Taking your Business Global How to Develop a professional Export Plan Khaled Bekhet,DBA Researcher, Maastricht School of Management (MSM) Cairo, 20.02.2013
1- Why Should Your Company Go Global?• Going global is the planned process of contracting to do business in foreign countries.• According to Howard Lewis III and J. David Richardson’s report Why Global Commitment Really Matters!, companies that export grow faster and fail less often than companies that don’t. And their workers and communities are better off.• The biggest draw is the growth and an interest in going where the customers are.
Global modes of entry (strategies) Direct Exporting, international distributors IndirectExporting, EMC, ETC, Fra Global Establishing nchising, Contractual Strategies international locations agreements Joint ventures
The Value of a Plan• Benefits: – Identifies strengths and weaknesses – Prevents losing track of export strategy – Allows for financing to build up a businesses’ export department – Enhances communication – Assigns responsibility – Provides for result measurement
The Value of a Plan• Additional Benefits: – Challenges assumptions which can give insight into new opportunities – Assures a commitment to exporting
Length of the Plan• Only needs to be a few pages to start, you feel exited to continue• The plan will evolve in detail and you will start to modify and improve.
The Planning Process• Questions to ask yourself (Product or Service): – What need does my product or service fill in the global marketplace? – What modifications need to be made to adapt to an overseas market? – Do I need a special license or certificate from exporter’s/importer’s government? – Do I need to modify my packaging/labeling? – How much will it cost to get the product to the market? – What will be my pricing strategy?
The Planning Process• Questions to ask yourself (Promotional, Management Issues): – What modifications will be necessary to my website to ease the purchasing process? – What (if anything) is necessary to protect my intellectual property? – Why am I pursuing international customers? – How can I use the lessons I’ve learned in my previous or others’ international sales experiences to make my new export plan stronger?
The Planning Process• Questions to ask yourself (Management Issues) – Am I fully committed to exporting? – How much time will it take for implementation? – Is my production capacity high enough to meet the new demand resulting from international sales? – Is my personnel capacity adequate to meet the new demand of international sales? – Will I need additional financing? • Where will it come from? • How can I become familiar with government export assistance finance programs that I may qualify for?
The Planning Process• Questions to ask yourself (Management Issues): – What will my export effort cost? – What are my projected international sales for the first year? – What additional expertise in international trade will I need and where will I get it? • Webinars, How-to books, other classes, freight forwarders – What sales channels could I use? – How will I handle returns or warranty issues?
The Planning Process• Questions to ask yourself (Management Issues) – Will I attend any trade shows or join any trade missions sponsored by the government for which I will need to plan for in the first year? • Where will I get information on these events?
The Planning Process• Questions to ask yourself (Management Issues) – What credit policies will I use • Cash in advance? Letters of credit? – How will I ship the product? • Freight forwarder? Postal service? Air/Sea? Customer’s Responsibility? – How will I make use of government export assistance programs? • Export subsidizations, IMC (For example) – What documents will I need to become familiar with to export? • Export License • Certificates of Origin….
The Planning Process• Questions to ask yourself (Management Issues) – What countries am I prohibited from exporting to? – What countries require a license to export my good to? – What is the minimum order I will sell and ship? • One unit? One container? One box? – What will be the elements of my Export Action Plan?
Part 1: The Introduction• Name of your company – Put your company name• Product to be exported – Household Refrigerators (841821)• Why you are going to begin exporting – A mission statement• Limit to a few paragraphs
Part 2: Goals• Examples: – Use direct export to increase company sales by 7% in two years – Entering markets outside of Egypt where 97% of buyers live. – Improve product lines, marketing and management by learning from discerning customers in the new markets where we will sell – Locate one new distributor in two new country markets within two years of selling via direct export.
Part 3: Financial & Resources Budget• Examples: – Annual capital budget equal to $25,000, which will cover assistance finding distributors and participation in a government-sponsored trade show or overseas trade mission – A decent web site that will be further internationalized with the help of professional designers. – A full-time staff position
Part 4: Non-Financial Resources• Examples: – Several staff members have travelled abroad – One staff member will take courses on how to export – One staff member will research free and low-cost government export assistance
Part 5: Current Trends and Practices• Examples: – Revenues have grown 4 percent for the past four years – Our product is sold through a network of domestic distributors – Occasional unsolicited international sales, all to individual buyers but with a few inquiries from potential distributors
Part 6: Production Capacity• An example: – Capacity to increase production 30 percent without additional capital investment.• Customize for your business and products
Part 7: Target Markets• Examples: – Will pursue all leads generated by screening efforts and will also investigate Nigeria as a regional market for West Africa. – Will investigate Nigeria and other country markets for Household Refrigerators by using available market research including those from government sources. – Will look at past 4 years for effects of recession and 2013 partial year for signs of recovery. – Will look at Egypt-Free Trade Agreement countries for advantages created by zero tariff on importation of goods. (COMESA) – Will look at shipments of Household Refrigerators from Egypt to other countries and the average selling price to help determine where the demand is and whether our price competitive – Will look at market size, GDP, national debt and currency reserves – Will ask Egypt Commercial Service Officers in Egyptian embassies to help find a distributor
Part 8: Your Risk Profile• Customized for your business• Example: – Our risk is mostly centered on non-payment or goods held up in foreign customs. Our cash in advance policy largely mitigates risk. – As we get close to finding one or more distributors, we plan to use the services of our government export promotion service. By better understanding the shipping and export documentation processes, we will minimize potential risk from customs clearance problems.
