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5 steps how to make your export profitable

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How to make sure your export will be profitable? Which countries are suitable to export to and what are the costs of market entry? This presentation helps you to increase the ROI of your foreign ventures. For more info see http://www.allianceexperts.com. Download the presentation at http://www.allianceexperts.com/en/knowledge/exports/5-steps-to-make-exports-profitable/

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5 steps how to make your export profitable

  1. 1. 5  steps  how  to  make     your  export  profitable     1 (and  avoid  costly  mistakes)  
  2. 2. Are  you  making   money  on  your   exports?   Even  if  you  include  all  the   additional  costs  of  being   active  abroad?   2
  3. 3. 3 Or  are  you  loosing   money  on  your   exports?   If  you  include  translation  services,     legal  fees,  distributor  margins,     shipping  costs  and  traveling?  
  4. 4. 4 It  is  good  to     see  exporting  as     an  investment,     but  one  day  it   has  to  pay  off…  
  5. 5. Alliance  experts  helps  you  to  make     your  exports  pay  off   Alliance  experts  is  a  global  network  of  business  development   specialists.  We  help  companies  enter  new  markets  profitably.   5
  6. 6. What  to  expect  in  this  presentation?   6 Slide 8 Slide 31 Slide 42 Slide 13 Which countries are suitable for SME’s? •  After filtering we identified 64 countries that are suitable for SME’s to export to •  Still, these markets need to be checked on customer demand and competition for your specific offering. •  For each of these markets we have grouped the key figures on population, earnings, spending, trade, taxes and urbanisation The profile of the right local partner Small Start-up Brings in knowledge Striving for limited dependence Brings in manpower Large Mature Brings in network Striving for large interdependence Brings in assets Estimated costs to enter a new market (before any substantial revenue comes in) Nr. Offering / Market Simple Average Complex 1 Simple product 20,000 USD 50,000 USD 80,000 USD 2 Service from abroad 30,000 USD 50,000 USD 80,000 USD 3 Product with service 70,000 USD 100,000 USD 150,000 USD 4 Customised product 70,000 USD 100,000 USD 150,000 USD 5 Customised service 100,000 USD 150,000 USD 250,000 USD Five steps to make your export profitable 1. Start with a strategy 2. Do market research 3. Find local partners 4. Enter the market 5. Make haste
  7. 7. Do  you  prefer  to  read  this  presentation  as  a   downloaded  pdf  file?   7 Get it now from www.allianceexperts.com (click here)
  8. 8. Five  steps  to  make  your  export  profitable   8 1. Start with a strategy 2. Do market research 3. Find local partners 4. Plan & Agree 5. Establish presence
  9. 9. Step  1.     Start  with  a  strategy   9 Three  decisions  in  your  market  entry  strategy:                              Country                                                            Offering                                                        Approach  
  10. 10. 1st  aspect:  which  country  to  go  to?   •  Where  is  a  need  for  your  products  or  services?   •  Where  is  less  competition  than  elsewhere?   •  What  is  a  good  country  to  do  business  in?   10
  11. 11. The  complexity  of  entering  the  market  differs   per  country   11 Simple   Average   Complex   Distance   Nearby   Far   Language   Same  language   Other  language   Other  writing   Culture   Comparable   Totally  different   Formalities   Open   Bureaucratic   Size   Small   Large    
  12. 12. Which  countries  you  should  avoid  or  shouldn’t   go  to?   •  Alliance  experts  has  done  a  screening  of  180  countries  for   which  recent  World  Bank  data  is  available   •  We  first  filtered  out  75  countries  with  a  GDP  of  less  than   20  billion,  the  size  of  Afghanistan.  It  would  require  a  lot  of   effort  for  limited  returns   •  Then  we  filtered  another  20  countries  with  a  GDP  PPP  per   capita  less  than  7.000  USD:  not  sufficient  buying  power   •  There  are  indexes  for  ease  of  doing  business  and  logistics   performance  in  a  country.  Using  this,  another  21  countries   such  as  Indonesia  and  Colombia  were  filtered  out.   12
