7 questions you should ask yourself before deciding to export

By Fabrizio Macrì in Internationalization

30/10/2020

Since 2003 I have been working to support SMEs in their effort to export and expand into foreign markets.

In teh last 30 years export has become increasingly a must for many companies that see their internal market shrinking and need to compensate their losses with export revenues.

Nevertheless going abroad without a clear strategy can be very disappointing and generate additional costs without considerable gains.

For this reason, together with my staff we encourage our customers to self reflect on their real exporting capabilities and to verify the market potential before approaching international markets.

This article suggests 7 questions which a company should answer before deciding to go international. The answers to these questions will help the entrepreneur to adop a strategy and to decide, weather starting to export will be convenient or not.

Question 1

Who is my client?

Am I able to define a buyer persona of my target customer? Am I looking for a final consumer or a trading partner? Is he/she a wholesaler or a retailer? Can I describe his/her profile? Usually I need to have a clear idea of the end user’s identikit and then I need to identify which trading partner could become my direct client and resell the product on the market.

Question 2

Is my «buyer persona» to be found abroad?

Does it really make sense to look for my target client abroad? Or should I first look for my target clients on the internal market? Is the internal market potential fully exploited? Does the current crisis really hit all my potential target clients on the internal market, or just my current clients? A company which has already exploited its full growth potential ripping economies of scale on the internal national market can certainly be more successful abroad, than a small inexperienced company which serves clients only on its local regional market. This is often the case in the industrial sectors: small local providers easily find out that their semifinished product can find new applications in different sectors on their local markets where revenue gains can be faster than on export markets. It is therefore important, before undergoing international activities, to scout the national market for new clients, and to exploit the full sales potential on the domestic market.

Question 3

Where is my client?

If the first two answers lead me to the conclusion that I am ready to export on a regular basis, I will have to decide where. Which countries? Which markets?

Entering new markets requires a little bit more then a flight and average language skills.

Different languages, cultures, tastes, habits have a strong impact on demand ; consequently my export potential can vary sharply from country to country. Very few products are successful worldwide ; most of them have a geographically limited success typically on close similar markets.

Therefore markets need to be approached gradually and investments in export need to be focused on one or 2 pilot markets before being extended further.

Possible target countries can be selected on the following criteria :

number and density of potential clients ;
purchasing power of my end users;
favourable regulations ;
favourable consumption or investment trends.

Question 4

Is my product fit for my foreign customers ?

Unfortuantely success is not guaranteed by the presence on the target market of many customers with high purchasing power and coeherent with the buyer persona I am looking for. Most of the potential customers on my foreign target market migh thave different habits from my domestic customers or they might use substitute goods to cover their needs.

If that is the case, what am I supposed to do to make my product more desirable? How can my product outcompete the local substitute goods?

Is marketing and promotion effective? Or should I change my product to adapt it to local taste instead?

Am I ready to diversify my production (offering a product on the domestic market and a different one on a foreign target market)?

Is the identity of my company at stake? Is my company ready to bear the costs of a more diversified production?

Question 5

Do I know local competitors?

Even assuming that potential foreign customers demand identical products to what I am able to offer, most probably foreign customers will be already satisfied with my competitors products.

Knowing local competition, its behaviour towards new entrants, its sales and after sales processes and its price policy helps us to understand first how accessible that market really is, second to what extent barriers to entry influence my sales strategy and finally if access to that market is worth the effort or not.

Question 6

Is my organisation ready to deal with foreign clients?

The ability to deal with foreign clients requires non only high quality products but also efficient processes. In order to serve customers belonging to different cultures a company should be ready to « communicate » in a globally understandable language and with universally accepted standards of service. These standards have to be visible in the «customer journey», they need to be expressed at every «touch point» of the customer with my organisation ; from marketing and communication to conversion (sales) and retention (after sales).Here are some typically critical pain points of Italian SMEs with little export experience:

absence of managers with decision making power and with satisfactory language skills;
absence of a dedicated export manager, who keeps a consistent contact with the customer;
lack of attention to the supply chain:

logistics and transport;
customs administration management;

lack of consideration for the regulations and habits in the target country;
strong focus on sales and week focus on after sales services and retention;
weak budget forecast and lack of financial resources for:

promotion activities;
sales activities for customers search;
new entrant price policy with lower prices while entering the market.

Question 7

Is it worth it ?

The above mentioned questions show that in order to be fit for exports investments in market and competition knowledge have to be planned, qualified employees need to be hired, good management practices need to be adopted. Is the return on these efforts worth it?

Are expected additional revenues coming from export enough to cover the additional costs generated by the above mentioned investments?

If we had to measure the profitability of an internationalisation process, we could use a new specific KPI called «ROEI» (Return on export investments) = additional export revenues/additional export costs. If the result is higher then 1, the ROEI will be positive and the international process can be considered profitable