Part 9: Credit Policies• Examples: – Cash in advance via transfer – Will check with our bank issuer to make sure account is in good order before shipping goods – Will consider and investigate providing terms for sales to distributors – Will become familiar with letters of credit for use with larger orders from distributors
Part 10: Return Policies• Customize for each product• Example: – Will provide full refund or replacement for lost goods or goods damaged in transit, our Web site will reflect policy
Part 11: Shipping• Examples: – Our staff will handle shipping tasks and will ship within 35 days of receiving order and verifying payment – We will primarily ship by see as a lower cost option• Sample shipping services: – USPS – DHL
Part 12: Freight Forwarder• What will the forwarder do?• What will it cost?• Look for local licensed freight forwarders
Part 13: Export Licenses• Check if export licenses needed for specific markets.• Only about few of Egypt exports require a license (military use, …)• Check for exporter responsibilities under Egypt law
Part 14: Health Certificates• Product may require a health certificate issued by Egypt Ministry of Health or Ministry of Agriculture.• Egypt Customs Website
Part 15: Language Laws• Be sure that the product packaging includes all necessary languages• Consumer goods may require that ingredients are displayed and that the phrase “Made in Egypt” is included in the national language on the packaging
Part 16: My HS Code• Check the Egypt Customs Web Site to find out your product’s number.• Example: – 841821.3 is the HS code for Household refrigerators, compression type
Part 17: Intellectual Property• Examples: – Will investigate international protection for my trademark with the Egyptian Official Patent and Trademark Office – Will file for patent protection in countries where we have distributors or agents.
Part 18: Export Documents• Example: – What are the documents we need to be familiar with including the Commercial Invoice, Bill of Lading, and Certificate of Origin? – Check Chamber of Commerce, Egyptian Export- Import control information center – Egyptian Customs Website and Central Census websites
Part 19: Pricing• Examples: – Our pricing strategy is mass product and mass pricing. – We will offer to calculate the full landed cost to the customer purchasing one or more of our products. We will make it clear in our communications and on the Web site that the customer is responsible for paying all applicable duties, taxes, and shipping costs. – For larger orders to say, Nigeria, we calculate the cost of shipping one package at $ 24.75 per package including trucking, freight forwarder fee, documentation fee, banking fee and insurance. With a market price of $227 per package, minus transportation costs and distributor fee, we will have about $202.25 to cover production, marketing, and profit.
Part 20: Website Tactics• Examples: – We will make the following changes within the next 30 days: • Internationalize the site by adding text on homepage welcoming international buyers. • Add a currency converter on the homepage. • Add text regarding duties and taxes and that it is the buyer’s responsibility to pay them. Include sample duties and taxes for select countries • Say that all prices are stated in U.S. dollars but inviting potential distributors to use currency converter link, which will be located next to each order placement button. • Add international buyer testimonials as they become available. • Add shipping by see cost as a lower cost option. • Include clearly written returns policy. • Invite inquiries from potential distributors.
Part 21: An Action Plan• Example on next slide
Action PlanPriority Objective Task Resources Schedule Evaluation Review export plan Your time or staff Next one-two 1 Create or revise export plan template and customize for your business time to write the plan weeks Completion of plan Use template to identify Task in-house or Complete within 2 Internationalize Website enhancements contract Web folks 30 days Evaluate international transactions Identify what you Learn more about international Review different need to know and Complete within 3 transactions resources who in the company 60 days Number of error free transactions needs to know it Identify staffing and Develop database of international Create database and Number of messages; number of new frequency of Start within 30 4 prospects and customers and email new product offers email template for sending promotions messaging; and free days potential prospects; sales samples Secure certificate from ISO, CE, ..if Understand the process, Complete within Certificate in hand if needed by importing 5 needed turnaround time, etc. Staff time 14 days country Determine whether product Complete within 6 needs an export license Review government lists Staff time 14 days Accurate knowledge of this item Check Trade Staff time; no Learn how to calculate duties and Complete within Accurate calculation and communication to 7 taxes Information Center’s Website: export.gov charge for 14 days buyer information Review recommended Staff time; no Identify for Tariff code for your Complete within Accurate completion of shipping 8 products links in Customs information charge for 14 days documents information Calculate landed costs Complete within 9 Establish pricing and returns policy and make revenue projections Staff time 14 days Establish revenue benchmarks Understand the services Meet your local government Complete within 10 export resource available to your company Staff time 30 days Value of assistance provided Use funds available Complete within 11 Research a new market from IMC and export subsidizations Staff time 120 days Go/or no go decision Travel to the market with help Meet potential Complete within 12 from your government export resource distributors $22,000 first year New revenue
Sources of Assistance in Going Global• Make yourself known to: – Commercial Attaches in Egyptian embassies in all target countries. – Engineering Export Council of Egypt (EEC-EG) – General Authority for Export and Import Control – Federation of Egyptian Industries (FEI) – Industrial Modernization Center of Egypt (IMC) – Egyptian Exporters Association-EXPOLINK – Trade specialists – Freight forwarders
Sources of Financing for Going Global• Export Credit Guarantee Bank of Egypt• Trade finance houses
References-Small Business Management: A Planning Approach, 2009, Joel Corman, Suffol University, Emeritus Robert, Lussier Springfield College, Lori Pennel, Bunker Hill Community College.-Breaking Into The Trade Game: A Small Business Guide to Exporting, 2005 was produced under the guidance of Luz A. Hopewell, Deputy Associate Administrator, Office of International Trade, U.S. Small Business Administration, Christopher Eskelinen, Export Development Specialist.-Your US-BRAZIL Trade Assist, 2006-2011 rosalienebacchus.com