Exporting, while it presents exciting opportunities, can be a daunting prospect, even for experienced traders/exporters, and this can be enough to put off many companies that could benefit from internationalising their business.
For all the talk of globalisation and the ease of international communications, the world isn’t a single market, and every country presents its own practical, legal, logistical and cultural problems that must be addressed if you want to sell into them effectively.
Some companies fall into exporting almost accidentally, with unlooked-for orders from overseas. Others, content to mine the domestic seam, and aware of the apparent complications of expanding overseas, may ask the fundamental question, why export?
The unambiguous answer is — greater opportunities for growth. The European Union alone represents a market of 450 million people, and globally the potential for expansion is almost unlimited. Yet, many companies protest that the home market satisfies their business expectations and the need for stability and continuity — and at a lower level of risk.
For the sceptics, recent research conducted by the University of Glasgow shows that new exporters boost their business productivity by up to a third in their first year of exporting and that this activity, far from compromising stability, can enhance it. It confirms that, in general in the UK, exporting companies are more productive than non-exporters, and are significantly more likely to stay in business.
It may seem obvious, but growth appears to be the surest way to business longevity.
The report is based on a larger and more representative dataset than previous studies, and covers both services and manufacturing. It is also the first source of evidence for the UK about the contribution of exporting to aggregate productivity. The main findings include:
* firms that are new to exporting, on average experience a 34% increase in productivity in the year of entry
* firms that stop exporting experience a drop in productivity (of around 7-8% for all the sectors covered)
* over the period 1996-2004 some 60% of UK productivity growth was attributable to exporting firms, including both established and new exporters
* the majority of firms engaged in exporting at some time between 1997-2003 had a statistically significant lower probability of closure; firms were 11.4% more likely to survive if they exported.
These are revealing and persuasive results, and perhaps the key suggestion the report makes is that its findings are likely to reflect improvements made by companies preparing to export.
Am I ready to export?
Being convinced of the wisdom of exporting, though important, is only the first step. Companies need to prepare themselves properly for trading overseas, in order to meet its challenges with greater confidence, minimise its risks, and exploit its opportunities.
Any successful exporter will tell you that their success would not have been possible without a sound base of information obtained from serious research. There are no short cuts — it will take time to consider the practicalities of dealing with export business, not least in relation to the management, staffing, skills, financial and production resources within your company, and, of course, the marketability of your product or service.
Every business is different, and you need to assess, honestly, whether yours is equipped to export and, if not, how to make it so. You will also need to analyse thoroughly the mechanics of exporting. Key questions to be answered include:
• which are the best overseas markets for my product?
• who are my competitors?
• are there any regulatory barriers to/controls on export from the UK and import into export markets that may affect my product/service (e.g. technical standards, health & safety regulations)?
• what export documentation will be required?
• what export finance and credit insurance is available?
• how will I get my product to the market, and how much will it cost?
• which are the most effective distribution channels (agent, distributor, sales office, manufacturing site, licensing or franchising arrangement)?
• what are the best ways to promote myself (advertising; exhibitions; sales literature; multilingual web site)?
This is an intimidating list — and not a comprehensive one — demanding commitment from staff at all levels, from the top down. However, there are plentiful sources of support, advice and information to help with your evaluation — chambers of commerce, professional organisations like the Institute of Export, and government bodies such as UK Trade & Investment, HM Revenue & Customs and Business Link. It will also be useful to speak to other companies that have experience of preparing and launching an export strategy — and the dedication required will bring its own rewards.