exporting to overseas markets, hardly impressive for a
group comprised of the world�s most sophisticated and experienced
environmental product and service providers.
The best time to think about exporting is probably during periods when
your business is already doing fairly well. In a perfect world, those would
be the times to begin aligning the strategic and tactical resources
necessary to a successful overseas effort. Nevertheless, many U.S.
companies, including many environmental firms, have often set their sights
on foreign markets only after they have found their fortunes declining
domestically. It may be true that it is sometimes easier to get "sign-off"
on international initiatives when they seem to hold out more promise (real
or imagined) than existing projects, but going overseas during difficult
times at home can raise the stakes to uncomfortable levels.
Simply needing to export does not necessarily imply that you are ready to
do so. Slow sales and shrinking margins may be no easier to remedy in the
international marketplace than they are in your existing markets. Global
opportunity can quickly turn to "globaloney" if your product, company, and
personnel are ill prepared to face the difficulties associated with overseas
trade. Certainly, much of the problem lies in the often exasperating
intricacies of unfamiliar environmental markets. But much of the problem has
been that many firms have attempted to enter foreign markets without first
engaging in the kind of soul-searching introspection that, if not faced
voluntarily, will be, sooner or later, thrust on you by the marketplace.
This section is intended to guide you through a practical self-evaluation
that should reveal just how well prepared you may or may not be to venture
into a prickly but promising global environmental marketplace.
The following material is divided into three areas. The first section
helps you to determine if your current products are ready for export and
what changes, if any, you must make to them. The second section covers the
export readiness of your personnel and what you may have to do to train your
employees properly. The third section deals with the export readiness of
your company, including the financial resources you will need for your
company to become a successful exporter.
An important indication of your product�s potential in the export market
is its domestic success. If your product has sold well in a wide domestic
market it can probably be successful in markets abroad where similar needs
exist. However, just because your products are selling well in the United
States does not mean that they will sell "as is" in foreign markets. They
are likely to require at least minor modifications, that is, packaging
translated into the local language, and will probably need more complicated
changes, such as redesign of certain technical features to meet local
product standards. Unlike most consumer goods, environmental products and
services are often "communication-intensive" in that the buyer is not going
to simply pull your product off the palette, plug it in, and then order six
thousand more just like it. As is often the case with U.S. customers, quite
a bit of pre-sale handholding and post-sale therapy are likely to be an
important part of the deal. This can be particularly true in countries or
industries in which industrial or public sector environmental managers may
be relatively unsophisticated buyers of environmental technologies and
services.
Even if the sales of your product are declining in your U.S. market,
sizable export markets may well exist. This is especially true if your
product has historically done well but your market share has been degraded
by more advanced products. Marketing opportunities still exist because a
considerable time lag often exists between the demand for new products in
the United States and some other countries. Less-developed countries do not
always require leading edge technology and may instead have a need for
products that are older, less expensive, and less sophisticated. The
important factor is that you judge the export readiness of your products
through the eyes of the foreign customer. It has been demonstrated well
enough by now, that it is folly to expect that environmental quality and
pollution control issues and their remedies are going to follow the same
path in other countries as they did in the United States and parts of
developed Europe.
Although commonalties clearly exist (and can be capitalized on), demand
for environmental goods and services should be expected to display a certain
amount of "leapfrogging" as foreign environmental buyers bypass at least
some sections of the learning curve previously established in the United
States. Your "old" technology may well be exactly what a foreign market
needs, but this is by no means a forgone conclusion in the environmental
arena and must be evaluated.
The following list of questions addresses several of the most critical
issues regarding your products that you must confront before you make a
final decision to export. You must consider whether or not your products
will require adaptation in each of the following areas. You will need to
examine what actions, if any, should be taken to improve your competitive
situation in overseas markets.
- Do you offer unique features? You present an intrinsic risk to
Asian buyers. Why should they take this risk?
- What are your current competitive advantages and disadvantages?
Your current U.S. competitors will sooner or later enter your export
markets.
- What is your product�s projected life cycle? Obsolete products
may find initial success but will not sell for long in foreign markets
- Look long and hard at your quality history. Repairing defective
products will be extremely expensive.
- Can you deliver? The most frequent complaint about U.S.
exporters.