  13. 13. Which  countries  are  suitable  for  SME’s?   •  After  filtering  we  identified  64  countries  that  are  suitable   for  SME’s  to  export  to   •  Still,  these  markets  need  to  be  checked  for  consumer   demand  and  competition  for  your  specific  offering.   •  For  each  of  these  markets  we  have  grouped  the  key   figures  on  population,  earnings,  spending,  trade,  taxes   and  urbanisation     13 Get the full database with important results now from www.allianceexperts.com (click here)
  14. 14. Top  10  countries  per  GDP   Country GDP United States 16.768 China 9.240 Japan 4.920 Germany 3.730 France 2.806 United Kingdom 2.678 Italy 2.149 Russian Federation 2.097 Canada 1.827 Australia 1.560 Country GDP/capita PPP Qatar 136.727 Luxembourg 90.410 Singapore 78.763 Norway 65.461 Switzerland 56.565 Saudi Arabia 53.644 Hong Kong SAR 53.216 United States 53.042 Netherlands 46.298 Ireland 46.140 14
  15. 15. Top  10  countries  on  trade  and  tax   Country Trade of services Luxembourg 214% Ireland 102% Singapore 87% Hong Kong 67% Cyprus 48% Estonia 43% Belgium 40% Denmark 39% Panama 34% Thailand 30% Country Total tax rate Qatar 11% Kuwait 13% Bahrain 14% Saudi Arabia 15% United Arab Emirates 15% Singapore 18% Croatia 19% Luxembourg 20% Canada 21% Hong Kong SAR 23% 15
  16. 16. Top  10  countries  for  ease  of  doing  business     and  population  density   Country Ease of business Singapore 1 New Zealand 2 Hong Kong 3 Denmark 4 Korea, Rep. 5 Norway 6 United States 7 United Kingdom 8 Finland 9 Australia 10 Country Population density Singapore 7.713 Hong Kong 6.845 Bahrain 1.753 Korea, Rep. 516 Netherlands 498 Puerto Rico 408 Israel 372 Belgium 370 Japan 349 United Kingdom 265 16
  17. 17. 2nd  aspect:  determine  your  offering   Coming  from  abroad  you  will  always  have  a  disadvantage  compared  to  local   producers.  So  make  sure  that  your  offering  either  is:   •  Unique  (so  you  won’t  have  any  competitors)   •  Better  (or  being  perceived  as  better),  and/or   •  Cheaper     17
  18. 18. What  basic  type  of  offering  do  you  have?   1.  Simple  product,  perhaps  differences  per  country,  no  customisation     2.    Service  that  can  be  provided  electronically  or  from  your  homeland     3.  Product  with  installation,  integration  or  training     4.  Customised  product     5.    Customised  service  or  solution  (e.g.  with  local  consultants)     18
  19. 19. 3rd  aspect:  market  approach   •  How  to  set  up  your  distribution?   •  Work  with  own  staff,  joint  venture  partners,  distributors,  agents?   •  How  to  arrange  payment  and  warranties?     19 Basic  type  of  offering   (nr.  1  to  5,  see  previous  slide)   Market  approach   leads     to  
  20. 20. Offering  type  1.  Simple  product   Characteristics:   •  Not  client  specific,  possibly  country  or  region  specific   •  Can  easily  be  sold  through  a  distributor,  no  additional  service   Approach:   •  Create  awareness  with  potential  foreign  distributors   –  Internet  marketing   –  Trade  shows   •  Sell  directly  to  the  distributor  and  leave  the  rest  to  him   20
  21. 21. Offering  type  2.  Service  that  can  be     provided  from  abroad   Characteristics:   •  Delivery  follows  the  same  process  as  for  local  customers   •  Sales  process  is  relatively  straightforward     Approach:   •  Choice  for  internet  sales,  local  distributors/agents  or  a  combination   •  For  internet  sales:  set  up  payment  process   •  For  local  distributors/agents:  set  up  an  incentive  structure  and  provide  them   with  marketing  tools   21
  22. 22. Offering  type  3.  Product  with     installation,  integration  or  training   Characteristics:   •  Not  client  specific,  possibly  country  or  region  specific   •  Distributors  need  to  be  trained  before  they  can  sell  or  deliver  the  product   Approach:   •  Identify  potential  distributors  and  select  one  or  a  few   •  Train  the  distributors  and  help  them  market  your  product   •  Manage  and  evaluate  your  distributors   22
