BASIC GUIDE TO EXPORTING, DEEPAK JOSHI [i can read with my eyes shut TXT] 📗

STEP 2: LINK TO GLOBAL VALUE CHAINS

 

 

Step 2: Link to global value chains 

 

·        Understanding global value chains : GVC

 

A value chain (whether global or not) consists of activities that bring a good or service from its conception to its end use and beyond. This includes design, production, marketing, distribution and support to the final consumer. The activities that comprise a value chain can be contained within a single firm or divided among different firms. When those activities are no longer contained within a single geographic location, such as a country, we have a GVC.

Global value chains aren't new. Trade and investment were becoming broadly internationalized in the late 19th and early 20th centuries. But due to the outbreak of the First World War, followed by the Great Depression and the Second World War, globalization didn't really move to the forefront until the last quarter of the 20th century.

International trade has evolved from companies that once manufactured products in one country and sold them in another. It is also departing from the branch–plant approach, wherein a business produced its goods in a foreign market and sold them almost exclusively in that market. Instead, international trade is now increasingly characterized by intermediate inputs (for both goods and services) who may be found anywhere in the world.

Growth of global value chains :

There are three major forces driving the growth of GVCs, according to the Office of the Chief Economist:

Declining costs of transportation

Unless time concerns dictate otherwise, companies can afford to move their goods production and services provisions to locations that offer the best competitive advantages.

Improved information and communication technologies

Advances in information and communication technologies (ICT) mean that companies are much less limited by distance when operating in foreign markets.

Reduced barriers to trade and investment

New bilateral trade and investment treaties, lower global tariffs and liberalized economies in developing markets, such as China and India, have allowed companies to gain access to markets that were formerly closed to them.

Global value chains allow each link of the export chain to specialize in what it does best. This leads to greater efficiency, increased productivity and lower consumer prices for higher-quality goods and services. At the same time, this trade environment stimulates the intense global competition that encourages innovation.

Companies worldwide have had to adapt to the evolution of GVCs. For example, non-core activities may be outsourced to suppliers, partners or affiliates in countries with lower labour costs or other competitive advantages. Alternatively, SMEs may supply goods or services to a GVC established by another company, including a foreign multinational.

GVCs and your business :

You have a considerable range of strategies for benefiting from GVCs. The following are among the most common.

Provide intermediate input for existing value chain

If your product is something that another company (either Local   or foreign) uses as an intermediate input, you may be able to link into their GVC by becoming a supplier. This is a very common approach and certainly the simplest. For SMEs, especially those with niche technologies or specializations, new opportunities are constantly emerging to sell to multinationals or their suppliers.

Develop your own GVC through outsourcing

If your company manufactures either finished products or intermediate inputs, you can set up your own GVC. Acquiring intermediate inputs—such as raw materials, components, subsystems and other goods and services—from foreign suppliers can help you manufacture your own products at either lower cost or greater responsiveness to market forces.

Make investments abroad to connect to or establish a global value chain

By investing abroad you can gain immediate access to a foreign market and expand your company's sales and promote its growth. There is a broad spectrum of investment approaches, ranging from the passive to the active.

You might, for example, join a GVC simply by investing in a foreign company while taking little or no part in its operations. Purchasing a foreign firm, or setting up a joint venture or partnership, is another way to increase your competitiveness in the local market. This approach can be very cost-effective if you obtain existing production and distribution capabilities through the investment, so you don't need to build them from the ground up.

At the active end of the spectrum, you could establish a wholly owned subsidiary in a foreign market. This can help you drive and benefit from the GVCs of which your company is a part. The most important advantage is that you aren't dependent on a partner, so you can control the direction your subsidiary will take. You will also have direct contact with your end users, allowing you to build solid customer relationships and helping to ensure that your identity isn't obscured by the presence of a partner. Finally, your overseas staff will answer only to you, and all data related to your foreign operation will be at your sole disposal.

 

STEP 3: DEVELOP YOUR EXPORT PLAN

 

 

 

 Step 3:  Develop your export plan

 

·        Why plan?

If you plan your export project thoroughly, you'll have a better chance of doing well in your target market. Bad planning (or no planning) can lead to major failure abroad and could severely damage your domestic operations as well.