- What kind of warranty program can you offer? You cannot afford
to send technicians around the world.
- Metric? Know your product�s application. If it doesn�t fit, the
sale won�t either.
- Does your product need post-sale technical support? Leave one
customer hanging, and you can forget about the others too.
- Can you deliver spare parts and components? They are often
requested on an emergency, air freight basis.
Not all of your products may be exportable now. This occurs often with
new exporters. You do not want to waste your valuable time attempting to
make every product attractive in overseas markets. Concentrate on those
products that have the most immediate export potential. You can work on the
other products after you have established your primary products in the
markets of your choice.
If you have discovered certain characteristics of your exportable
products that you feel may cause problems in foreign markets, take immediate
steps to correct them. Determine how and when they will be corrected. Set
deadline dates and a follow-up system to ensure that all corrections have
been made. You want to be certain that your products will make an excellent
first impression in your new foreign markets.
Existing companies in your new export markets will not be pleased that
you have entered their domain. They will fight you at every turn. Do not
give them an easy opening with problems in product quality or post-sale
support. You can be certain that they will call them to the attention of
potential customers whom you hope to sell to in the local market.
Once you have decided which products are exportable, ask yourself if you
have the people within your organization to execute your export marketing
program? Be realistic in assessing the capabilities of your employees.
Closely examine the key issues outlined in the following table. If your
company has never exported before, do not expect your employees to learn
exporting "as they go along." They will need thorough training to ensure
that export transactions are handled in a timely and professional manner.
Your staff must be able to respond quickly to export inquiries and
process orders efficiently. Most of the principles of domestic marketing are
used in exporting, along with additional factors such as language, culture,
and distance to markets. The following list of business functions will help
you gain a clearer picture of where you may need to improve or modify human
resources to service your export transactions successfully.
- Marketing: International market planning, forecasting,
and promotional programs are not what your employees are accustomed to.
- Sales: Patterns of customer contact, trade show
attendance, presentation, and travel will be unfamiliar.
- Export Administration: Processing of inquiries, quotes,
and export documentation must be efficient.
- Finance: Payment terms, letters of credit, credit, and
nonpayment insurance must be established, if applicable.
- Accounting: You may need to adjust invoicing, collection,
deposits, financial records, and document handling.
- Manufacturing: Are you ready not only to produce but also
to prepare for overseas shipment?
- Transportation: You may need to move products via
unfamiliar carriers.
- Advertising/Sales Promotion: Preparation of brochures,
flyers, and public relations materials may require new expertise.
- Legal: Export contracts, agreements, freight forwarding
will require a new area of legal expertise.
Note: Export training is a continuous activity. Circumstances and
opportunities in international trade are constantly changing. After you have
provided your key employees with the training necessary to launch your
export marketing program, you should provide training updates. This will be
an excellent investment.
If you decide to launch your export marketing program with current
personnel, they will need export training. Arrange for training immediately.
If possible, schedule training in the evenings or on weekends so that it
will not disrupt your domestic operations. An alternative is to have an
export consultant visit your office and train your personnel on site where
company information is readily available.
You may decide to hire an outside person to administer your export
marketing program. In selecting this person, be aware that two basic kinds
of "export experience" exist:
Corporate experience. These executives are accustomed to making major
policy decisions. They are not familiar with the "nuts and bolts" of
exporting. If you are a small company and you expect the new employee to
wear many hats, a person with this type of experience may find it difficult
to fit into your organization.
Small company experience. These people are accustomed to taking care of
the routine tasks that will play a major role in determining the success or
failure of your export marketing program. They have seldom, if ever, been
involved in policymaking. This type of person should perform well in a
smaller company.
You must have an export customer-response system in place that can
provide almost immediate replies to requests for price quotations, product
specifications, credit terms, delivery dates, and so on. Everyone within
your organization must be fully aware of his or her responsibilities in
successfully completing an export transaction.
Indecision and delays are major enemies of U.S. exporters. You will gain
a competitive advantage over many U.S. and foreign suppliers by always
responding quickly to export inquiries, establishing firm delivery dates
within your organization, and following up to make certain that shipments
are ready for delivery as agreed with overseas customers.
