In this week’s blog post, we deal with the final three questions that companies expanding overseas need to ask themselves – before they get started.
Last week, we looked at these questions SMEs should be asking if they are thinking of expanding operations overseas:
- Is the company ready to enter a new market?
- Are you confident that you have chosen the right country?
- Are you sure that your product or service is right for the country that you have chosen?
- Do you understand your customers in the target market?
Companies that can answer “yes” to these questions have a much higher chance of going on to be internationally successful. Thinking carefully about each of these questions can provide the basis for your company’s expansion strategy. Here are the next three questions you need to be asking.
Are you equipped to deal with the culture of the target market?
When you’re operating in a foreign setting, you want to feel as comfortable as you possibly can and you want the people you are dealing with to feel comfortable with you. This won’t happen if you’re not at least somewhat familiar with the culture of the country that you are going to.
By culture, I mean the way that people see the world and how they relate to each other, particularly in a business context. If you’re planning on doing business in another country, you need to understand what is different about the way people do business there. You can’t afford to assume that things work the same way they do at home.
You don’t need a degree in anthropology, or to have lived in the target country for years, but you do need to be thoughtful, alert and ready to see things from a different perspective. You also need to do your research, so that you understand the essentials of business etiquette in the country you’re heading to. How do meetings work? Are people flexible about time or fixated with punctuality? What is appropriate business attire? Are there topics which should be avoided? Are gifts expected?
If you’re not equipped to deal with the culture of the target market, go and get some help to make sure that you will be when you get there!
Do you know how the regulatory framework of the target market will affect your business?
Don’t leave home without making sure that you have checked out the regulatory environment of the market you plan to go to. Although trade barriers have declined rapidly over the last 50 years or so, they still exist in some markets and you will need to understand tariffs and duties as you work through your selection process – they can make a huge hole in your bottom line.
Also worth mentioning in this era of low tariff barriers are the dreaded non-tariff barriers such as standards and labelling – these can make an exporter’s life hell! For example, if you manufacture organic food, do you know how the testing body in your target market will evaluate your product? If you don’t know and it turns out that your product doesn’t meet the standards, you’re going to be in a world of hurt.
Do you have a sound strategy for market entry?
Once you can confidently answer “yes” to the first six questions, it’s time to ensure that you have a credible strategy for entering your new market in place. This includes knowing what business vehicle you will use to export, how you will transport your products from the home market to the new market (or whether you will manufacture them in the new market) when you will begin exporting, what payment mechanisms you will use, what insurance is required and so on and so forth.
It’s important to get these details in place at the outset, so that you know what costs and risks are involved and so that you can mitigate those risks and minimise those costs as much as possible.
If you take the time to answer these seven questions before you export, it won’t guarantee that nothing goes wrong with the process, but it will help you to avoid nasty surprises and expensive mistakes. As they say, “Plan the work and work the plan”!
Cynthia Dearin is managing director of Dearin & Associates, a boutique international market entry consulting firm.