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   Successful Exporting – Going to New
   Markets - by Freddy Dreher


     The 10 Golden Rules for successful exporting

    Preface

I have successfully managed or advised international companies for 27 years. Most of these companies became market leaders in their industry. Several subsidiaries were  successfully established under my leadership. I bought companies and integrated them into the root business. Furthermore, I was lucky to work with open-minded owners and managers, ready to listen to my suggestions. Some of the companies I worked with have been given as references by the US Senate, IBM and other organizations. Hence, I have accumulated a lot of experience while doing my job. This article was written by a practitioner for practitioners.

Follow these golden rules to avoid being met by unexpected surprises. Your success will come faster and with less risk. The article contains 3 chapters:

Chapter 1
Why exporting is essential for companies
Chapter 2
How companies start to export 
Chapter 3
The 10 Golden Rules
If you follow these golden rules, you can become part of the successful exporting community. Fine tuning, product development and communication techniques are needed to  make it to the Champions League. The techniques to make it to the Champions League are not the subject of this article.

Chapter 1

o Why is exporting essential for your company ? In the context of this article, exporting is not random selling abroad, but the development of a new foreign market for your company.
o When you export, you are less dependent on the economic fluctuations of the home market.
o When you export, you are less vulnerable to competitor attacks.
o If you only sell domestically, an international competitor with local price dumping can attack much easier.
o When you export, you create larger economies of scale, can produce more and thus are more productive.
o When you export, you reduce structural and development costs through economies of scale.
o When you export, you learn from other markets. This leads to an increase in knowledge and  you then become more competitive . Your company will become more competent and agile.
o A company that can assert itself in tough markets is a competitive company. If you cannot succeed in export, your company might not be productive or competitive.
o If you supply technical products to OEMs, you have to follow their clients' needs and offer technical support in their geographic area. If you don’t, a competitor will take your place as the supplier.
o If you are already successfully established in a difficult export market, then this serves as a reference and exporting should be easier. You have successfully completed the learning process.
o The value of your company will increase.
o You're only successful if you are clearly perceived by your customers and competitors as such  and if your customers repeatedly order from you.

Chapter 2

How companies start to export

For small companies, often the simple route to exporting is anyone from abroad who has applied to become a dealer or an agent. Sometimes, you will be contacted directly by a customer. This is logical, that is why you attend trade fairs. Given this opportunity, you are in the export business without having made any fundamental considerations. Initially, this usually goes well, the first orders arrive, however, you soon realize that it is somehow not working. Difficulties arise which you are not prepared for. The export business was strategically planned - but wrongly planned - the route to disaster. If you are planning to export but forget to consider the basics, you may enter into a high risk scenario without knowing it. These cases are real money-burning machines. I will give you one self-experienced example.

Initial situation

A Spanish company manufactures all kinds of vending machines and payment systems. The company is extremely modern, has an extremely modern production facility and very competent development departments. The company is the undisputed market leader in Spain and Portugal. It is quite successful in markets such as the UK, Australia and South America. It is a company on the rise, with more than 1000 employees. Germany is their largest potential European market. hence, they wanted to succeed there and founded a sales company dedicated to selling the complete offering. Fully confident in the products, the competitiveness and the financial viabilty, the management was sure that success was only a question of time. They knew that the German market is extremely difficult, they knew it would take a long time and patience. The Board of Directors was extremely realistic. After the company was founded, the homework was done properly. They produced German catalogues, very good German instructions and committed sales people who offered the products in all possible markets. In the first year, there were many successes because customers wanted to test the products. Everything went very well. Obviously at a loss, but this was budgeted for. Also, the well-known international auditing company was surprised by these first successes.

