EXPORTING ESSENTIALS: SELLING PRODUCTS AND SERVICES TO THE WORLD SUCCESSFULLY (2014)
Chapter 1. Are You Ready to Export?
Over the next five years, we will double our exports of goods and services around the world—an increase that will boost economic growth and support millions of American jobs in a manner that is deficit-friendly.
—President Barack Obama (2012)
Anyone who wants to export, can. The world awaits. The essential element needed to be successful exporting is readiness. The rest is mechanics and know-how. Whether you’re a first-time exporter or entering a new market, selling goods and services across borders is easy and just a mouse click away. I’m here to show you how. But before I get to that, let me take you back to a little more than twenty-five years ago.
It was 1985. Even back then, I challenged conventional assumptions about how to compete and started to view markets outside the United States as the future of the business I had started: Global TradeSource, Ltd. I even put “global,” “trade,” and “source” in the company name, thereby shifting the buyer’s possibilities from being local to those of the world and drawing upon the distinctive strengths of alternative, growing overseas markets as those that would offer the company’s products and services.
That kind of vision, along with a more recent facilitator called the Internet, has broken down every imaginable barrier to growth and prosperity and has transformed not just how we conduct business but the world at large. The moment you create a Web site, blog, or Facebook account, your point of contact with consumers becomes global. The Internet is the great global leveler and gives everyone a chance to make spectacular strides in exporting—by finding, acquiring, and servicing customers the world over faster than ever—which in turn drives profits and growth for businesses. The blueprint for prosperity in exports is right at your fingertips. Never has there been such attention to the Internet, interconnectedness, and exporting than now.
Note The Internet has broken down all barriers to world commerce. It is your most potent weapon in the battle to capture more international sales.
The use of technology, especially social networks such as Facebook, LinkedIn, and Twitter, along with the advent of smart phones and tablets, makes finding and exporting opportunities in the world marketplace a breeze for small business owners and executives. And as a result of these incredible advancements in technology, these same empowered individuals can create opportunities on the web—not just browse for themselves—and even launch whole new enterprises in a heartbeat based on unmet needs and interests expressed by consumers.
Because social networks enable us to extend our worldwide connections rapidly, increasing our ability to identify opportunities on a more open, transparent basis, none of us operates in a vacuum as a solo entrepreneur any longer.
What does this have to do with exporting and your readiness to do so? Plenty. It defines how an export business is born and can grow, if nurtured correctly, into something absolutely amazing.
Next, let’s take a look at a three examples of real-world situations that could arise that will shape how you view the potential of exporting and how it gets done. After that, we’ll move on to what it takes to succeed in exporting. Last, we’ll make a distinction between exporting services and products—which will allow you to decide what you are going into the international market with.
You’ll note that at this point I do not talk about the financial considerations of exporting. They are obviously an important aspect that you must consider before you export in order to be properly capitalized. However, I am intentionally leaving the discussion out of this section because it will be covered later, beginning with Chapter 3.
How an Export Product Business Is Born
Imagine someone named Abel Anderson who is working in the automotive industry while running a food-export business. In the evenings and weekends, he goes to food fairs. Although he works full time in the automotive industry, his real passion is food. He’s always seeking novel food items to try.
At one local trade show that Abel attends in Chicago, he falls in love with a specialty item that tastes like cheesecake, caramel, chocolate, and butter crumbs all rolled into one scrumptious cookie the size of a hockey puck. He chats with the person at the booth named Samantha and asks her if she exports the product. She tells him she does not. Abel expresses interest in working with her baking company in his spare time as an independent contractor to export its products to a select few countries. Lo and behold, she agrees.
After spending a few days with Samantha making sure the ingredients in the cookie can hold up in overseas transit and pass regulatory laws, Abel draws up a contract. He then contacts the International Trade Administration via the Internet to conduct a partner search for agents located in Dubai, Saudi Arabia, and Oman—areas of the world where he thinks there is significant demand and enough wealth to purchase gourmet food products. Within three months and with the help of ITA, he lines up importing distributors in two countries—all just by using e-mail and Skype. He sends a test shipment of cookies to each location and discovers in the process that everyone who samples the cookies loves them. He receives his first order from the Dubai agent for ten thousand packages of cookies.
