Export, A practical guide PDF

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Transport and Logistics: Export – a practical guideExport involves working with other countries and customs, other rules and regulations, and other mentalities as well. With the ongoing unification of Europe, including the demise of border controls (excise and duties) and the introduction of the eur...

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Transport and Logistics: Export – a practical guide Export involves working with other countries and customs, other rules and regulations, and other mentalities as well. With the ongoing unification of Europe, including the demise of border controls (excise and duties) and the introduction of the euro, it has become easier to expand businesses inside Europe, and survive. Top 10 obstacles to export success: 1. Administrative burden 2. Cannot find a good partner abroad 3/4/5/6. Lack of knowledge of foreign markets, local testing, local distribution channels and customs and excise regulations 7. Language problems 8. Transportation problems 9. Currency problems 10. Insufficient financing Top 10 exporting errors: 1. No market research: target markets, consumer demand, competition and export/ import laws 2. Lack of commitment (inzet): you must have the patience, determination (vastberadenheid) 3. Poor alliances: pay attention to the qualifications of the foreign agent or distributor 4. Initial expectations set too high: be smart, concentrate on particular markets 5. Not a top priority: firms often regard domestic markets as more important than export markets 6. Inadequate distribution relations: have a good relationship with your distributor 7. Rigid standards (strakke normen): refusing to modify products to comply with foreign regulations 8. Own language only: a company that doesn’t make the effort to trade or produce documents in the language of the product’s destination 9. No export expertise: don’t be afraid to tire freight forwarders, customs brokers or technical specialists (expediteurs) 10. Going it alone: opportunities and more markets are missed when businesses don’t pursue potential partnerships of joint ventures

Chapter 1 – Preparing for export An export plan is the foundation stone of your export business success. Furthermore diligent (ijverig) research has to be done: get into the market, develop relationships with people (distributors or end users). In this way you are able to understand their differences and the markets. The general liberalization of international trade and abolishment of borders within trade blocks such as the EU and NAFTA (North American Fellow Trade Alliance) have created not only more opportunity for business, but more competition as well. Companies now need to fight harder to guarantee continuity, certainly if they want to realize growth. Governments have three major export objectives: * General strategy: to improve the competitive position of the domestic business world with regard to foreign companies * Trade policy: to lift as many barriers as possible to foreign trade * Export policy: to stimulate domestic companies to do business abroad

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The government uses the following instruments to stimulate export/ international trade: (tentamenvraag) * Trade policy (international agreements). For most countries, the majority of trade is done with countries in the same trade black. Example: trade within the EU * Government subsidies are based mainly on either stimulating export, developing a professional export organization, or economic development in developing countries in close cooperation with domestic companies * Other export instrument include: - Export-credit insurance against political risks and damages arising from a calamity in the export country obtainable from firms like Atradius and Euler Hermes - Contracts with foreign governments, including visits and trade missions abroad - Information and promotion, including organizing trade fairs and exhibitions in collaboration with foreign associates Two important reasons for protecting a market are (un)employment issues and wanting to avoid dumping (overprotection). The government can implement protections in three ways: 1. Import duty: a form of tax raised on the import of an article, making foreign articles more expensive than local product 2. Import restrictions: in this case the number of imports is restricted. The limit is set either on quantity or total number, usually for one year. When there are contingencies (or tariff quotas) a total number is set. If imports exceed this quota, a higher amount of duty is raised on the extra items. Both methods 1 and 2 stimulate internal production and slow down imports 3. Non-tariff restrictions: these are the non-financial measures designed to limit or restrict foreign import. They can be divided in three groups: Custom, hygienic and technical restrictions Passive exporter: Every once in a while you might send off an order abroad, or you might be facing overproduction and think you can solve the problem by selling the extra products abroad. Active exporter: If you are truly focused on keeping exports going and enhancing the continuity of your business as a whole. You will have developed a solid export business plan, which is founded on sound market research. From active export to international marketing: In this phase you familiarize yourself with the foreign market, researching the specific needs of customers abroad and adapting the elements of your marketing mix to satisfy those needs. From international marketing to international entrepreneurship: Now you are focused intensely on the foreign market. You can do this by entering into a partnership (collaboration) with a firm operating inside the export market. Some typical incidents that can lead to passive export situations: * You receive an unexpected request from abroad * While on holiday, you notice a local demand for a unique product * Friends or family living abroad point out export opportunities in their country * At a trade fair you meet an importer looking for the product you are bringing on to the domestic market Active export is based on strategic considerations such as the following: * You want to become less dependent on local market demands because the local market is either too small, or has stabilized or decreased, or the competition is too strong * Being present in more foreign markets increased your commercial opportunities

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* A product successful at home may also have potential in the foreign market * The product may be at the end of its lifecycle at home, but may still be exploitable in developing markets * Keeps staff employed! * Higher turnover better enables the company to pay costs (money!) FAS = Foreign Agricultural Service: is responsible for the USDA’s (US Department of Agriculture) international activities: market development, trade agreements and negotiations, and the collection and analysis of statistics and market information. The FAS website contains a wealth of useful information and links on international trade and export. The export plan is usually based on questions like: * Will export to market X contribute to the growth objectives of the film? * Is the product suitable for this new market? * Is export to market Y financially feasible (uitvoerbaar) for the firm?

