U.S. Commercial Service U.S. Department of Commerce THE BASICS OF EXPORTING Carol A. Moore Mississippi Export Assistance Center March 23, 2010

Basic Elements for Export 1.Assessing Your Organizational & Product Readiness for Export 2.Market Research & Assessing the Competition 3.Developing an Export Strategy & Marketing Plan - Assessing Market Characteristics 4.Factoring Logistics into Strategic Planning 5.Promoting Products In Target Markets 6.Complying with U.S. and Foreign regulations 7.Export Management & Trading Companies 8.U.S. Commercial Service Assistance for Exporters

Assessing Your Organizational and Product Readiness

Reasons For Exporting There are many good reasons you should be exporting. – Economies of scale – Increased revenue and profit – Increased productivity – Spread risk base of business – Smoothing effect on order book – Offset lack of demand for seasonal products – New product ideas – Additional markets – Tax advantages

Reasons For Exporting (cont.) Just because exporting is a good idea, you should not jump into it unless: – You have an export plan – Your company is ready to export – You have done market research

“Reasons” For Not Exporting Some perceived disadvantages to exporting: – Sacrifice short-term profits for long-term gains – Increased travel and administrative costs – Hiring additional staff – Need to develop new promotional material – Modify your product and packaging to meet international requirements

“Reasons” For Not Exporting cont’d – May need to obtain export licenses – Fluctuations in foreign currency exchange – Apply for additional financing – Previous bad experience with exporting These disadvantages may justify a decision to forego exporting at the present time, but... – With proper planning one can overcome these obstacles, and avoid critical mistakes.

Are You Ready To Export?.…an exercise 1.Does your company have a product which has been successfully sold in the domestic market? 2.Does your company have, or is preparing, an international marketing plan with defined goals and strategies? 3.Can your company commit sufficient production capacity to the export market? 4.Does your company have the financial resources to actively support the marketing of your products in the targeted markets? 5.Is your company willing and able to dedicate staff, time, and resources to the process of developing export markets?

Are You Ready To Export (cont’d.) 6.Is your company committed to providing the same level of service given to your domestic customers? 7.Is your company willing to modify product packaging and ingredients to meet foreign import regulations and cultural preferences? 8.Does your company have adequate knowledge about shipping its product overseas in order to identify and select international freight forwarders? 9.Does your company have adequate knowledge of export payment mechanisms in order to avoid risk and negotiate competitive terms?

Organizing For Exporting A company new to exporting generally treats its export sales the same as domestic sales. – This is a mistake. Two key advantages of separating international from domestic business are: – The centralization of specialized skills needed to deal with international markets. – A focused effort on export sales.

Evaluating Your Product Readiness How successful are your products domestically? – If you are successful at home, then chances are you be successful abroad. – If similar needs and conditions exist overseas. What are the unique features of your products? – If these features are hard to duplicate overseas, then chances are you may be successful abroad. – Do these features enhance your marketability in particular areas?

Evaluating Your Product Readiness Are you losing market share to more technically advanced products? - Other countries may not need state-of-the-art technology. - Other countries may be unable to afford the most sophisticated and expensive products.

Organizing For Exporting cont’d Separating international from domestic business may be done at different levels in the organization. – For example, at first a company may create an export department with a full or part-time manager. Reporting to the head of sales. – Later on, a company may choose to increase the autonomy of the export department. Reporting to the company president.

Ways To Organize For Exporting There are several ways a firm may organize its exporting efforts: - By product line …Good if each product line is distinct. - By territory …Good if product modification is needed in each territory. The key is to facilitate the marketing effort. Experience has proven that a company's international success depends more on its marketing methods than on the unique benefits of its products.

Market Research and Assessing the Competition

The Importance of Market Research Your company may begin exporting without any market research if it receives unsolicited orders from abroad. – But, you will find even more promising markets by conducting a systematic search. Businesses that invest time in market research increase their chances of succeeding more cost effectively. Researching potential markets can help your company by: – Finding where your products are most likely to sell – Identifying market segments and niches – Determining both domestic and international competitors

The Importance of Market Research cont’d – Discovering how to overcome barriers to market entry – Understanding customers' needs and accommodating as appropriate – Identifying new trends – Determining your price competitiveness Market Research Databases:

Factors To Consider There are numerous factors to consider when evaluating potential export markets. These factors can be grouped into several categories – Market Size – Income Distribution – Market Growth – Market Accessibility – Economic Stability – Political Climate – Cultural Climate – Education – Language – Environmental Factors – Geographical Factors – Legal System

Market Growth To determine the growth potential of a market: Look at the last three to five years of import history for your product within a given market. – Are the number of imports increasing or decreasing? Look at trends and growth forecasts. – What do they tell you about the market and its potential for growth? – Has it reached its peak? – Is the market saturated with like products?

Market Growth cont’d Look at change in per capita income. – Will their newly found disposable income create demand for your product? Consider the industrial development stage of your market. – Markets beginning to industrialize may not have need for the latest technology. – Some may leap ahead and skip steps in achieving technological progress.

