In practice, small firms may begin exporting simply through the receipt of unplanned orders from abroad, rather than as a result of any formal management decision or export strategy, but this seldom leads to successful long-term sustainable export growth and or to expansion of a particular market
In most instances only a carefully planned approach provides the surest way for companies to be successful in the export market. Management may need to devote a considerable amount of time and money to the start-up procedures and may only see the benefit of their export endeavours some 24 - 36 months after first endeavouring to enter the export market
In reality, one finds that only a small percentage of companies venturing into the international trade arena is successful in obtaining export orders, and a great percentage of these orders do not result in long-term sustainable export growth.
Companies should be certain about:
The reasons why the company has decided to export
The benefits to be derived from exporting
The proposed initial action plan
What additional finances would be required in order to enter into the costly world of exporting
If you are considering exporting because your company is not flourishing in the domestic market, then perhaps reconsider entering into the export market.
Only companies that have enjoyed a successful track record locally should export.
When you consider exporting, it is understandable that you would draw on past knowledge and expertise/experience gained in the domestic market. Experience would expose the hidden pitfalls and would teach you about best business practice. Basic business principles that you apply to the domestic market would be applied to the international market too.
No company with less that three - five years experience in the domestic market, should consider venturing into the international market place. If you have not had a successful track record of more than three - five years in the South African market, then surely you would not be able to successfully develop an international presence. Entering into an international market means dealing with different kinds of customers, environment, legal systems, economic and international regulations that may be very different from those in the domestic market.
International market development is a costly exercise. Apart from the infrastructure costs of setting up an export department, companies need to invest in appropriate market research, suitable promotional material, product and or trademark registration, increased production costs and means, etc. Certain products may need to be modified to meet the requirements of a particular market, and labelling and/or packaging may need to be adapted to conform to foreign government, regulations or foreign buyer preferences. In addition the pipeline between expenditure on raw materials, production, marketing and distribution, and the receipt of proceeds is much longer for international sales than for the domestic sales, financing of the operation may be required for much longer periods of time.
Companies therefore need to have a sound financial base to be able to cope with the additional demands on resources that comes with exporting.
If your product has not been accepted locally, then the likelihood that the product will not be accepted internationally is strong. You should be in a position to be able to supply and service the export market as you do the local market. You should ask yourself:
Is my product in demand in a foreign market, in either its original or modified form?
Will my product meet required quality standards e.g.. European Union standards (EU) , Food and Drug Administration Standards (FDA), Hazardous Analysis and Critical Control Point (HACCP)
Can my product be easily transported
Can I provide the same after-sales service or product maintenance that I supply in the local market, into the intended international market
Ask yourself if you have the capacity to carry additional stock should suppliers be unable to provide immediate deliveries. My firm has enough warehousing space to sufficiently store finished goods.
Foreign buyers need to be confident that an export company is capable of maintaining deliveries and are able to supply the same quality constantly. Therefore if a company's operations locally are not successful the likelihood of supplying an international market is slim.
If you are currently selling into any of the BLSN states, then experienced gained in these areas will assist you with other export markets. Experience gained from these areas could be used in other international markets. You would have a better understanding of:
Exchange control regulations
International payment procedures such as documentary/letters of credit
If you are not, then these markets could be a good starting point for your company to consider.
The efficiency of a company's communication system is a vital factor in determining the degree of success an international marketing drive is likely to have. If you do not have an effective communication system such as Internet, e-mail, fax and telephone facilities then these must be purchased in order to ensure that your company responds promptly to enquiries received.
In addition, exporters have to remain in constant contact with bankers, freight forwarders, transporters and insurers, etc. Attention should also be given to the time differences between South Africa and foreign markets. This may require additional telephone answering facilities that operate outside normal South African working hours. In addition, an up-to-date interactive web site is a must nowadays which customers can visit to find out more about the company, it's products/services, and through which they can contact your company using email, is essential.
The most central risk in international trade is that of non-payment. Exporters should approach their local bank in order to obtain additional information pertaining to international methods of payment, the transferring of funds and the rules and regulations pertaining to international payment procedures as laid down by the South African Reserve bank.
Access to adequate finance expands an exporter's range of potential customers through an ability, when necessary, to offer extended credit terms. All exporters must investigate what financial options are available.
Each international payment options has different risk. It is essential that exporters understand the risks and the costs involved with each method of payment. The four main methods of payment are:
Cash in advance,
Documentary credits (also called Letters of credit),
Bank collections and
Payment ranges from the least amount of risk for the exporter, such as cash in advance, to the most amount of risk for the exporter such as: open account. All potential clients should be investigated for creditworthiness. Your Chamber of Commerce and Industry and commercial banks can assist exporters with creditworthiness checks. Exporters should also consider export credit insurance particularly if the exporter is selling on a bank collection or open account basis.
The major distinction between domestic and international sales is that the latter involves a higher risk.
Every successful company needs an administration system for the processing of orders, invoices and the collection of payment. Documentary requirements for international trade procedures are complex and staff would have to be trained in the various aspects of exporting and the documentary requirements associated with international trade procedures.
A suitable computer system and necessary documentation package that will allow your company not only to communicate with potential buyers but to be able to transfer documentation electronically is essential.
Local advertising, brochures, television, advertisements, etc, could easily be adapted for the international market place. This would be far more cost effective that if you had to develop advertising materials from scratch. Experiences learnt from the local market can be used for your export market.
An exporting contract, is unlike other contracts. Exporting presents greater obligations with regard to marketing, sales, delivery, payment and continued export growth and development. Your staff will be required to:
Undertake the development of an international market
Costing products for the international market and working with foreign currencies
Creating contracts of sale
Producing products under strict international requirements
Packing goods so that they withstand the hazards of international transport
Arranging for the delivery of the goods
Completing the necessary documentation, both local and international documentation
Arranging insurance of the goods
There are a number of organisations that specialise in international trade procedures. Refer to the section on export network, for a list of all service providers
Exporting is far more costly than most companies envisage. The marketing component is extremely expensive as most of the costs are incurred in the intended target market. Packaging and transportation costs are also expensive. The cost of production could also be higher as in some instances additional staff may have to be employed in order to meet the greater number of orders received. Larger quantities of raw materials would have to be purchased to meet the increased demand and this could serious effect cash flow.
Countries require products to comply with mandatory standards they have adopted such as CE standards for the European Union. These standards are known as "technical regulations" and are put in place to protect the health and safety of the people using these products and in other instances to protect the environment. These barriers in practice constitute barriers to international trade known as "Technical Barriers To Trade". All countries are required to publish these regulations and make them freely available to all companies wishing to enter their market.
To do well you need an export plan that is practical and flexible and that will ensure your export growth is both profitable and sustainable. This plan will help you manage and grow your company and identify potential threats and challenges. The plan must include:
The list of activities you need to do in order to achieve your objectives
A mechanism for measuring and reviewing your progress
An export plan helps you to remain focused on your objectives