Business and public sector groups have become increasingly aware of the advantages of exporting. After all, we live in a global economy, connected to just about everyone almost anywhere, and International Free Trade Agreements are multiplying. On the one hand, a growing number of SMEs are considering doing business in other parts of the world. On the other, breaking into a foreign market remains a risky business—an act that should only be undertaken with a healthy amount of preparation.
Let’s face it: No one can realistically expect to conquer the export world overnight. Indeed, many entrepreneurs don’t know where to even begin.
If you’re thinking about diversifying your business by exploring markets in other countries, here are five steps you must take before you can grow your empire:
- Adopt the funnel approach: Define your goals—what do you want to achieve and how will exporting help you get there? For example, will you introduce new products that may be desirable in a specific geographic region or are you simply trying to increase your sales? What information do you need to make sound financial decisions about exporting? What are the requirements around packaging and labelling for example, in a new market? Where will you house inventory? Should you lower minimum order quantities to potential distributors?
- Research and select appropriate markets: Be sure to check out the Canadian Trade Commissioner Service. Free of charge for Canadian companies, trade commissioners are strategically located around the world, and have a mandate to assist Canadian companies interested in exporting. Often, they have access to up-to-date market studies by country, including specific industry categories, and can provide a deep understanding of local markets.
- Identify potential customers: Understanding how your product or service gets to market in a specific region is a fundamental consideration when choosing where to export. With a Harmonized System, or HS code, entrepreneurs can begin by using Statistics Canada online trade data, which is free. When selling hockey skates, for example, firms can look at overall import flows, which countries are currently bringing in skates, and the dollar volume of trade. With this kind of high-level data, entrepreneurs can gauge potential market size and share, and find detailed information on those companies currently importing.
- Have a market entry strategy: Once you’ve determined the potential of a particular geographical market, you need to choose a market entry strategy. There are a range of choices. You can: work with a local marketing/distribution partner; find a warehouse to stock inventory and contract with local sales representatives; licence the product or service to an established local company with a similar business line; incorporate and hire a sales force; enter into a joint venture. When selecting an approach, it’s worth assessing the barriers to market entry (e.g. language, regulatory restrictions, cost, local knowledge), which may determine the best strategy for you.
- Mitigate potential risks: Exporters need to be vigilant about managing risk associated with currency exchange rates, transportation costs, local and other international competition, and packaging and regulatory requirements. For export receivables insurance, bridge financing and potentially buyer financing, Export Development Canada (EDC) could be your new best friend as they offer a multitude of receivable insurance and financing programs to suit a wide range of needs.
Remember, Canada has a strong brand internationally. SMEs that export can use that Made in Canada brand to leverage products and services. Geographical proximity, language, culture and unfulfilled consumer demands are all factors to consider when taking the export leap of faith—the one thing you cannot afford to do is ignore the fact that there is a world of marketplaces beyond our national borders.
Pernille Fischer Boulter is the founder of Kisserup International Trade Roots Canada Inc., and Kisserup Europe. She has more than 25 years of international business experience and provides advisory services, project management, trade training and consulting services to public and private sector organizations worldwide.