In the second year, disaster struck because many customers sent back the test machines. The first complaints from customers that the machines were not ready for use were not taken  seriously. The Managing Director was under pressure to succeed, fired a sales person, made extreme price concessions and tried to succeed in all of the different markets.The Managing Director spread himself and his company's energy too thinly in the different markets. He promised improvements to customers without keeping the promises. The losses became a nightmare! In the third year, conflicts arose between the German Managing Director  and the Spanish Export Director. The Managing Director was dismissed. The company had no leadership. The accounting and general administration were getting worse. The auditing company made it clear that the company needed to file for bankruptcy, soon. The losses amounted to several millions.

They looked for a new Managing Director in order to turn around the disastrous situation. I took on the challenge and we worked together. It took years but, finally, we created a marvelous success story, becoming the market leader in two sectors.

But why did this disaster happen?

Some basic rules (golden rules) were not taken into account at the beginning.

Problem 1: The products were not suitable for the market.

In Germany, the requirements for the machines were slightly different compared to the countries where the company was already extremely successful. Do you think that a machine selling cigarettes is the same in all countries? Far from it. There was a small difference here which was fatal. In Spain, the machines belong to the bar owner or to small operators handling a few hundred machines at most. The same was true for the UK, South America, and the rest. The owner is familiar with almost every machine. The time required to fill the machines is not so important. Also, protection against vandalism is not so important because the locations are known to the owners. In Germany, an ATM operator has many thousands of machines, up to 80,000 machines. The machines are filled by employees on  piece work and the vending machines stand anonymously. This has the consequence that protection against vandalism and the speed of the filling process become extremely important factors. Attention was not paid to them. When the Managing Director mentioned this diplomatically, the Spanish Export Director did not take it seriously enough. He wanted to sell his standard products. He looked at the critical comments as an admission of incompetence.

The disaster was caused by the lack of market knowledge and, consequently, an unsellable product allied to the ignorance of the management.

Problem 2: Managing Director and Management

As in the Spanish company, almost nobody spoke English or German and they were looking for a Managing Director with sales experience and especially good knowledge of Spanish. It was decided to employ a Managing Director who could speak fluent Spanish; unfortunately he was not prepared for a task of this complexity. His counterpart, the Spanish Export Director, was not capable of coaching the chosen Managing Director to make him capable of running the company.

Problem 3: Dispersal, no priorities

The company had many different products dedicated to serve very different markets, both in B2B  and OEM. Some products were more electronic in nature, others more mechanical and software problems always reared up. In short, the product portfolio and the portfolio of customers were extremely complex. It was impossible to operate immediately in all these markets. They did not select one or two markets (with the associated products) to be served first. They did not focus their marketing and sales efforts and the necessary product development on just one or two markets. The result was an accumulation of different problems which were no longer manageable, either for the subsidiary or the headquarters. In the eyes of the Spanish parent company, the German branch was a single Bedlam only bringing negative news.

Conclusion

A few errors are enough to doom a successful company when they try to export and do it badly. Millions have been lost and years have been wasted. In Germany, the company became well- known, well-known for being bad. They were further away from success than they were at the beginning.

Chapter 3

The 10 Golden Rules for successful exporting

Here are the fundamental questions which you need to ask yourself prior to entering into a greater commitment. It is not a marketing plan but perhaps clarifies whether or not you have a chance of being successful. The word product here stands for your offering,  whether you sell products, services or technology.

Rule 1 Which market you are aiming for?

Selection of the country or region

Identify those export markets that are similar to your home market and those which differ from your home market. Export markets that are similar to your home market can be characterized as follows:

• You can communicate in your native language
• Competitors are almost the same as those in your home market
• The customers are almost the same or have the same requirements from your products.

The more you can identify these three points, the easier your project and the lower the risk.

Examples:

For French companies, this holds true for countries such as Morocco, Tunisia, and most of Belgium.
For German companies, this applies to Austria, Switzerland, and the Netherlands with fewer advantages in Poland, Czechia, Slovakia, Denmark and Sweden.
For UK companies this applies to countries such as Ireland, little old colonies, and, depending on the product, Canada, South Africa, the United States and Australia.
Markets which differ linguistically, culturally and by their market structure from your home market are more complex and challenging. In these cases, you must proceed more prudently and be very self-critical. Think about which markets you want to export to. Identify what you know about each one of these markets, such as:

• The size of the market and its composition
• Which market exists for each of my products?