Market Access To determine the accessibility of a market you need to know: – Import duties and tariffs – Product standards – Local suppliers – Foreign suppliers – How distribution channels work – How to obtain import permits – Pricing methods – Advertising and promotional practices – Credit terms

Economic Stability To determine the economic stability of a market you need to know: – Exchange rate performance – If currency controls exist – The balance of payments – Foreign currency reserves – Government debt and budget – Rate of inflation – Rate of unemployment

Political Climate To determine the political climate of a market you need to know: – If the political system of the market is stable. If not, how the possible changes will affect you How the government affects your ability to import into the market The government's attitude toward your country

Cultural Climate To determine the cultural climate of a market you need to know: – What are the primary religions in the market. – The meaning of symbols in the culture. The meaning of numbers in the culture. – In the former USSR, flowers in even numbers are for funerals. The meaning of color in the culture. – White is the color of death in China and Korea.

Education To determine the education level of a market you need to know: – The literacy rate – The computer literacy rate The education level of the foreign market may affect your ability to sell your products. – You may have to add more graphics to your brochures and installation instructions.

Language The de facto language of international business is English. – But the customer always prefers to speak in their native language. Do you have the resources to communicate with customers in their language? – Can you translate marketing literature and product information correctly ? British English versus American English Brazilian Portuguese versus Portuguese from Portugal – Foreign language character sets require additional considerations. – Double-byte characters – Left-to-right versus right-to-left

Environmental Factors Environmental factors that will affect both the demand for your products and their performance are: – Temperature – Humidity – Altitude – Sand

Geographical Factors Geographical factors that will affect your costs are: – Travel time – Travel costs – Delivery time – Shipping costs

Legal System Legal factors that will affect your decision on which markets to enter include: – Independent judiciary How corrupt is the judiciary? How fast are judicial processes? – Copyright protection – Trademark protection – Right to sue – Right to own property – Right to travel

Developing an Export Strategy and Marketing Plan Assessing Market Characteristics

Why Write An Export Plan There are several benefits to writing an export plan. It becomes a selling tool to get management to: – Form a consensus on the goals and objectives, capabilities and constraints. – Commit to support the exporting effort. It becomes a selling tool to get financing. – Banks want to see plans in writing. It shows that you are serious about your endeavor. It becomes a management tool to measure progress. It becomes a tool to facilitate communication. – Written plans are not forgotten. – Clearly written plans are easy to understood and follow.

Creating An Export Plan The first time an export plan is developed, it should be kept simple. – Its initial purpose is to be a management tool. – It should be only a few pages long. Important market data may not yet be available. Planning elements may not yet be available. Expect the export plan to be revised and refined over time. – Initial planning effort will generate more information and insight. The export plan will become more detailed and complete. – Changing business conditions will force the export plan to change.

Export Plan Content An export plan should contain the following information. Executive Summary Export Policy Commitment Statement – Mission statement – Why your company should export Background Analysis – Why your company is ready to export Market Analysis – Identifying markets – Identifying products to export

Export Plan Content Cont’d – Identifying distribution method – Pricing – Competition Implementation Plan – Primary markets – Secondary markets – Method of exporting Financial Analysis – Export budget – Profit and loss forecast

Export Plan Content Cont’d Review Plan – Operational review – Management review Addenda – Facts to back up the export plan Background data Research information

U.S. Commercial Service Assistance for Exporters

U.S. Commercial Service Our Mission: The U.S. Commercial Service strives to be the best source of customized solutions for U.S. businesses to enable them to compete and win in the global marketplace.

Our Objective We are measured individually and as a team for creating export success for our clients, one market at a time.

Our Network Trade specialists in over 100 U.S. cities and 83 countries worldwide... We can... Locate international buyers, distributors & agents Provide expert help at every stage of the export process Help you to enter new markets faster and more profitably

Trade Assistance Our trade specialists in the U.S. work directly with our team of experts overseas in getting you all the information and advice that you need to successfully enter identified markets. We can help you:  Evaluate international competitors  Identify and comply with legal and regulatory issues  Screen and appoint foreign agents or distributors  Understand the shipping process  Assess your trade finance needs  Learn about cultural issues and business protocol  Settle disputes

Typical Initial Counseling Meet one-on-one with area firms to discuss their individual international marketing strategies Provide market research reports and help firms to gain valuable knowledge on their top potential markets Discuss market entry strategy Finding viable overseas business partners

A Record of Success In FY 2009, the Mississippi Export Assistance Center of the U.S. Commercial Service : – Counseled nearly 200 Mississippi firms – Facilitating nearly 120 export successes valued at over $8.6 million.

U.S. Commercial Service BUSINESS MATCHMAKING Gold Key Matchmaking International Partner Search International Company Profile TRADE PROMOTION EVENTS Catalog Exhibitions International Buyer Programs Trade Missions/US Pavilions MARKET RESEARCH  Market Research Library  Customized Market Research  China Commercial Brief TAILOR-MADE PROGRAMS  Advocacy  Single Company Promotions  Business Consulting

How to Contact Us MISSISSIPPI U.S. EXPORT ASSISTANCE CENTER Mississippi JSU 1230 Raymond Road, Box 600 Jackson, MS Tel: (601) , Fax: (601)