The Export Readiness Assessment (ERA) is an interactive, on-line diagnostic tool developed by Maurice Kogon. The 23-point assessment determines a company’s export readiness by addressing present operations, attitudes and products.
The Export Readiness Assessment (ERA) is designed for:
Companies that see exporting as a possible new or expanded activity but are uncertain about their export potential or prospect; and.
Export counselors who need a fast, user-friendly way to "qualify" new clients for export assistance.
Explanatory Notes: Company Readiness
Are you an established presence in your industry in the domestic market?
Recognition and acceptance within your industry are important assets in exporting. Foreign buyers need to feel they can rely on and trust their suppliers over the long haul. Unknown suppliers are greater risks than firms with established credentials. If you’re already well known and respected domestically, you have a head start. You have a demonstrable, time-tested record of stability, reliability and relevant experience in filling orders, servicing the product, and managing inventory and costs. You’ll want to reinforce that image in your overseas promotions. If you’re less known or unknown, you’ll need to build credibility and confidence that you’re worth the risk. You should emphasize customer support in your promotions; consider price and other incentives to attract interest; respond promptly and professionally to inquiries, orders and customer requests for service; and consistently meet delivery expectations.
If you’re already selling to a large nationwide customer base, exporting is a logical next step. You’re already familiar with long-distance administrative, distribution and promotional techniques of the types used in exporting. You’ve already shown you can succeed throughout the domestic market, where you’re already competing against foreign imports as well domestic products. This is the same competition you’d likely face in almost any export market. National exposure has also made you more visible to potential foreign buyers visiting or operating domestically. If you’re only selling locally or regionally now, you’re best off broadening your domestic sales base before you try exporting. This will ease the transition. It will increase your exposure to customers, competition and long-distance marketing techniques. Thereafter, you might begin testing your export market appeal in a few selected countries, either on your own or by working through a domestic export intermediary.
How do you sell and distribute your products in the domestic market?
Exporting requires an effective overseas sales and distribution network. Most exporting is done through local agents or distributors in each market. These market "insiders" speak the language, know the market, and know where the customers are and how to reach them. Their role is to develop and send you sales orders, arrange payment in dollars, prepare all required import documents, and clear your goods through customs. Many specialize by industry and are equipped to stock, install and service the goods. The end-users in the market know and prefer to deal with these local representatives, rather than buy direct from you or other foreign suppliers. Although you could attempt to represent yourself through your home office or your own sales offices abroad, the benefits of increased "control" may not justify the costs. Unless sales volume warrants, you’re better off finding good agents or distributors to represent you.
Choosing the right reps is crucial. You’re relying on them to be your eyes and ears in the market and bring you sales. If they don’t perform as expected, you may not be able to switch. In some countries, you can’t easily terminate an agent/distributor relationship. Therefore, you want to be careful and selective in your search. The more you know about selecting and managing distributors, the better off you are. If your company already has a domestic sales force, especially one with regional distributors, you have an advantage. Even if you have little or no prior experience, you can get “rep-find” help from a number of federal, state, county, and college-based trade assistance organizations in your locality. See Trade Resources Directory for contacts in your area. See Exporting Basics for advice, checklists and guides to help identify qualified agents/distributors, model agreements, and other legal aids to protect your interests in overseas agency relationships.
Do you customarily conduct market research and planning for your domestic operations?
Systematic market planning is essential to exporting, just as it is in your domestic business. As the old adage goes, unsuccessful companies don’t “plan to fail, they fail to plan.” Successful companies collect and use information to achieve an edge over the competition and to set realistic goals, budgets, strategies and timetables for future effort. Analysis and planning are even more critical overseas and can be instrumental in avoiding costly mistakes. You can’t assume that what’s worked for you domestically will work overseas. Exporters encounter different income levels and demand cycles abroad; different languages, cultures and environments; different laws and regulations; different ways of doing business; and different risks (e.g., foreign exchange fluctuations, civil strife, nationalization, etc.). Long-term success in exporting requires an awareness of these differences, an accurate assessment of the resulting potentials and pitfalls, and a strategy to deal with them in each target market. A “seat of the pants” approach runs a high risk of failure.Help is available if you need it, and costs need not be high. You can gather international marketing information from many sources, including the CITD’s Trade Information Database and the DOC Export.gov site. These contain the latest trade statistics; country-specific commercial guides; industry-specific market surveys and trade contacts/leads; and relevant trade laws and regulations affecting market access in specific countries. Exporting Basics also offers valuable guidance on how to analyze markets and develop customized export market plans.