Abel is now in the export product business. It won’t be long before he gives up his full-time job in the automotive industry.
His story is an example of how the journey to exporting or launching an export business begins. Abel started first with his own good idea of exporting a product, and then, with the help of technology that most of us use every day, he was able to turn his idea into a new business venture. Here, then, we have a new paradigm for world competitiveness built on information and technology. So while nothing beats a good face-to-face encounter to help deepen your knowledge of a country and the customer, making the most of technology should also be a priority.
In the future, the economic transformation of countries will require businesses to rely less on selling to locals and more on selling abroad. This gets back to how exporting boosts economic productivity and also suggests its capacity to solve the problems caused by a growing world population, rapid urbanization, and even climate change.
Everything we do today is potentially relevant to consumers anywhere in the world, provided they understand what we are doing. Consider, for example, running a public relations firm. Think it has international legs? Let’s find out.
Tip Any product or service you sell no doubt has potential customers abroad. And guess what, you will need them all in order to stay relevant as the twenty-first century progresses.
How an Export Service Business Is Born
Envision offering your local marketing service, which is booming in North America, to someone in the United Kingdom. Let’s imagine that someone named Katie Schroeder does just that. She runs a successful Chicago-based public relations company called Take It Viral, or TIV, representing some of the most popular big-name consumer brands in the United States. TIV has received numerous accolades for its creative social media campaigns using Twitter, Facebook, Instagram, and Google+.
As a result of media fanfare, a business owner in the United Kingdom—we’ll call him Joe—has tracked Katie’s work and e-mails her with a request for her company to conduct a social-media PR campaign in the United Kingdom. Joe makes luxury ties and wants to broaden his brand recognition in the United Kingdom and expand his business into the United States. Although Katie has reservations about delivering that type of specific service outside her normal selling channels, she contemplates how to go about it. All she really needs is a plan, technology, a couple of additional support people, and a few good local UK connections to make it happen.
So Katie decides to take the project. Her first step is to develop a road map. Her next step is to execute it. She deploys her existing employees to launch the program, and as the UK business grows, Katie outsources work through the online freelance employment databases Guru.com, Elance.com, and Odesk.com, specifically seeking people in the UK market who are capable of managing social media campaigns.
At the same time, Katie consults her international accountant on how best to handle the tax impact on her business for the newly generated overseas revenue stream and payments made to independent contractors located in the United Kingdom. Further, she explores all payments options—for both money received from clients and money paid to workers—with her trusted international banker. Last, she goes over the potential pitfalls on the legal front with her international attorney.
Through the advice of her banker, Katie sets up a PayPal account to pay off-site workers and receives her first UK client payment via a wire transfer to her bank account. Voila! She has gone global and achieved her first service export! She is already considering opportunities in France, Ireland, and Germany. Her new goal is to become less dependent on the ebb and flow of the North American market, build up a profitable alternative revenue stream (e.g., in the United Kingdom), and expand into additional international markets so that the world will eventually become her revenue stream.
Note Exporting requires a team of experts—accountants, lawyers, and others—who understand the markets you are selling into. Get them involved early to help you avoid missteps.
How a Business Expands into New Foreign Markets
Ever dream about branching out into new overseas markets? Meet someone we will call Alfild Nelsen. Alfild is currently running a successful specialty chemical-cleaning-product business with revenues of more than $10 million. Thanks to NAFTA, she currently exports to Canada and Mexico, but to further offset the anticipation of slowing local growth, she wants to branch out into other international markets. While thinking about that, she ventures off to Australia with her husband for a vacation. She visits a huge do-it-yourself store in Melbourne and spots a wide array of high-end cleaning products not unlike the ones she makes in her own business. She buys a couple of the products and thinks about how she could find a qualified representative for her own line of cleaning supplies to be sold in the same store. Nothing beats healthy competition!