  23. 23. Offering  type  4.  Customised  product   Characteristics:   •  Client  specific,  made  to  order  (bespoke)   •  Distributors  serve  as  the  channel  for  your  contact  with  the  customer   Approach:   •  Decide  upon  distribution  or  agency  agreement   •  Set  up  exclusive  distribution  per  country/region/market  segment   •  Negotiate  a  distribution  margin   •  Train  distributors  in  the  sales  process   23
  24. 24. Offering  type  5.  Customised  service     or  complete  solution   Characteristics:   •  Although  standard  components  may  be  used,  strong  interaction  with  the   client  is  needed  to  get  to  the  right  results   •  Consultative  selling  process     Approach:   •  Work  with  a  dedicated  and  specialised  local  sales  partner   •  Fly  in  or  relocate  own  sales  support  and  project  delivery  staff   •  Work  on  a  joint  marketing  and  sales  plan  that  involves  presentations,   exhibiting  at  trade  shows  and  collaboration  with  industry  organisations   24
  25. 25. Step  2.     Do  market  research   •  Start  with  a  first  orientation:  go   to  the  country  yourself   •  Read  about  the  country,  talk  to   people  living  there   •  Do  research  on  how  they  like   your  products  or  services  and   how  you  can  enter  the  market   25
  26. 26. Market  research  is  an  insurance  fee  you  pay  to   reduce  your  risks   No market research Market research Potential outcome Odds Financial result Odds Financial result No market entry 0% 20% 0 Market entry is failure 60% - 100.000 32% - 100.000 Market entry is success 40% + 100.000 48% + 100.000 Costs of research 100% - 10.000 Total weighted outcome - 20.000 + 8.000 26 As  a  result  of  your  market  research  you  might  not  want  to  enter  the  market,     but  if  you  enter  the  market,  the  likelihood  of  success  is  much  higher.  
  27. 27. Choose  the  market  research  that  helps  you   with  your  decisions   •  General  reports  on  market  volumes   don’t  show  where  there  is  an   opportunity  in  the  market   •  Only  if  you  do  field  research  you  will   find  the  best  chances   •  Ask  distributors  how  they  perceive   your  product  and/or  service   27
  28. 28. Step  3.     Find  local  partners   •  If  you  want  to  set  up  everything   from  abroad  it  is  very  costly   •  Local  partners  have  the  right   market  knowledge,  a  network  and   are  trusted  more  easily   •  Never  start  with  the  first  partner   that  comes  along  without  talking  to   others.   28
  29. 29. Process  of  finding  the  right  partner   29 Company  profile   What  makes  your  company  attractive  and  what     kind  of  partners  are  you  looking  for?   Long-­‐list  and  short-­‐list   Who  are  potential  partners  in     the  market?   Approach   Find  the  decision  makers  and  check  their  interest     in  your  company  after  seeing  your  profile   Visit  and  Selection   Visit  the  companies  and  make  your  choice  
  30. 30. Questions  to  ask  yourself  when  looking  for     a  local  partner   •  What  customers  you  would  like  to  get  in  touch  with?   •  What  would  give  more  credibility  to  your  product  or  service?   •  In  which  region  /  market  segment  are  the  biggest  opportunities?     30
  31. 31. The  profile  of  the  right  local  partner   Small     Start-­‐up     Brings  in  knowledge     Striving  for  limited     dependence     Brings  in  manpower     Large     Mature     Brings  in  network     Striving  for  large   interdependence     Brings  in  assets     31
  32. 32. Structure  for  drafting  your  partnering  profile   We  are  looking  for  a  business  partner!     Your  company  description  in  maximum  4  lines,  including  some   key  metrics  or  numbers  or  statistics     What  makes  your  company  unique  in  its  market?     What  is  your  ambition  for  the  next  three  years?     What  should  a  partner  add?     What  is  the  benefit  for  the  partner  working  with  you  instead  of   another  company?     How  would  you  like  to  split  revenue  and  costs?    