To what extent do you advertise and promote your products in the domestic market?
Whether you export directly or through intermediaries, you’ll need to promote to make your presence known. Although export promotion can be tailored to fit your budget, the more you do, the more results you’ll likely see. When you export, you’re competing not only against potentially better known exporters from your own country, but also against domestic and third-country competitors vying for the same target market. They might offer price discounts or liberal credit, improve their product, “pull strings,” or take other steps to counter your presence. You’ll have to contend with them while you’re also trying to gain more market recognition for yourself. Since foreign buyers can’t be presumed to already know or want your product, you’ll have to educate, impress and motivate them. Thus, if anything, unless your product essentially sells itself, you’ll probably need to promote even more aggressively abroad than you’ve done domestically. Most countries have adequate media and can support any of the methods that would normally apply to your products, including direct mail, telemarketing, press releases, paid ads, trade shows, sales trips, Internet directories and Web pages, and e-mail. However, some techniques may work better than others in particular markets. Costs could also affect your approach. Certain techniques clearly cost more if done from afar, such as direct mail, telemarketing and business travel. These techniques might best be carried out by your overseas reps, possibly on a cost-sharing basis. If your promotion budget is limited, there are low-cost ways to market and promote abroad. For example, Department of Commerce matchmaking services can get you worldwide exposure for your company and products, generate trade leads, and find qualified overseas distributors for you at modest cost.
Do any of your current managers or staff have export marketing or sales experience?
You don’t need to be an expert to export. If you prefer, you can use outside experts to deal with the complexities, including export intermediaries, freight forwarders, and overseas agents and distributors. Between them, they can represent you, find overseas customers, present you with sales orders, handle all the export paperwork, and deliver the goods. You fill the orders and get paid for the sale. You pay them a fee or commission. That’s not too complicated. However, if you opt to do your own exporting, you’ll need at least some expertise. There are key differences between domestic and foreign selling which must be understood and accommodated. These include different methods of calculating costs and quoting prices, different payment terms and methods; different currencies; different documentary requirements for invoicing, packing, labeling and shipping; different forms and levels import barriers; and different legal systems, laws and regulations. Also critical are differences in language and culture among and even within countries. What is customary, appealing or innocuous in the domestic market might well be misunderstood or offensive elsewhere. Even experienced multinational companies have made mistakes in this environment. To avoid costly blunders, it’s wise to invest in continual training for new as well as experienced staff. Exporting Basics is a good source of export training, covering all areas discussed below. Also, look for export workshops sponsored by trade assistance organizations in your locality.In-house expertise would be particularly useful in the following areas:
Market research and planning: It’s important to look before you leap. Ignorance and poor planning are the leading causes of export failure. Every potential export market differs somewhat in its needs, economic conditions, and business environments and cultures. Market research will help you determine which markets are most worth pursuing, who your customers and competitors are, how products are distributed and promoted in each market, what tariff or non-tariff barriers may exist, and whether you’ll need to adapt your product or approach to the market. Market research and planning skills are valuable assets. You need someone that knows not only what information to look for, but also where to find it and how to use it for effective market planning. Exporting Basics provides guidance and tools for market planning. The CITD Trade Information Database points to on-line sources of trade statistics and international market research offering a wealth of industry and country specific data that can help you identify and effectively enter promising markets.
Legal procedures and protections: Laws and business practices vary widely among countries. These encompass trade, monetary and fiscal policy; pricing, distribution and promotion; treatment of intellectual property; health, safety and technical standards; and the like. Although many are business friendly and compatible with international practices, some pose obstacles and risks for exporters. They can affect what you’re allowed to do or should do to protect yourself in the market. It’s important to have access to legal counsel that can alert you to potential pitfalls and help you take the necessary precautions. The Trade Information Database and the Department of Commerce Export.gov site include country-and industry market surveys and extensive coverage of legal requirements in most world markets.