When she returns home to the United States, Alfild places the cleaning products she bought underneath her kitchen sink and forgets about the idea of exporting to Australia. Besides, she’s too busy with her efforts that go into expanding her business into the Mexican and Canadian markets! Several months go by and when she has some spare time, she suddenly revisits the idea of exporting her specialty chemical cleaning products to Australia. She pulls out her laptop, remembers a service a colleague uses for exporting to New Zealand called Gold Key Service, and finds the Web site. She e-mails the organization and within thirty days has a customized market research report, an appointment with a prospective trade partner in the chemical cleaning industry, and a trip scheduled to meet face-to-face with the partner in Australia. Alfild has made the first step in branching out into new international markets. These examples show that you can escape constraints on growth at home by way of exports and entering new markets. The potential is as vast as your imagination. Whether you are an export newbie like Abel or Katie or an experienced exporter like Alfild, at some point you must decide whether to export a product or a service, or both. As I just highlighted, most people begin with a single idea that they are comfortable with, know like the back of their hand, and have rich experience with and therefore feel that they have a competitive advantage in the global marketplace. Understanding the difference between exporting a product or a service is critical to making the right choice for your business and your personal fulfillment.
The Difference Between Product and Service Exports
Exporting a product involves transporting something you can see, hold, easily assign a monetary value to, and physically move from point A to point B. Exporting a service, such as one that is business oriented, professional, technical, financial, or based on franchising or insurance, requires a somewhat-different approach. Here’s a quick rundown of the differences between a product and a service as they affect the export process:
High perceived value
Low perceived value
High freight costs
Negligible freight costs
Negligible human interaction
High human interaction
You cannot see or touch a service—and you often cannot assess its true value until after you have used it and discovered all the resulting benefits.
Services are in many ways a tougher sell than a product, either at home or abroad, yet once sold, they move faster thanks to technology. Each of the listed differences creates a marketing challenge for the service exporter; perhaps the most crucial being the need to convince a distant customer to buy your service sight unseen and without any real idea of how they will benefit. This is why a service business depends first and foremost on people. Of course, when you export a product, you are also relying on a whole string of people to do their jobs—banks to help you get paid, freight forwarders to move your goods, local distributors to get your product on store shelves—but exporting a service demands a special emphasis on human interaction, both at home and abroad.
The United States is the largest exporter of services in the world. The most competitive advantage of service exports, especially during any recession, is that they perform better than goods exports. Service exports typically don’t face tariffs, as goods sold overseas often do, but some barriers still persist.
People Power Drives Your Service Exports
Selling a service requires even-more people power than product sales to be successful. When you export a product, you offer it, clinch your sale, follow through, and troubleshoot as needed. Then, once the product is in your customers’ hands, they oversee sales in their geographic territory and contact you to order more products when they sell out. There is little need for communication between buyer and seller once the product is in the distribution pipeline and moving—being bought, sold, and enjoyed.
By contrast, a service export requires direct interaction with your customer, not just initially but for the duration of the service contract. For some services, of course, the quality of the interaction with your customer is exactly what they’re paying for. This is why people with superior communication skills, diplomacy, and—this can’t be emphasized enough—acute cultural awareness are the greatest assets for delivering a quality service export.
An example of a service export is an architectural firm that designs buildings in the United States and reaches out overseas to perform its work, or it can involve providing royalties and licensing fees, including the money people pay to use American software.
I will go into greater detail on service exports in Chapter 6, but for now I reference the distinction between a product and service export because the differences have implications for the marketing and management of the export. It is important to decide at the outset what you wish to accomplish: exporting a product, service, or both. Although the process is transferable from goods to services, each type of export requires its own distinct strategic approach.
What It Takes to Export
So where do you start? As with any new business venture, you need to first take stock of both yourself and your business to see if you have the personality, mindset, and business that can benefit from exporting. Let’s begin with an assessment of you and then we’ll cover the business.
Assessment of You: The Global Mindset
What unique qualities and characteristics does it take to become a successful exporter? To crack open a new overseas market? To become a top-notch international executive at a global conglomerate? The answer is that it takes the same qualities to do any of these things. Successful exporters, international expansion artists, and global executives may vary in their temperament, personality, and experience, but in the ways that really count, they are more alike than different. What counts is their ability to venture out in the world and adapt as they go. I call it a global mindset.
