The Value Of Planning
Many companies begin export activities haphazardly, without carefully screening markets or options for market entry. While these companies may or may not have a measure of success, they may overlook better export opportunities. In the event that early export efforts are unsuccessful because of poor planning, the company may even be misled into abandoning exporting altogether. Formulating an export strategy based on good information and proper assessment increases the chances that the best options will be chosen, that resources will be used effectively, and that efforts will consequently be carried through to completion.
The purposes of the export plan are, first, to assemble facts, constraints, and goals and, second, to create an action statement that takes all of these into account. The statement includes specific objectives; it sets forth time schedules for implementation; and it marks milestones so that the degree of success can be measured and help motivate personnel.
The first draft of the export plan may be quite short and simple, but it should become more detailed and complete as the planners learn more about exporting and their company's competitive position. At least the following ten questions should ultimately be addressed:
- What products are selected for export development? What modifications, if any, must be made to adapt them for overseas markets?
- What countries are targeted for sales development?
- In each country, what is the basic customer profile? What marketing and distribution channels should be used to reach customers?
- What special challenges pertain to each market (competition, cultural differences, import controls, etc.), and what strategy will be used to address them?
- How will the product's export sales price be determined?
- What specific operational steps must be taken and when?
- What will be the time frame for implementing each element of the plan?
- What personnel and company resources will be dedicated to exporting?
- What will be the cost in time and money for each element?
- How will results be evaluated and used to modify the plan?
One key to developing a successful plan is the participation of all personnel who will be involved in the exporting process. All aspects of an export plan should be agreed upon by those who will ultimately execute them.
A clearly written marketing strategy offers six immediate benefits:
- Because written plans display their strengths and weaknesses more readily, they are of great help in formulating and polishing an export strategy.
- Written plans are not as easily forgotten, overlooked, or ignored by those charged with executing them. If deviation from the original plan occurs, it is likely to be due to a deliberate choice to do so.
- Written plans are easier to communicate to others and are less likely to be misunderstood.
- Written plans allocate responsibilities and provide for an evaluation of results.
- Written plans can be of help in seeking financing. They indicate to lenders a serious approach to the export venture.
- Written plans give management a clear understanding of what will be required and thus help to ensure a commitment to exporting. In fact, a written plan signals that the decision to export has already been made.
This last advantage is especially noteworthy. Building an international business takes time; it is usually months, sometimes even several years, before an exporting company begins to see a return on its investment of time and money. By committing to the specifics of a written plan, top management can make sure that the firm will finish what it begins and that the hopes that prompted its export efforts will be fulfilled.
The Planning Process And The Result
A crucial first step in planning is to develop broad consensus among key management on the company's goals, objectives, capabilities, and constraints. Answering the questions listed in table 1-1 is one way to start.
The first time an export plan is developed, it should be kept simple. It need be only a few pages long, since important market data and planning elements may not yet be available. The initial planning effort itself gradually generates more information and insight that can be incorporated into more sophisticated planning documents later.
From the start, the plan should be viewed and written as a management tool, not as a static document. For instance, objectives in the plan should be compared with actual results as a measure of the success of different strategies. Furthermore, the company should not hesitate to modify the plan and make it more specific as new information and experience are gained.
A detailed plan is recommended for companies that intend to export directly. Companies choosing indirect export methods may require much simpler plans. An outline of an export plan is presented in table 1-2.
Approaches To Exporting
The way a company chooses to export its products can have a significant effect on its export plan and specific marketing strategies. The basic distinction among approaches to exporting relates to a company's level of involvement in the export process. There are at least four approaches, which may be used alone or in combination:
1. Passively filling orders from domestic buyers who then export the product.
These sales are indistinguishable from other domestic sales as far as the original seller is concerned. Someone else has decided that the product in question meets foreign demand. That party takes all the risk and handles all of the exporting details, in some cases without even the awareness of the original seller. (Many companies take a stronger interest in exporting when they discover that their product is already being sold overseas.)
2. Seeking out domestic buyers who represent foreign end users or customers.
Many domestic and foreign corporations, general contractors, foreign trading companies, foreign government agencies, foreign distributors and retailers, and others purchase for export. These buyers are a large market for a wide variety of goods and services. In this case a company may know its product is being exported, but it is still the buyer who assumes the risk and handles the details of exporting.
3. Exporting indirectly through intermediaries.
With this approach, a company engages the services of an intermediary firm capable of finding foreign markets and buyers for its products. Export management companies (EMCs), export trading companies (ETCs), international trade consultants, and other intermediaries can give the exporter access to well-established expertise and trade contacts. Yet, the exporter can still retain considerable control over the process and can realize some of the other benefits of exporting, such as learning more about foreign competitors, new technologies, and other market opportunities.
4. Exporting directly.
This approach is the most ambitious and difficult, since the exporter personally handles every aspect of the exporting process from market research and planning to foreign distribution and collections. Consequently, a significant commitment of management time and attention is required to achieve good results. However, this approach may also be the best way to achieve maximum profits and long-term growth. With appropriate help and guidance from trade offices, freight forwarders, international banks, and other service groups, even small or medium-sized firms, can export directly if they are able to commit enough staff time to the effort. For those who cannot make that commitment, the services of trade consultant, or other qualified intermediary are indispensable.
Approaches number 1 and 2 represent a substantial proportion of total sales, perhaps as much as 30 percent of exports. They do not, however, involve the firm in the export process. Consequently, this guide concentrates on approaches 3 and 4. (There is no single source or special channel for identifying domestic buyers for overseas markets. In general, they may be found through the same means that buyers are found, for example, trade shows, mailing lists, industry directories, and trade associations.)
If the nature of the company's goals and resources makes an indirect method of exporting the best choice, little further planning may be needed. In such a case, the main task is to find a suitable intermediary firm that can then handle most export details. Firms that are new to exporting or are unable to commit staff and funds to more complex export activities may find indirect methods of exporting more appropriate.
An exporter may also choose to gradually increase its level of direct exporting later, after experience has been gained and sales volume appears to justify added investment