Cross-cultural sensitivity: Exporters need to be sensitive to cultural differences among and even within countries. These differences — whether of language, race, religion, ethics, lifestyles, interpersonal relationships, tastes and preferences, or other — can make or break your sales efforts in a country. You want to appeal, not offend in the products you sell and the words, symbolism and body language you use in your promotions and face-to-face meetings. In many countries, you must first build trust and relationships with prospective partners, a time-consuming process of cultural interaction on their turf. Cultural sensitivity needs to be internalized in the company, not farmed out. There are many books and articles on this subject, both general and country-specific. See also the CITD Trade Information Database for information and tips on conducting business in a multi-cultural environment.
Language skill: A facility for the language of your markets is an important asset in exporting. It shows you care, helps build trust and confidence in the relationship, reduces risks of miscommunication, and saves time and money. However, since fluency in many different languages is not realistic, it is desirable at least to have an English language capability. English is widely used in international business, and interpreters and translators are available as needed.
Export costs and pricing: When you are asked for a price quote, you want your price to at least covers all your costs. Exporting usually incurs added costs not typical in domestic sales. These include fairly obvious costs to ship the goods overseas, but also some costs that a non-exporter might easily overlook or fail to include. Among such costs are documentary fees; fees for freight forwarding, financing and insurance services; port charges; and costs to adapt your products to meet international standards and regulations. A local freight forwarder can help you determine these costs and how to minimize them, but it’s also important to have someone on staff who knows what these costs may be and which ones to include in a price quotation. The Export Quotation Worksheet in Exporting Basics can help you better understand and calculate costs for export pricing purposes.
Export documentation: Exporting involves more and different paperwork. In addition to any domestic export documentary requirements, foreign governments typically require a commercial invoice and, in some cases, a consular invoice, certificate origin and possibly other documents. Various freight-related documents are needed for sea and air shipments, such as a packing list and bill of lading. Although many exporters rely on freight forwarders to prepare and process these documents, it’s best if the company has at least some in-house familiarity with documentary requirements. Further details about export documents can be found in Exporting Basics.
Getting paid: Your foreign customers may differ on how and when to pay you. First, they may want to pay in their own currency, which you would have to convert at some foreign exchange risk. Second, they may want to buy on credit over an extended time period, leaving you to finance the shipment at greater risk of non-payment. In a highly competitive environment, you may need to compromise or lose the order. A commercial bank can advise and help you mitigate risk and get paid, but it’s important to have some in-house familiarity with payment options and procedures. For more on payment terms and methods, see Exporting Basics.
Has your company received any unsolicited inquiries from foreign firms?
Unsolicited foreign inquiries are a strong indicator of export potential. They offer tangible proof that you have been discovered abroad. You may not know how or why, but count it as a plus that someone overseas has taken the initiative to search you out. Many companies say they first started exporting only after and because they received unsolicited inquiries. Although some foreign inquiries may be “fishing expeditions,” many are serious expressions of interest from firms seeking new or better products. They represent immediate or potential “money in the bank” for you, and deserve your prompt, solicitous response, even if you’re not currently able to export the product.
If you haven’t been approached yet, don’t be discouraged. A likely reason is not lack of interest, but lack of awareness. You and your product probably just aren’t known abroad, either favorably or unfavorably. You need exposure abroad to pique interest and demand. You can even do this indirectly as part of your domestic marketing. Try articles or ads in industry journals with international circulation. Consider exhibiting at a major domestic trade show known to attract foreign buyers. For direct overseas exposure, the Internet is a low cost option and may well trigger an avalanche of unsolicited orders or inquiries. Increasingly, companies are creating their own Web sites to promote their products. You can also gain worldwide Internet exposure through Internet export directories or by posting your own sell offer in Internet trade lead systems.
Could you promptly fill any new export orders from present inventory or other sources?
Exporters should be able to respond promptly to any new orders they receive. Foreign buyers typically can buy from various sources, and if you can’t fill the order when they want it, they’ll usually find someone else who can. You don’t want to start or impair a relationship with delays and apologies. If you have idle plant capacity, you’re probably in a good position to fill any new orders. You may already have inventory on hand, or you could increase production fairly quickly without needing more workers, materials or equipment. With that flexibility, you can go after new export business as aggressively as you wish. However, if prompt delivery is a problem, you’re better off not soliciting new export business until you’re better able to respond. One option is to start slowly and selectively. If the response warrants, you could begin an orderly expansion to meet the combined domestic and foreign demand.