  33. 33. Step  4.     Plan  &  Agree   •  Conclude  agreements  with     your  local  partners   •  Localise  your  offering   •  Find  your  way  through     custom  formalities   •  Arrange  easy  payment     •  Train  your  partners   33
  34. 34. Conclude  agreements  with  your  local  partners   •  Start  with  the  outlines  for  the  partnership   •  Negotiate  first  without  the  lawyers  involved:  work  towards  a  deal  sheet   •  Check  whether  the  right  incentives  are  in  place  for  each  partner  and  chances   on  opportunistic  behaviour  are  small   •  Conclude  by  having  the  partnering  arrangement     drafted  in  a  balanced  way     34 Alliance experts has structured questionnaires with all relevant aspects that will quickly help you to arrive at a deal sheet. This deal sheet can serve as input for your lawyers, saving you on your legal fees.
  35. 35. For  every  partner  there  needs  to  be  the  right   balance   35 Resources   Responsibilities   Risks   Rewards  (profit)   Ruling  power  (votes)  
  36. 36. Local  packaging  and  translations   •  Decide  whether  you  want  to  promote   your  product  as  a  local  or  a  foreign   brand   •  Check  on  legal  requirements  such  as   certification  and  ingredient   declarations   •  People  are  going  to  search  for  your   website:  make  sure  there  is  a  proper   translation   36
  37. 37. Navigate  through  custom  regulations   •  Don’t  focus  on  avoiding  import  duties,   but  on  getting  your  products  quickly   through  customs   •  Let  your  local  partner  be  involved  or   responsible  for  the  import  clearing   •  For  your  first  shipments,  make  use  of   exemptions  for  smaller  quantities   (e.g.  boxes  less  than  50kg  in  China)   37
  38. 38. Train  your  partner’s  sales  people   •  Part  of  the  sales  process  is  providing   information  and  removing  objections   •  The  more  your  partner’s  sales  people  know,   the  easier  they  can  sell  your  product   •  The  easier  it  is  for  them,  the  more  they  will   push  your  product   •  Make  sure  you  can  train  the  sales  people   yourself  and  discuss  what  support  they  need   38
  39. 39. Step  5.     Establish  presence   •  Market  entry  costs  are  inevitable   •  Returns  will  only  come  later   •  The  more  determined  you  enter   the  market,  the  quicker  the  returns   will  come,  the  lower  the  risks  and   the  quicker  you’ll  earn  your   investment  back   •  Be  on  top  of  things   39
  40. 40. Market  entry  costs   Independent  of  market  size   •  Market  orientation   •  Market  research   •  Product  adaptions   •  Translations   •  Partner  selection   •  Partner  contracting   •  Partner  training   •  Making  marketing  materials       Dependent  on  market  size   •  Launch  campaign   •  Brand  awareness  campaigns   •  Sampling/promotions   •  Sales  efforts  or  sales  support                40
  41. 41. Market  entry  costs  depend  on  your  basic  type   of  offering  and  the  complexity  of  the  market   1.  Simple  product,  perhaps  differences  per  country,  no  customisation     2.    Service  that  can  be  provided  electronically  or  from  your  homeland     3.  Product  with  installation,  integration  or  training     4.  Customised  product     5.    Customised  service  or  solution  (e.g.  with  local  consultants)     41
  42. 42. Estimated  costs  to  enter  a  new  market     (before  any  substantial  revenue  comes  in)   Nr.   Offering                /            Market   Simple   Average   Complex   1   Simple  product   20,000  USD   50,000  USD   80,000  USD   2   Service  from  abroad   30,000  USD   50,000  USD   80,000  USD   3   Product  with  service   70,000  USD   100,000  USD   150,000  USD   4   Customised  product   70,000  USD   100,000  USD   150,000  USD   5   Customised  service   100,000  USD   150,000  USD   250,000  USD   42 Hours  based  on  a  all-­‐inclusive  cost-­‐based  rate  of  100  USD/hour,  travel  on  economy  flights  and  4*  hotel  