Financial institutions and other lending agencies will not normally provide funds to a business that lacks a well-developed export plan. In addition, potential partners and investors will want to see exactly how you plan to achieve your objectives.

An export plan is a business plan that focuses on international markets. It identifies your target market(s), export goals, necessary resources and anticipated results.

 

Your export plan should contain the following: Introduction business history vision and mission statements purpose of the export plan organizational goals and objectives international market goals short- and medium-term objectives for exporting location and facilities Organization ownership management staffing level of commitment by senior management relationship between exporting and domestic operations corporate experience and expertise in exporting strategic alliances labour market issues abroad Products and services description of products and services key and/or unique features that distinguish your product/services from those in the target market adaptation and redesign required for exporting production of products and services future products/services pipeline comparative advantage in production Market overview political environment economic environment size of market key market segments purchasing process and buying criteria description of industry participants market share held by imports tariff and non-tariff barriers industry trends and other market factors market outlook Market-entry strategy target market(s) description of key competitors analysis of competitive position product positioning pricing strategy terms of sale distribution strategy promotion strategy / development of sales leads description of intermediaries and partners Regulatory and logistical issues intellectual property protection other regulatory issues modes of transportation and cargo insurance trade documentation use of trade service providers Risk factors market risks credit and currency risks political and other risks Implementation plan key activities evaluation criteria and process Financial plan revenues or sources of funding operating budget cost of sales marketing and promotion costs other expenses or expenditures

 

STEP 4: IDENTIFY YOUR TARGET MARKET

 

 

 Step 4:  Identify your target market

 

·        Understanding international market research

After the export plan, market research can be the most important contributor to your international success. There are more than 190 countries in the world and you want to target the right one(s) for your product or service.

To do this, you need information that will provide a clear picture of the political, economic and cultural factors affecting your operations in a given market. Market research is the key to understanding your opportunities. It can confirm that an opportunity actually exists, provide you with insight into how a new market can be developed, or help you discover what's important to your potential customers.

The three basic stages of international market research, while detailed, aren't particularly complex:

Screen potential markets

Collect statistics that show your sector’s product or service exports to various countries.

Identify five to 10 large and fast-growing markets for your product or service. Look at their performance over the past three to five years. Has market growth been consistent year over year? Did import growth occur even during periods of economic slowdown? If not, did growth resume with economic recovery?

Apply the same research questions to select smaller emerging markets that may not have as many competitors as an established market.

Target three to five of the most promising markets for further study.

2. Assess target markets

Examine trends that could influence demand for your product or service. Calculate the overall consumption of products or services like yours and identify the amount imported.

Study the competition, both domestic and international. Look at each competitor's Local   and foreign market shares.

For marketing purposes, become familiar with channels of distribution, cultural differences and business practices.

Identify any foreign barriers (tariff or non-tariff) for the product or service being imported into the country, as well as any Local   barriers (such as export controls) affecting exports to the country.

Research potential federal, provincial or foreign government incentives to help you promote the export of your product or service.

3. Draw conclusions

After analyzing the data, you may decide that you should restrict your marketing efforts to a few countries. In general, one or two countries are usually enough to start with.

Types of market research..

There are many ways to study a market, but the more detailed and objective your research, the better.

There are two main types of market research: secondary and primary.

1 Secondary research

Secondary research can be done in Domestic Market, using data sources including periodicals, studies, market reports, books, surveys and statistical analyses. Many of these are available online, as well as from chambers of commerce, economic development organizations, industry and trade associations, and Local   companies that are already doing business in your target market.

2 Primary research

After completing your secondary research, collect market information through direct contact with potential customers or other sources. Primary research almost always demands direct, personal involvement through on-site interviews and consultations.

State your company's objectives at the outset and present your questions clearly. For example:

Company description: give a brief description of your company, its history, industries and markets served, professional affiliations (if any) and your product or service. Objectives: briefly list or describe one or more objectives for your planned export product or service, based on your secondary market research. Product or service: clearly describe the product or service you want to export. Questions: base your questions on your secondary research and be as specific as possible. You'll get a better response if it's clear that you've carefully researched your subject.

Profiling potential markets

Here's a checklist to help you summarize what you can learn about a possible market. After you've created two or three profiles, compare them to see which market(s)