On occasion, you may get an export order too good to pass up even if you’re not ready. In these cases, particularly for unsolicited orders, the buyer may not have alternatives and may be willing to wait for your product. If you need up-front money to produce or acquire the quantity sought, you may be eligible for a Working Capital Loan Guarantee from the Small Business Administration (SBA) or the Export-Import Bank (EXIM). SBA or EXIM will guarantee 90% of a commercial bank loan to enable an exporter fill an export order, in effect using the purchase order as collateral. The money can be used to procure additional labor, equipment or materials as needed. The loan is paid out of the proceeds of the sale.
How would you handle any new or additional export business within your organization?
New or additional export business will create added and more specialized work for the company. Successful exporters typically assign at least one specialist to the export function. Larger exporters usually have their own export department, with one or more specialists handling specific functions. Top managers often handle specific export tasks in smaller companies. They may or may not do this in larger companies, but they should at least provide active oversight. However you choose to organize, you’ll need managers and staff that can handle the extra load and know what they’re doing. Foreign customers have little tolerance for errors, bottlenecks, backlogs or delays that can create complications and add to their costs. If necessary, they can and will find more reliable suppliers. Thus, if you’re now understaffed, or your current staff lacks key export skills – in planning, market development, promotion, shipping, documentation, collections, etc. — you’ll need to add experienced staff or train your existing staff. Even if you rely on outside freight forwarders to handle your shipping and documentation, it’s still best to have some internal familiarity with these procedures. If staff upgrades aren’t feasible, you’re better off exporting through a domestic intermediary.
What is the current status of your export activity?
Prior export experience is a definite plus, but not a prerequisite. It proves that you have an exportable product and that you can sell it competitively in at least some markets. It also suggests that you appreciate the significance of exporting to your bottom line and already have some experience in the mechanics of exporting, such as documentary, financing, shipping, distribution and marketing procedures. If you have not previously exported, you lack the experience but not necessarily the potential to export. Every experienced exporter was at one time a non-exporter. Experience, while obviously an advantage, is not a necessity if you export through a domestic intermediary. If you’d rather handle your own exports, you can overcome initial inexperience by hiring a professional or training someone in-house. Be sure to make use of government and private services available to help you along the way (e.g., Department of Commerce, state and local export assistance centers, freight forwarders, banks, etc.). A directory os such trade assistance organizations can be found on the CITD website.
Is your top management committed to exporting as a new or expanded area of activity?
A motivated management is a prime factor in export success. Other export needs can be acquired, such as financing, experience and market exposure, but exporting requires strong management commitment and support over the long haul. There are good and bad reasons to export. The primary motivation should be to increase sales, profitability and growth over the long term. Exports can contribute in many ways – they help broaden and diversify existing markets, reduce vulnerability to domestic slowdowns, match or preempt competitors, extend product life-cycles, exploit superior proprietary technology, use idle capacity, and reduce unit costs through economies of scale. If management pursues exporting for these sound reasons, it will more likely make the necessary long-term commitment. This support is critical, because exporting is not a spigot that can be turned on and off at will. It requires patience and adequate resources to develop markets and long-term relationships. If your management sees little or no benefit in exporting, views it as a possible sideline, or has more opportunistic motives for exporting – unload surplus inventory, offset a domestic slowdown, fill occasional unsolicited orders – it probably won’t support the effort at critical times. In these situations, it’s generally best to avoid any major export initiatives until management is more on board. Consider instead a low risk, “go-slow” approach, such as exporting through a domestic intermediary or using available low-cost services to attract foreign inquiries or find overseas agents. If these steps produce initial results, they will help build management’s confidence in a stronger commitment.
How much per year could you afford to spend on export development?