Competitors
• Who are they
• Where are they from
• Who is successful
• Who is less successful
• If you know, why

Customers
• Who are the potential customers and how do they rank
• What do you know about these customers and their working practices
• Standards and industry standards.
• Do you meet all the norms and standards? Do not forget local working practices which are as important as legal obligations.

Mentality
• Is the mentality similar to that in your home country?
• How do you view the mentality of the people in this market and their expectations of a supplier? This is very important because, ultimately, you sell your products to people and they have expectations from business partners.

Language

• Do you have the linguistic ability in your company to communicate with this market?
• Why do you want to export to this market?
• How important is a market to you and why? This issue avoids prioritizing unwisely. If you ask these questions and store the answers in a spreadsheet then you will  have a quick checklist for each market. You might still want to classify a market as top priority, even though you know little about it. Why is this useful? It is a big market or a key market. At least you know that your knowledge is not sufficient and you need to work on it. It is a rule: never enter into a market if your knowledge is lacking.

Rule 2 Your products - critical highlighting of your offer.

Are my products appropriate for this market? Even if you sell your products very successfully in other countries, it may be that, in other countries, these products are virtually unsellable. There may be good reasons and that is why this question is extremely complex. Often,  major misjudgments are made here.

Standards

I presume that you have checked that your products fulfill all legal standards. This is a basic requirement. The question of whether your products comply with industry standards is much more difficult. Sometimes, these standards are not filed, they are born from habit. These might be informal standards. Imagine that your products have to communicate with peripheral devices. Then, check if your products can communicate with the devices used in this specific market. The software or hardware being used may be different to those you know. Talk to the relevant associations and potential large customers.

Country-specific handling of products produces different criteria for product assessment. The way that customers handle your products may be different to your domestic market. These small differences can have an immense impact. Some variations are easy to recognize, whereas other differences are very subtle. The problem is that you often only recognize these differences if you are already active in the market. Another problem is that customers will not draw your attention to the problem. He does not know about differences. However, there is a method that is simple and effective. Identify what the customer is doing with your products and how he uses them. Find out who works with the product and how the maintenance is done. What training do the technicians have? Recognize the differences from your own market and consider whether this could have an impact. Discuss these differences with any potential customers. The appearance of a product is always very important, even if it is a technical product. If appearance is relevant, then everything around the product is relevant, such as packaging and literature. What are the habits and perceptions of the market with regard to the aesthetics of your products. Be aware that aesthetics may be extremely important for purely technical products. The shapes and color language of technical products can cause subliminally much positive and negative response.

You want to export – you need to recognize such differences and you need to find solutions. The exception with exporting is that you set completely new standards.

Example:

If you offer a car that runs without fuel or electricity for a low price and you want to sell it in the UK, you can still sell it if it is left hand drive.

Rule 3 Are your prices competitive?

The market determines the price of a product. That is an extremely important statement in any sphere of business. Of course, this depends on the nature of the products. If there are already similar products in the market, which is almost always the case, then the market has a perceived value. This is a given fact. Forget arguments about your products being beautiful, better and
longer lasting. The market does not know these arguments because it does not know your products. Your customers will always compare their own price experience with your offer.
What is the current market price? I don't mean a  competitor's price list. I mean the real price, which is affected by payment terms and Incoterms. Do not forget market entry fees.

