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

STEP 6: ENTER YOUR TARGET MARKET

 

 

 Step 6:  Enter your target market

 

·       Understanding entry strategies

Developing a market-entry strategy simply means finding the best methods of delivering and distributing your goods. Or, if you're exporting services, it means setting up ways to obtain and manage contracts in the foreign country.

help you finesse your market-entry strategy connect you to the trade commissioners and global contacts you need—in more than 160 cities around the world—to help you with the challenges of market entry.

·         Refining your entry strategy

You've chosen the most promising markets for your product or service. Now, based on your market research, you must decide which entry method best suits your needs.

Some factors to consider:

How is business conducted in your target market and industry sector? What are your company's export strengths and weaknesses? What is your company's financial capacity? What product or service are you planning to export? How much service and after-sales support will your customers require? What trade agreements or barriers apply to your target market?

·         Methods of market entry

The traditional means of market entry fall into four broad categories: direct exports, indirect exports, partnerships and acquisitions/investments. We'll examine each of these and then look at the question of intermediaries: agents, distributors and other go-betweens.

·         Direct exports

For products, you market and sell directly to the client. For services, you negotiate, contract and work directly with the client.

Advantages of Direct exporting

A higher return on your investment than selling through an agent or distributor Allows you to set lower prices and be more competitive Close contact with your customers

Disadvantages of Direct exporting

You don't have the services of a foreign intermediary Customers or clients may take longer to get to know you

·         Indirect exports

For products, you market and sell to an intermediary such as a foreign distributor. You can also retain a foreign agent or representative who does not directly purchase the goods.

For services, you contract with an intermediary who then negotiates and contracts on your behalf.

For many new exporters, an intermediary may be the best way to enter a market.

Consider short-term trial contracts to test-run the arrangement and ensure it will do what you are seeking.

·         Partnerships

You might find it advantageous to partner with a local company whose strategic position complements or enhances your own. A well-structured partnership can benefit both parties in the following ways:

Your partner can complement your capabilities and provide the local expertise, insights and contacts. Each company focuses on what it does and knows best. Both partners share the risk. You can pool ideas and resources to help keep pace with change. You can approach several markets simultaneously. Your partner may provide technology, capital or market access that you might not be able to afford on your own. Partnerships may help resolve problems related to professional accreditation, movement of personnel across borders and tax and legal status. In a highly competitive global market, combining the technical and financial strengths of two businesses can make both more competitive.

You develop a partnership strategy in three steps:

Decide whether or not a partnership can work for you. If your needs can be satisfied in-house, a partner may not be necessary. If you need financing, you may be better off looking for investors. But if you require special expertise or a local market presence, then a partnership might work very well. Define the form, structure and objectives that a partnership must have to suit your needs. To do this, evaluate your company's goals, its ability to achieve them and where you need help in doing so. Then identify how the partnership must work in order to fill in those gaps. Find a partner who meets these criteria and who will be a good "fit" with your company. It is very important to select a partner that has the values and approach to businesses that match your own for a partnership to be successful.

There are several different forms of partnerships. The primary options are:

Licensing – a license is the granting of rights to another business so that it can legally use your proprietary technology and/or intellectual property. This usually does not involve granting all the rights to the property.
  Franchising – more than licensing, the franchisee is given the right to use a set of manufacturing or service delivery processes, along with established business systems or trademarks, whose use is controlled by a licensing agreement.
  Cross-licensing – each firm licenses products or services to the other for sales purposes.
  Cross-manufacturing – a type of cross-licensing in which companies agree to manufacture each other's products.
  Co-marketing – carried out on the basis of a fee or a percentage of sales to take advantage of existing distribution networks and domestic markets.
  Co-production – the joint production of goods, enabling your business to use its skills and resources to provide cheaper manufacturing.
  Joint venture – each business contributes capital to a newly created corporation that they operate together, or the Local   and the local business enter into a general partnership agreement and operate the joint venture as a partnership.

Using the expertise of lawyers, accountants, bankers and other professionals is vitally important when setting up any type of partnership. All parties must be absolutely clear on who holds which rights and which responsibilities.

Plan your alliances carefully and pay attention to the qualifications of a foreign agent or distributor. The experts can help vet your potential partner. Talk to a trade commissioner to request a bona fide check to qualify the contact.

Acquisitions and investments..

A partnership isn't the only way to tap into the resources of a foreign company. Acquiring a firm in your target market, or making a substantial investment into one, can achieve the same results.

Through acquisitions and investments, you immediately gain access to the local market, as well as patents and other intellectual property, resource availability, access to capital, specialist expertise, proprietary technology and product differentiation.

You may also enjoy lower operating and production costs in your foreign operation than at home.

Selling to foreign governments

Foreign governments can present a rich source of contracts for exporters. The United States government alone procures more than $500 billion in goods annually.

 

 

Selling to multinational corporations..