Costs of exporting can be kept low, but can’t be avoided altogether. If you’re starting from scratch, as with any business, you’ll face the usual start-up costs for an office, furniture and equipment, supplies, etc. As a beginning exporter, you’ll have some up-front research costs to identify your best markets. To enter and develop these markets, you’ll incur costs to gain exposure, set up sales and distribution networks, and attract customers. As your exports increase, you might translate your sales literature, take overseas business trips, do more media advertising, and participate in trade shows abroad. In some countries, you may have to redesign or modify your product to meet local requirements or customer preferences. Generally, the more you spend to prepare, promote and adapt for export, the greater your return. Clearly, firms with stronger, more flexible resources are in the best position to finance an export venture. That doesn’t mean you have to be “big” to export. While bigger firms can afford to do more, most firms now exporting are small businesses.
So, don’t be deterred if your funds are limited. You can start even on a tight budget. The key is doing the most with what you have. You could be fairly aggressive on an export budget of LE76,000-150,000 per year and very aggressive above that. If you can’t afford that much, there are low-cost ways to market and promote abroad, handle new export orders, and finance receivables. These don’t require hiring new staff or setting up an export department. For example, low-cost help is available from U.S. Department of Commerce Export Assistance Centers, state export agencies, and international trade assistance centers located at universities and community colleges. At no cost in some cases, or modest cost, you can get worldwide market exposure, generate trade leads, and find qualified overseas distributors to represent you. If internal funds are not available for export start-up or working capital, consider export financing programs offered by the Small Business Administration (SBA) the U.S. Export-Import Bank (ExIm bank) or state agencies. Alternatively, you could save up-front costs by exporting through an intermediary. They already have relationships abroad and will incur some or all of the initial costs to find you customers and generate orders. You mostly pay only when and if any business actually results, usually in the form of a commission based on a percentage of the sales price. Export trading companies typically buy goods outright from domestic producers for eventual resale abroad. You, as the producer, would get paid right away and would also benefit from exposure of your product abroad.
Explanatory Notes: Product Readiness
How long would your management be willing to wait to achieve acceptable export results?
Don’t expect immediate results from exporting, even with a good product in a promising market. Patience is a virtue and perhaps a necessity. It takes longer for export “seeds” to develop and return profits – sometimes several years. While the payoff may be shorter or longer in your case, you’ll need time to establish market identity abroad, select distributors, attract buyers, and build solid relationships with your distributors and customers. These efforts will ultimately result in high, ongoing sales and profits. If you’re under pressure or can’t wait, however, there are some steps you can take to try to generate fairly quick inquiries and orders. At a fairly low cost, you can use mail list, “rep-find,” trade lead, and promotion services available from the Commerce Department, state export agencies, and local trade assistance centers. These can help you contact potential buyers, find qualified overseas reps, and promote your product in promising markets. A more costly approach for fast results might be to exhibit at a promising overseas show, where buyers can see your product and possibly order it “off-the-floor”.
Have domestic sales of your product grown over the past 3 years (average per year)?
A strong domestic sales performance is a good indicator of export competitiveness. If your domestic sales are increasing, or have at least kept pace with your competitors, you’re likely to be competitive abroad. You’ve already shown strength in the domestic market against the same domestic and imported foreign products you’d likely face in export markets. Exporting is definitely a step to consider. Even if your domestic sales have been weak, don’t necessarily assume you’ve lost competitiveness and can’t export. In fact, if your sluggish sales are mainly due to a domestic economic slowdown, or to product obsolescence, exporting may be just the ticket to turn things around. When the domestic economy stagnates, other countries may be booming. As their production and consumption increase, their import demand also rises, including for domestic products. Exporting to markets in higher growth cycles could be very profitable. Similarly, if technology advances have made your product obsolete in the domestic market, it could still conceivably sell very well in less-developed countries where older technology may suffice or even be preferred. Over half the world’s economies are less developed. They may not need or can’t afford your latest model, and you should be able to offer substantial competitive discounts for your older model.
What is your product’s current share of the domestic market?
Market share is a key indicator of product competitiveness, whether you’re selling locally, regionally or nationally. If your share of that market is already high or growing, or at least holding steady, your product likely has fundamental competitive strengths; e.g., attractive pricing, uniqueness, high quality, strong service and customer support, or other. These competitive assets are as appealing to foreign buyers as domestic. If you’ve been able to meet or beat the domestic competition for these reasons, you should also be competitive abroad. In many cases, you’ll be facing the same competitors abroad that you’ve already done well against domestically. Conversely, a low or declining market share reflects competitive weaknesses not normally conducive to exporting. Because competition is even more intense overseas, the chances are that you would do no better overseas, and probably worse. However, this could depend on the reasons for your low domestic market share. For example, if product obsolescence is the reason, exporting may offer a new lease on life. Other countries, particularly lower income or less developed countries, may not need the latest technology and may value yours for its presumably lower cost.