  43. 43. Investments  versus  returns   Nr.   Type   year  1   year  2   year  3   year  4   year  5   1   Simple  product     2   Service  from  abroad     3   Product  with  service     4   Customised  product     5   Customised  service     43
  44. 44. How  to  estimate  your  returns?   Internally   •  What  is  your  gross  margin  on  your  products  or  services?   •  What  costs  do  you  have  for  local  distribution  or  delivery?   Externally   •  What  is  your  market  share  in  your  home  market?   •  How  long  did  it  take  you  to  get  that  market  share?   •  What  is  the  expected  volume  in  your  target  market?   •  What  market  share  do  comparable  competitors  have?   •  What  is  the  market  share  in  comparable  sectors  of  your  local  partners?   44
  45. 45. Plan  first  before  you  enter  a  new  market   45 Alliance  experts  has  sample   budgets  and  calculation  tools   to  estimate  the  costs  of   market  entry  and  the   returns.  Book  an  export   strategy  session  with  us  to   use  our  tooling  for  your   specific  situation.   Complexity     of  your  target   country   Your  type     of  offering   Estimate  your  costs   for  market  entry   Internal   External   Estimate  your  returns   Determine   your  payback     time   Additional   margin   Potential   volume  
  46. 46. How  to  reduce  your  need  for  financing?   46 Market  entry  costs  are  inevitable   Establish  presence  quickly   This  way  you  reduce  risks     and  competition   Revenu  comes  in  faster   You’ll  earn  back  your  investment   quicker  
  47. 47. Be  focused,  reduce  risks   •  Ask  local  partners  for  their  roll-­‐out  plan   and  estimates.     •  Ensure  partner  commitment  and   availability  for  training  before   concluding  the  deal   •  Be  on  top  of  things:  have  somebody   stationed  nearby  and  be  available   throughout  your  partner’s  office  hours   •  Follow  the  local  market  developments   closely   47
  48. 48. Subsidies  for  export   •  Many  countries  have  subsidies  for  export   or  help  local  companies  in  a  different  way   •  Collaboration  with  other  companies  to   enter  a  new  market  will  often  be   facilitated   •  Ask  a  local  export  specialist  for  the   applicable  arrangements   48
  49. 49. Conclusions   •  Entering  a  new  market  will  always   cost  you  time  and  money.  Plan   before  you  act!   •  Don’t  let  coincidence  guide  your   steps:  do  a  country  selection,   market  research  and  a  broad   partner  selection   •  Find  people  that  can  help  you   bridge  cultural  differences   49
  50. 50. Alliance  experts  is  a  global  network  of     business  development  specialists   50
  51. 51. We  help  companies  enter  new  markets     profitably   We  are  nearby  in  your  home  country  and  well  acquainted  with  the  country   where  you  intend  to  go.  Use  our  support  in:     •  Strategic  export  advice   •  Market  research   •  Search  and  selection  of  local  partners   •  Negotiation  support   •  Local  representation     Look  for  more  information  on  www.allianceexperts.com   51
  52. 52. Free  resources  available  for  you   •  This  presentation  as  a  pdf   •  Our  database  with  important   metrics  of  64  countries  that  are   suitable  for  SME’s  to  export  to   •  The  article  ‘What  is  the  ROI  of     your  international  strategy?’     52 Download it now from www.allianceexperts.com (click here) Pictures  credits  to  www.freedigitalphotos.com  and  ddpavumba  (slide  2  &  3),  Renjith  Krishnan  (slide  9,  10,  37)  and  Stuart  Miles  (slide  9  &  17)    

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