Canadian companies are too timid when it comes to exploring international markets. Many businesses progress from local to provincial to national markets, but never make the step to overseas ones. Only 10% of small Canadian companies and 34% of medium-sized ones are currently exporting. The rest are stuck catering to a relatively minor domestic market while ignoring the possibilities of the massive markets available overseas.
New opportunities aren’t the only reason to explore international markets. Doing business all over the world provides you with some diversification, allowing your business to remain viable when your home market is in a down cycle. In 2008 North American revenue at my company dropped by over 75% as a result of the recession, but our international sales remained steady. Without the international business we might not have survived.
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Global customers also want to work with global suppliers—if you’re not able to support your customer in every market they do business in, they will look elsewhere.
But even if you understand the advantages of exporting, you can’t simply start shipping products overseas. A company must achieve two primary requirements before it’s ready to go international: a competitive advantage in the global marketplace and confidence
It’s simple to determine whether now is the right time to grow your sales outside the domestic market, but don’t confuse simple with easy. The process of winning overseas business will not be easy—export markets are more competitive than domestic markets, with lower gross margins and more complex sales.
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First figure out whether your product or service offering is competitive outside of Canada. If your products are protected in the Canadian market by import duties, have only local appeal, or cannot be transported long distances, you need to find other ways to diversify and grow. But if your firm manufactures widgets that have some competitive advantages and you’ve proven your edge over the competition, then you might be a candidate for international growth.
That brings us to the next requirement, confidence. The stereotype of an entrepreneur is the brash, brimming-with-confidence over achiever—the Steve Jobs type. In reality most entrepreneurs are just business people that are willing to accept calculated risks and have a “can do” attitude. But many Canadian entrepreneurs appear not to make the same careful calculations when it comes to exporting. They treat international business as the great unknown and lack the confidence to make that step.
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SMEs that do venture into international markets see their revenues increase by an average of 33%. In the case of my business, export sales approached 100% of revenue with 85% coming from outside North America. That’s just where the markets were located, and if I had not initiated an international expansion 15 years ago I would have missed all that fantastic growth.
Once you’ve determined that your business is ripe for overseas expansion, how do you get started? At Definitive Growth Strategies I work with firms that want to significantly increase their international sales. Quite often these firms have already tried to grow overseas but have had limited success outside of Canada.
The first step is to determine which international markets you can be most successful in based on factors like market size, market growth, import duties and competition. It can be a real eye opener to realize that the best markets for your business may not be around the corner, but on the other side of the globe.
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Once you’ve figured out which markets have the highest potential, you need to choose a method of distribution. To be successful in an international market it’s critical to have a local presence, which you can establish with independent agents, sales representatives, or business partnerships.
Soon the opportunities will start rolling in, and it’s critical at that point to have an understanding of how business is done elsewhere. Look into market-specific differences in tangible details like incoterms, letters of credit, letters of guarantee, and foreign exchange forward contracts.
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Just as important will be intangible issues such as negotiation strategies, customer expectations, business customs and etiquette, or even dealing with corrupt business practices. All these details tend to vary from country to country, and understanding them is crucial to be successful in international markets.
Don’t be daunted by the scale of the undertaking. The entrepreneur that ventures into international markets is not only rewarded with increased revenue and profit, but can confidently state that he can compete with the rest of world and win.
Corey Miller is the principal at Definitive Growth Strategies, a consulting firm that helps transition North American B2B manufacturing companies into global competitors. Prior to that he ran a successful high tech company in the auto industry for over 20 years. He can be contacted here.
MORE EXPORT STRATEGY:
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- Are You Missing Out on the Inland China Opportunity? »
- Don’t Overlook This Exporting Obstacle »
- The Smart Way to Adapt to a Sudden Export Surge »
- The Consumer-First Path to Global Expansion »