Chapter 3 – External analysis For most countries, the majority of trade is done with countries in the same trade block, for example trade within the EU. Many companies choose to sell to neighboring countries because they think they have a better understanding of the culture. When an export market is close to home distribution costs are kept relatively low. Country and market selection 1. Initial selection criteria 2. Market research 3. Market selection: Macro-economic criteria and meso-economic criteria Export market research: do-it-yourself or outsourcing The confrontation matrix: * Opportunities with strengths * Opportunities with weaknesses * Threats with strengths * Threats with weaknesses The SMART model Specific = can only be explained in one way Measurable = use numbers to indicate the direction of objectives and evaluate progress Acceptable = there should be a platform acceptable to all stakeholders Realistic = ambitions but attainable Timed = the timeframe within which objectives should be realized

Chapter 5 – Entering the market Market entry strategies: there are two ways of entering an export market. You can negotiate with your customers directly (direct export) or through a third party (indirect export).

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Direct export: using your own sales representatives has obvious benefits, because in-house staff will be totally familiar with the characteristics of your product or service. The downside of sending staff overseas is the high cost or travel, accommodation, and other element such as the possible need to hire an interpreter. Most exporters choose to follow the indirect export route, and make use of intermediaries, be it a distributor (wholesaler) or sales people living in the importing country. The wholesaler imports, stocks and distributes the product, and takes care of warranties and follow-up orders. There are many advantages to intermediaries, especially when you want to export into a market culture very different from your own. Some countries have complex distribution systems, which can be difficult to understand. The fastest way of starting an export business is by direct exportation. Direct export – advantages: - More control over the export process - Potentially higher profits - A closer relationship to the overseas buyer and marketplace In general the commercial agent has good knowledge of the circumstances in the local market. He has knowledge of local market demands, local business culture, knows potential customers and possible competition. The commercial agent often has more principals and will have to divide his attention over various products. There are two major methods of indirect export. The first if individual, by means of: * Export management company * Importer * Foreign distributor/ wholesaler * Retailer * Piggyback marketing Importers buy goods, such as raw materials, foodstuffs and manufactured goods produced in foreign countries for distribution in the domestic market. An agent is a matchmaker between seller and buyer and will not own the goods. A distributor buys from the seller and sells to his clients. The foreign distributor purchases goods from an exporter to resell profit. Retailers: A company may sell directly to foreign retailers, although in such transactions, products are generally limited to consumer lines. Piggyback marketing is an arrangement in which one manufacturer or service firm distributes a second firm’s product or service. The most common situation is when a European company has a contract with an overseas buyer to provide a wide range of products or services. Indirect export (collaborative) * Strategic alliance

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* Joint venture * Export combination * Merger Strategic alliance: In a strategic alliance your company works together with another company to enter an export market. A strategic alliance can be successful when the products of both companies are complementary. Joint venture: This is a business agreement in which parties agree to develop a new entity and new assets by contributing equity. Disadvantage: the effective loss of managerial control. The export combination combines the products of the members in a broad offer to foreign clients. In most cases, the members are from the same industry, although sometimes they come from different industries and bring in complementary products. Merger is the fusion of two or more companies into a new entity that maintains the identity of the acquiring company. A merger is also a way of expanding your business abroad, but as a form of entry strategy, it won’t be of much interest to beginners. Legal constructions include: * Licensing * Franchising * Contract manufacturing A license is an agreement whereby an organization gives the right to a specified buyer to use his product or service in a specific geographical area, for a specified time. The buyer takes the right to use the product or service, the buyer does not buy or own the product or service concept itself. Franchising: a company granting an independent operator the right to distribute its trademarks, products, or techniques is known as a franchiser. Franchising in the practice of using another firm’s successful business model. Franc means Free. Contract manufacturing: This is a good way of entering a foreign market without having to invest heavily into the new market. Reasons for terminating an agreement with a partner: * The end of the agreement * Difference of opinion concerning sales strategy * Conflicts and irrevocable cultural differences There are two cases that give you the legal right to end a contract prior to the expiry date: 1. No fault: when both parties mutually agree to dissolve the contract. You both agree the partnership isn’t working and it will be cheaper for both sides to stop it now.

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2. In the event of default: in this case a particular event must occur before you are allowed to terminate the agreement early. A clause to this effect must be written in the contract. The first option is the least expensive!