To sell goods or services to foreign corporations, it is essential to conduct research to understand their supply chain sourcing practices. Incorporating the mechanism by which you access the supply chain should be considered in developing your market-entry strategy. Corporations have different sourcing needs, practices, guidelines or entry points to their supply chain. Some approach their supply chain management in terms of Tier 1 and Tier 2 suppliers, for example, with Tier 1 suppliers selling directly to the corporation and with Tier 2 selling to Tier 1. Also, some require their potential suppliers to register their business on an online portal for consideration. Many multinational corporations also have corporate supplier diversity initiatives to source from women, minorities and other groups that are traditionally underrepresented in supply chains. For these initiatives, the key contacts and process for entering the supply chain are typically different (i.e. potential requirement for certification). This, however, does not preclude designated groups from accessing other parts of the supply chain; it is simply a unique entry point that may provide them with a competitive advantage.

You may be wondering where to start in understanding the complexities of accessing corporate supply chains. Information on websites, talking to corporate representatives in Local   subsidiaries, or meeting with representatives during business fairs or networking events can shed light on sourcing needs and practices. Trade Commissioner Service can also assist with providing business intelligence and qualified contacts.

Free trade agreements: understanding the role of trade policy in reaching your export and investment goals..

The global trading environment has become increasingly complex. The World Trade Organization (WTO) has provided an effective foundation for establishing and enforcing global trade and investment rules. In addition to pursuing their interests in WTO forums, WTO member countries have increasingly sought out other tools to generate opportunities and ensure fair treatment for their businesses, as well as create advantages relative to competitors.

There has been a proliferation of trade and investment agreements:

on a bilateral or regional basis, that is, outside the WTO: free trade agreements (FTAs) foreign investment promotion and protection agreements (FIPAs); air transport agreements (ATAs); and sector-specific initiatives within the WTO, including: WTO Agreement on Trade Facilitation (TFA); WTO Agreement on Government Procurement (GPA); Trade in Services Agreement (TISA); WTO Information Technology Agreement and its recent expansion (ITA); WTO Environmental Goods Agreement (EGA), among others.

So what is the trick to finding your way through all these agreements?

Stay focused on what you sell and where you want to sell it. Identify which barriers and rules could apply to your specific goods or services in these markets.

There are three important trends to note regarding tariffs and global trade:

Overall, global tariffs have decreased as a result of unilateral tariff reductions as well as WTO agreements. Bilateral and regional trade agreements also provide for the elimination or reduction of tariffs, but only on a preferential basis (e.g. only for goods originating from each party to the agreement). Because tariffs have generally decreased, there has been an increased focus on non-tariff measures that can affect trade (known as non-tariff barriers). These measures are permitted to meet legitimate public policy objectives, but governments need to ensure that they are the least trade-restrictive option necessary to achieve those objectives. The goal is for regulations to be in place to protect the public, while at the same time allowing trade to flow. Modern FTAs increasingly address not only tariffs, but also non-tariff barriers that are restricting or distorting trade. All countries, including India, employ regulations and other measures to meet legitimate public policy objectives, such as ensuring the safety of our food supply or preventing the spread of pests or diseases. Regulations are also necessary to ensure that products are not harmful to consumers, such as specifications on an infant’s crib. However, these measures should not be used to unnecessarily restrict trade or discriminate against foreign products. 

Evaluating the use of intermediaries..

Before you jump on a plane and start knocking on doors, think about using an intermediary. The right one can save you an enormous amount of time and money. There are several types: agents, representatives, trading houses and distributors.

1.  Agents and representatives

Agents and representatives aren't exactly the same. An agent secures orders from foreign customers in exchange for a commission. A representative specializes in sales within a specific geographic area.

Both types of intermediaries may be authorized and commissioned to enter into contractual sales agreements with foreign customers on your behalf. This is usually less costly than setting up your own direct sales operation. Such an arrangement also gives you control over the price of your product or service—an important advantage.

Do your due diligence on a potential agent or representative to make sure they will serve your interests. For example, to ensure that they aren't pushing for an exclusive relationship just to keep your product or service out of the market. Consider negotiating a trial period.

Good foreign agents or representatives can research markets, advise on financing and transportation options, clear goods through customs, provide access to potential customers, make collections and supply information on local business practices, laws and cultural traditions.

2.  Trading houses

Trading houses are domestic intermediaries that market your goods or services abroad. A full-service trading house handles a great many aspects of exporting, such as market research, transportation, appointing distributors or agents, exhibiting at trade fairs and preparing advertising and documentation.

Some trading houses act as "principals" or "export merchants," buying products outright from Canadian suppliers, while others act as "agents," selling on commission.

If you prefer not to sell directly to foreign customers or worry about finding a foreign intermediary, you might consider using a trading house.

3.  Foreign distributors

Unlike agents, distributors actually purchase your product or service and resell it to local customers. Often, they set the selling price, provide buyer financing and look after warranty and service needs.

A bonus is that the distributor can usually provide after-sales service in the foreign