Four tips on tapping into overseas markets
Friday, April 21, 2017/
Some businesses go too hard too soon, stretching their resources to hit an overseas market without first forming a strategy and researching the market. Conversely, some business owners are cautious of expansion. So, what’s the secret to success?
1. Determine if your business is ready
If you’re looking to overseas markets, how solid are your domestic sales? By demonstrating your success, you’re not only making sure you have the working capital and cash flow to invest, but you will also make overseas buyers feel secure in you as a supplier.
According to Austrade, you should:
* Understand how the market operates: Conduct market research to learn about market size and demographics, import duties, regulations, distribution channels, opportunities and competition
* Consider your export budget, determined by the countries and markets you’re targeting and the products or services being exported
* Take into account additional resources you’ll require such as extra employees
* Calculate the added cost of any product or service modifications
Ben Thompson, CEO of employment management software platform Employment Hero, says business owners need to make sure they have a solid base from which to expand.
“One of the key things is not to overstretch and leave one territory before you feel as though you have really won there,” he said. “If you leave the local battle to start a new one you may end up losing on both fronts.”
2. Validate your product or service
Before investing, consider trialling your product or service in the market and gauge the demand by looking at how frequently you’re getting steady international enquiries and sales leads.
Thompson says it’s imperative businesses test the waters. He is currently looking to launch his platform in the UK market, but has learnt many lessons from expanding another business overseas, the Power to Motivate employee reward system.
“You don’t want to spend millions of dollars to discover for whatever reason the product doesn’t work in a new territory, so definitely prove the market before you make the leap,” he says.
“Make sure you can run very low-cost business case assessments within those target territories.”
James Wakefield, co-founder of luxury tailored menswear company InStitchu, exports all over the world but now has physical presence in Auckland and New York City. He says using your company’s existing capability is a great place to start.
“Businesses must make a realistic assessment of the demand for their product and the internet has made this process so much easier,” he said. “If you have an online channel, use this to reach out into the market and see what the immediate uptake is like. Analytics means that we don’t have to guess anymore, we can make an informed choice.”
3. Research and adjust to that overseas market
Every market is different and you’ll need to examine the positioning of your product or service.
Wakefield says the decision to open offices in the US and New Zealand was a relatively easy one, and they are successfully selling globally because their product is quite universal.
“We had a core group of loyal customers in New Zealand and the US who were clamouring for an affordable, high quality custom menswear service – we just answered,” he said. “As far as cultures go, the US and NZ are both pretty similar to Australia and this was a calculated move. We could move into these markets with very little change to our messaging and strategy.”
Remember that each market is unique, so researching trends and behaviour of each market is essential.
4. Avoid the pitfalls
Doing business overseas always involves risk: exchange rate fluctuations, cultural differences, loss or damage, non-payment of receivables, non-delivery of goods, or custom regulations to name a few.
You can mitigate risk by seeking expert advice, and choosing the right partners and professional advisers and by completing a comprehensive risk assessment.
Wakefield says InStitchu stays ahead of the game with exchange rate fluctuations through their pricing policy.
“We manage exchange rate changes through dynamic pricing of our products,” he said. “The prices on our product will shift, in very minimal amounts, to reflect the current exchange rates around the world.”
Thompson knows you need to be product-ready for a new market. He says taking Employment Hero to the UK requires an intensive amount of development to ensure all employment regulations and tax office integrations are adapted into the system, so he’ll wait until they get it right to avoid peaking too soon.
“There are reams of information we need to sift through and a huge amount of development before we even think about moving someone to the UK,” he said.
“Because of the complexities of international expansion that I have been through in my career as an entrepreneur, I have done it before and I want to make sure we do it properly.”
Wakefield says adjusting your management structure and communication systems is imperative when you have a business in another time zone – and being prepared for that, rather than reacting to issues that inevitably arise, is crucial.
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