Is your product price-competitive in the domestic market?
Domestic price-competitiveness is a big plus in exporting. Competition abroad is usually stiffer than at home, and price is often a decisive competitive factor. A competitive price is a must for products that are otherwise indistinguishable, such as basic commodities. Even for performance-based products, price often becomes decisive at some point. Unless your product is indisputably superior to the others, or is indispensable, the buyer may ultimately let price be the final determinant. If your prices are competitive domestically, you’re in a strong position to offer very attractive export pricing as well. While you’ll need to add some export delivery costs to your prices (e.g., freight, insurance, etc.), so too will most of your exporting competitors. You can thus retain your relative price advantage in many export markets. On the other hand, if you have little or no price advantage domestically, and have no offsetting product strengths (superior quality, uniqueness), exporting may not be a viable option. Given the importance of competitive pricing, you should try to obtain comparative price information before you enter a target market. If necessary, strongly consider adjusting your prices to meet the competition.
What payment terms would you be willing to offer reputable foreign buyers?
Exporters become more competitive abroad when they allow their buyers more time to pay, particularly for price-conscious products. With more time to pay, foreign buyers can lower their up front costs and leverage their resources. This might allow them to buy larger quantities or pay higher prices they couldn’t otherwise afford. Typically, buyers seek payment terms ranging from 30-120 days after receipt of the goods. For more costly purchases, buyers may seek multi-year credit terms. Although exporters would rather be paid in advance or on delivery to reduce risk and financing costs, this may not be feasible in a highly competitive export environment. Foreign buyers often have alternative sources and may well opt for a supplier more willing to finance the sale. They’ll generally pay in advance or on delivery only when they need or want a product badly enough, have no good alternative, and can afford it. Thus, willingness to extend credit is often a determining factor in making export sales. For higher-priced products, offering attractive payment terms may be the only way to beat the competition. Credit sales do incur risks and financing costs. However, these can be minimized. There are services available to help determine a prospect’s credit-worthiness. Export credit insurance will protect against non-payment and other commercial risks. Suppliers can also finance or discount the export receivable so that, in effect, they get their money right away (less interest or a premium) even though the buyer has more time to pay.
Does your product compare favorably with domestic competitors in features and benefits?
It helps to be “superior” in some key way, particularly when you’re higher priced than your competition. Foreign buyers look at product performance, not just cost, when they make procurement decisions (e.g., dependability, versatility, durability, repair frequency, productivity, labor-saving etc.). They will often pay more to get more. If your product fits a niche in the domestic market, or has some advantage over competing products, you have strong export potential. In your overseas marketing, you’ll want to emphasize any areas of product superiority or tout other advantages, such as reliability as a supplier, strong customer service, etc. If you have no particular qualitative advantages, you may still have export potential. Many of the most heavily exported products are virtually indistinguishable (e.g., agricultural products, raw materials and semi-manufactures). You and your competitors alike must use price and credit as your main selling points. If you do have a distinguishable product, but it’s comparatively “inferior,” consider markets that aren’t as picky. Buyers in many less-developed, cost-conscious, labor-intensive countries may not need or want the “best” or “latest”. They’ll often take a lesser product to pay less (e.g., manually-operated vs. automated equipment, yesterday’s technology, no frills models).
Would you be willing to adapt your product and/or packaging to better suit foreign markets?