Rule 9 Strategy, marketing and image

Depending on your circumstances and budget, you need to develop a strategy:
• Buy a competitor
• Establish a subsidiary
• Send sales people into the country
• Work with distributors
• Search for agents
• Much more options are available, depending on your specific needs. No matter what you decide, you need to do it consistently. Strive for quality, not for speed. Your first steps are decisive in the long term. Think carefully about each option before you decide on your strategy.
• Marketing and communication are just as important as your products because your products are completely unknown. Adapt your marketing and communication to the local market. A major issue which is seldom considered is image. A positive corporate image is like a life insurance policy in difficult times. A positive image helps you to succeed. A bad image is like tar on the skin, very difficult to get rid of. I took over companies with a bad image several times. I know how long it takes and how difficult it is to change it to a positive one. You start from zero, you have no image - it's up to you and your behavior to create the image you want for your business in the new market. I have always emphasized to my staff to behave and  communicate in a way that the image never gets affected negatively. The goal was always to improve the image. No selling, no communication, no advertising that compromises the image, no statements or promises which are not respected. To comply with this and to hold out is difficult because you have to let opportunities pass you by  sometimes. Your behaviour with customers and suppliers must meet the highest standards. What do I mean when talking about image? My stakeholders must believe that they are dealing with a respectable, professional company, meeting high quality and technical standards and on whose statements they can rely. The end user needs to have a clear vision of what the company and its products stand for. This is not a statement about pricing, nor does the company need to accept all the wishes and requirements of every client. But it does mean that the company deals seriously with the customer's requirements. It also means that the company is respectable and only deals with respectable customers. For example, customers who pay invoices on time give a positive image.

I want to take a small excursion into the car industry, to illustrate the importance of image. There is much discussion on why the French car industry does not sell enough. Everybody talks about production costs while nobody talks about image. Most German car manufacturers have a certain image for being:

• Reliable
• Technically advanced
• Sports perfprmance
• High quality
• Safe to drive

You can easily identify who stands for what with successful manufacturers, as is exemplified by Audi, BMW, Mercedes and Volkswagen. For the less successful manufacturers, it is difficult to clearly identify it, think about Opel or Ford. If you do the same exercise for Renault, Peugeot or Citroen, you may find out why many consumers want to buy a car from another manufacturer, coming closer to the image they are looking for. Successful corporations know that sales are generated by the combination of:

• Image
• Product (your offering, your problem solution)
• Competiveness
• Approach to the customer

Rule 10 Make two Business Plans

Black and White – optimistic and negative scenario-based. Before you start, establish two business plans: one with a realistically optimistic approach and one with a negative approach. Both plans are important. The optimistic business plan is, of course, your motivation, your goal. The negative business plan helps you to create a worst case scenario. It helps you to evaluate the risks. As I mentioned before, if we want success, we need a long-term strategy. This means that you can even suffer a worst case situation without having to completely change the long-term strategy or panic. If you follow this rule, then you should be protected from too much risk and the probability of success is much higher. Also, the total cost will be lower because the project has been well thought out. Potential hazards are known to you.

Rule 1 to 10 Not paying attention to each of the 10 Golden Rules can lead to failure.

Outlook
You are starting to export. This brings you into the Premier League of SMEs. Export success improves your economic stability and gives your company a mental push. This is a good achievement and all your team can be proud of it. Do not fool yourself, the first export success does not mean that you belong in the Champions League. Companies belonging in the Champions League worked hard for many years and adapted with time and experience. Members of the Champions League are trend setters, they are copied by their competitors and they set truly international product standards. Personally, I was twice part of the managing team leading companies into this category. The strategy is closely connected to product design, management style, mental adjustment and a lot of work for SMEs without an international structure. Not to forget about organization, CRM, competiveness, communication and the famous image. Talking about this step is not the goal of this article.

Closing remarks

In writing this article, I hope that I can familiarize you with the essentials for successful exporting. As a German, living in France, who loves the country and its people, I hope that this country is overcoming its export crisis. I want to thank all the entrepreneurs and managers who shared their experiences with me. Only with these people’s confidence was it possible to bring their companies to the road of success.


We are very grateful to Freddy Dreher of http://www.ceo-europe.com for writing this article. It has been heavily copy edited by a native speaker but retains the original meaning.


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