Chapter 6 – Export and culture Culture is one of the most interesting aspects of exporting, but also one of the most challenging and difficult. You can hire an agent who understands the local culture of the country you are doing business with. But much better is hire someone who understands both cultures, domestic and export, and can tell you how to deal with the differences. This is why research into what foreign customers want, as well as information on the country itself, becomes crucial. The following points are strongly related to local behavior. Factors that can affect cross-cultural business include: * Who speaks first * Attitude to religion and nature * Decision-making * Time * Social behavior * Personal space * Short and long-term planning Cultural adaptations Adapting the product: Name, packaging and colors of the product Adapting promotion: Car  Nova (in Spanish this mean: No go. Adapting price and distribution: In Asia – Vehicle to go to work on In USA – A fine-weather play thing Good idea to do some intercultural training. Learn about the customs and habits of your new business partner so that you can build mutual trust. Many benefits to speaking a foreign language: * It creates a positive rapport with major customers, leading to better communication and the prevention of misunderstandings * It creates an international culture and philosophy within your company or organization thus giving you competitive edge Promotion material and other documentation should be adapted for the local culture. Ask a translator to do this, and then ask a native-speaker to translate the text again to see if it is all good.

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Chapter 7 – Export marketing mix Market segmentation: Geography – customers in various countries have different needs Demographics – age, social class, sex, religion, income, etc. Psychology – characteristics depending on the personality and life style of customers Behavior – brand loyalty, eagerness to purchase and use of a product Positioning means that in the long run customers prefer your product, service, brand or organization above those of the competition. You must make sure that your company’s market position is distinctly better than the competitor’s products, services or brands. The consumption environment is different in the foreign market. This is influenced by: - Climate - Foreign language - Divergent (afwijkende) product specifications - Environmental regulations - Special regulations due to the packaging and recycling Labels should be redesigned for the foreign market. It is important to pay special attention to color, size and looks since product packaging must instantly appeal to foreign buyers. Packaging: extra protection for the long journey to distant markets. Europallets: 120 x 80 cm. Brands: private label? Find out of available The CE mark: conformité européenne. Required for most industrial products traded in the EU. legal requirement for eligible products: machines, toys and medical accessories. It protects manufacturers from having to test their products in other EU countries. Having the CE mark permits you to trade in all EU countries. it declares that the product complies with the minimum requirements for safety, health, environment and consumer protection. Chamber of Commerce. Patents: to protect your inventions and innovations. Copyright: not registered but wise to do Warranty and product guarantee: differs from the home country Service Production abroad: may be economical, 1) production costs, labor and capital costs. 2) production processes can be adapted without changing production at home. 3) cross-border production guarantees shorter delivery times Exporting know-how: different options - License: foreign producers signs agreement with exporting firm. FF sells under own - Contract manufacturing: foreign manufacturer produces, sales remain in exporting firm - Management contracting: foreign firm provides required capital. Exporting carries production and sales abroad. - Joint ownership: exporting provides required capital together with foreign. Pricing policy includes all decision-making related to cost calculations bearing on the ultimate export sales price. In determining the export sales price, the following cost factors should be taken into consideration: -higher cost of export goods due to product modification -extra administrative overhead -distributor’s margins/discounts -loss of interest -currency risk/hedging facilities

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-transport costs -promotional and advertising -bank guarantees and method of payment -customs -packaging costs -foreign buyer’s negotiating margins -quotation costs -insurance/specific demands/extra service Distribution is the organization and management of the flow of goods. It is often called the logistics of the marketing process. Can be defined by 2 objectives: 1. Timely delivery of specified goods in required quantities, shape and quality at buyer 2. Delivery of the specified goods in required quantities etc, at the owner’s exporting firm Promotion promotion policy: international communication strategy: 1 international – firm’s major concern is domestic market. There are exporting operations. 2 multinational – branches in different countries. 3 worldwide – head office treats the world as one market. Mode of communication in foreign markets depends on 3 factors: 1 business objective 2 type of products: consumer products are sensitive to culture. Industrial not very sensitive 3 type and accessibility of communication methods: potential buyers obtain product information from different sources Export markting mix - Product (packaging, brands, CE mark, patents, copyright, warranty, service etc) - Pricing - Distribution (Place) - Promotion (e-commerce, electronic guidelines) - People - Presentation - Politics

Chapter 8 – Delivering the goods Transport options: - own transport. There are more costs, but also benefits: -promotion instrument (your ads on trucks) -service (driver can install the goods -fewer problems with returned goods or packaging -better contact with customers - outsourcing transport. You have to pay for the terminal handling charge (THC) but the shipping agent takes care of process. Benefits: -transport by specialists -no investment required in means of transport -no need to employ drivers

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-no worries about organizing transport Modes of transport, the choice is based on: type of goods//usefulness of particular transport system//packaging requirements//national legal requirement//delivery conditions//destination//speed. Pipeline: Pe...