Adaptability is a must in exporting. Foreign markets differ from the domestic market in many ways that can critically affect product acceptance — in income levels, standards, climates, sizes of people and space, language, religion, cultural preferences and taboos, business practices, etc. These differences often dictate whether your products would be allowed into a market; could be afforded; could tolerate the local physical environment; would “fit” or operate efficiently; or would appeal to or offend potential buyers. For example, your products must comply with different health, electrical and technical standards abroad. Low income countries may demand more affordable versions of your products than high income countries (stripped down, second generation, etc.). Harsh environmental conditions in some countries can affect product performance (e.g., abnormal temperatures, humidity, altitudes, pest infestations, pollutants, etc.). Your products may not fit the smaller sizes of people, homes, streets, etc. in some countries. The colors and shapes of your products, or the words or symbols you use in your product literature, could be culturally offensive in countries with different religions, languages and customs. Willingness to adapt your product design, packaging or promotion can greatly increase your market options and may well be crucial in certain markets. Unwillingness will limit you to the fewer markets that accept domestic products exactly as they are. If costs to adapt are deterring you, think again. Not all needed adaptations are costly or difficult. Some may be fairly easy and inexpensive, such as adjusting the sweetness in a soft drink; switching packaging materials to protect against rot, rust, mildew, pests, etc; changing the color or shape of the product package; translating or adding local context to brochures to make them more understandable. These are usually well worth the cost or effort. In other cases, you may need to make more substantial changes, such as re-engineering or retooling the product. Rather than rule out change altogether, weigh the potential benefits of greater sales against the increased costs to adapt.
Is your product costly to transport over long distances?
Transportation costs are not usually a prohibitive or decisive competitive factor in exporting. With modern containerization and other advances in transportation and logistics and a more competitive shipping environment, transportation costs generally can be kept to a low percentage of landed cost (product cost plus freight and insurance). The exceptions are unusually heavy or bulky items that can’t be knocked down or containerized. Your domestic competitors presumably face comparable transport costs, since their products are similar in size and weight; are destined for the same markets; and will have to get there by the same mode, mostly by sea or air. Other competitors could have some transport cost advantage if they’re closer to your market or could get there by truck or rail (e.g., Europeans selling within Europe; Asians within Asia, etc.). If transportability or transport costs are a serious constraint, you might consider contracting or licensing production in the target countries. Alternatively, you may still have possibilities in nearby, contiguous markets that can be reached more easily and quickly. Whatever your destination, you should look for the most cost-effective mode and rate. A freight forwarder can help you optimize your transportation costs and handle all the arrangements.
Is any special training required to assemble, install or operate your product?
You could have a competitive problem if overseas users need extensive on-site training. Many products require little or no training, or the users can get along with basic instruction sheets that cost little to translate. However, on-site training can be very costly and cumbersome, particularly abroad, where languages and distances vary greatly, and skilled or trainable labor may be in short supply. High training costs will put you at a competitive disadvantage against in-country suppliers who could probably meet a local training requirement more readily than you. You may need a competent local distributor who can install and use the product and train end users. To cut costs in these cases, you might try a “train the trainer” approach, either at your domestic site or overseas. The trainee(s) would then provide the necessary ongoing or follow-on training in each market.
Does your product require any special technical support or after-sale service?
Support-intensive products require a more costly, more logistically complex support structure than other products, particularly in exporting. Customers must have access to replacement parts and competent technicians to install and repair the product. When the customers are overseas, the normal difficulties are compounded by distance and language differences. If your main competitors are locally-based, they could presumably provide in-country support more easily and at less cost than you. To ease the logistics and costs of an overseas support requirement, you could team up with a local distributor equipped to install and repair your product and stock your spare parts. That might limit your support role to supplying any special tools or testing equipment needed; possibly translating your installation and repair manuals into the local vernacular; and providing some hands-on training of your local rep’s technical staff. Alternatively, you could establish your own support facilities in-country, or airlift technicians and parts in as needed. However, these are more costly, more complex options, usually best avoided in a start-up phase. You might reconsider them later should higher sales volume justify the higher costs.
Can your product tolerate harsh or widely varying environmental conditions?
Many products can tolerate different environmental conditions up to a point, but lose effectiveness as extremes are approached (e.g., abnormal temperatures, humidity, altitudes, pollutants, etc.). The more sensitive the product to these changes, the more required to “protect” it against the elements. Although even the domestic market varies environmentally among regions, the problem is compounded in exporting, where differences from country to country are far more pronounced. Protection could be as inexpensive as strengthening or insulating the packaging, or it could involve more costly measures, such as altering the product itself or storing it under controlled conditions. It’s best to avoid markets where costs of protection would be prohibitive or make you uncompetitive and focus instead on more environmentally conducive markets.