Do you have excess production capacity that you could use to manufacture
export products? If so, how many people would you have to hire for the extra
work? Would it be more economical for you to pay your current employees
overtime? If you were just starting to export, it would be more advantageous
if you could keep your investment in new equipment to a minimum.
How much money have you budgeted to finance your export marketing program
-- and for how long? You cannot realistically expect to earn a profit in the
first year of operation. You may have to wait two years or longer in some
markets before you begin to see a return on your investment. This is not
unusual in exporting for which lasting relationships often determine who
gets the sale.
The following table "Company Readiness for Export" can help you determine
what steps, if any, you must take to prepare your company for exporting.
Begin making adjustments as soon as possible. Once you have become involved
in foreign markets, you will find it more difficult to make necessary
changes. It may not be worth moving forward at any level if your own lack of
preparedness has you shooting yourself in the foot just as you leave the
blocks.
It is absolutely essential that you make a firm commitment to export. Do
not become impatient if you experience problems in the initial stages of
exporting. When you started selling your products in the United States, did
everything go smoothly right from the start? The scale of your early export
efforts is far less important than the level of quality you are willing to
maintain. Provide adequate funding and give exporting a realistic chance to
succeed. Remember, 95 percent of the world�s population lives outside of the
United States! Think how many potential customers that would be for your
products.
You�ll need to evaluate the availability of resources and funding for
changes and efforts in each of the following areas:
- Office Space: Export area facilities should be on par
with the domestic division. Although your initial export efforts may be on
a small scale, don�t relegate those activities to a converted utility
closet.
- International Communications: Fax machine, Internet and
e-mail systems (not to mention your long-distance phone bill) will be
pushed to new limits. International communication can be difficult enough.
Don�t hang up on yourself.
- Technical Support: Product reports, technical drawings,
and design modifications must be at the ready.
- Foreign Travel: Personal relationships often decide who
gets export orders. Pay close attention to those relationships, and make
sure you are sufficiently budgeted to service them.
- Employee Training: As outlined in the "personnel" section
above.
- Advertising: Translation and/or modification of
brochures, flyers, ad copy, and public relations will require investment.
- Production Capacity: Quick delivery is essential to
success in international trade.
Note: The above activities require funding. However, there is one
more activity that does not cost money. That is creating enthusiasm for
exporting within your organization. Emphasize to all employees that
exporting will be a profitable undertaking that will increase their incomes
and give them greater job security.
Training can teach your employees how to handle the many facets of
exporting. However, if your financial situation is weak, it will not matter
how well you have prepared your personnel and products for export.
Introducing your products into world markets will require a significant
up-front investment by your company. If your current financial situation is
weak, delay your decision to export until you have accumulated enough money
to be a long-term player in world markets.
You are now ready to proceed. The first step is to identify your
potential export markets. Do not overwhelm yourself by trying to take on the
entire world. Instead of trying to respond haphazardly to sporadic worldwide
orders, maximize your potential export profitability by applying a
step-by-step market research approach to target your most lucrative export
markets methodically.
Once you have selected your export target markets, you will need export
sales representatives. Select them carefully because they will more than
likely be outside your day-to-day supervision. As the only visible
representation of your company and your products, how they act is how you
will be perceived, and how you are perceived will determine your export
sales.
Once you have established your markets and your representatives, you will
price your products for export and write your own export marketing
agreements. For your export transaction to be successful, it must be
beneficial to all parties involved.
You will want to become familiar with the export laws that govern your
export transactions to avoid the severe penalties and costs of
noncompliance. This should be done before turning your shipment over to your
foreign freight forwarder, who is responsible for your products arriving at
their destination. The more you understand about the confusing shipping
process with all its associated paperwork and hectic coordinating of
transactions and the more skilled your freight forwarder is, the more likely
you will profit from exporting.
You must arrange for satisfactory payment terms that will minimize the
risks you will face from dealing with unfamiliar parties. Use the resources
available to help you complete your financial transactions in an
advantageous manner. The most common reason companies fail in exporting is
due to lack of a well prepared export marketing plan. Avoid falling into the
same trap by projecting accurate sales forecasts and budgets.
Before you know it, you will be traveling overseas to visit your new
export markets. Become familiar with local customs and be sure not to offend
your newfound business partners.
|