Note Successful exporters have, or develop, a global mindset—the ability and courage to operate their business in an unknown environment.
I somewhat liken exporting to riding a roller coaster at an amusement park. You eagerly jump into the coaster car, fasten your seatbelt, and get ready for the exhilarating ride of your life. Exporting offers a similar experience. It’s an adventure that challenges every way you run a business. So the first question I ask individuals who express interest in exporting is: Do you have the mindset and guts to ride it out? After we clarify what that means—dealing with the highs and lows of attempting to do business in far-off places that are hard to access quickly and impossible to understand culturally—we discuss what is really involved in preparing to export. It’s called doing your homework.
Homework can be done on your temperament and abilities, on how to export, on researching the market, on financial considerations, and on determining whether your product or service is in demand anywhere in the world. The more preparation you undertake, the greater your chance of reducing mistakes. But before you can advance from Point A, thinking about an export idea, to Point B, launching the export idea, you must first take stock of yourself and decide if you are ready and willing to develop the dynamic outlook that will enable you to export. It starts with a determined global mindset: a mix of intellectual and behavioral qualities that enable individuals to understand and operate a business in environments unlike their own.
Examining the State of You: The Global Mindset
A global mindset starts with self-awareness, reflects an authentic openness to and engagement with the world, and employs a heightened awareness to the sensitivity of cross-cultural differences. Toss in that adventuresome spirit I mentioned early on, adaptability, a solid educational background, core business competencies, and life experiences that preferably involve international travel, and you have a recipe for the ideal global thought leader. Capitalizing on these attributes is a powerful factor for developing a global mindset and achieving success in the export world.
Here’s my shortlist of twelve characteristics that I find work in the export marketplace. They are based on my own hands-on experiences and the observations of others who have achieved success crossing boundaries in the business world:
1. The ability to venture out in the world and adapt quickly
2. Being comfortable and confident in your own skin, along with having a heightened sensitivity to others
3. Carrying a high level of intelligence, including cultural and emotional
4. Enjoying living in different parts of the world and relishing learning a foreign language
5. Knowing how to bring out the best in people no matter where they are from
6. Getting things done with people who come from diverse backgrounds in any part of the world
7. Being curious, having a love of learning, and immersing oneself in foreign cultures
8. Being objective and open to people and the environment
9. Having enough flexibility to focus on serving and helping others
10.Possessing the ability to take something complex and simplify it
11.Confronting obstacles with optimism and a willingness to continue learning new ways of doing things
12.Being resilient—or having the ability to bounce back from even the most challenging of circumstances
You may not have all of these characteristics, and I am sure there are some I have overlooked, but if you have most of them, you will be comfortable operating anywhere in the world and well on your way to success in exporting.
Assessing Your Business: The Local Business Model
You have a successful local business; now what? You’ve saturated your domestic market and there’s no room to grow geographically unless you look outside your own borders.
Export.gov offers a questionnaire that highlights the “state of a business” characteristics common to successful exporters (http://export.gov/begin/assessment.asp).
The following are the questions you should answer:
1. Does your company have a product or service that has been successfully sold in the domestic market?
2. Does your company have or is your company preparing an international marketing plan with defined goals and strategies?
3. Does your company have sufficient production capacity that can be committed to the export market?
4. Does your company have the financial resources to actively support the marketing of your products in the targeted overseas markets?
5. Is your company’s management committed to developing export markets and willing and able to dedicate staff, time, and resources to the process?
6. Is your company committed to providing the same level of service to export markets that is given to your domestic customers?
7. Does your company have adequate knowledge in modifying product packaging and ingredients to meet foreign import regulations and cultural preferences?
8. Does your company have adequate knowledge in shipping its product overseas, such as the ability to identify and select international freight forwarders and freight costing?
9. Does your company have adequate knowledge of export payment mechanisms, such as developing and negotiating letters of credit?
Once you complete the questionnaire, you will immediately receive an online score, which will help you assess your export readiness as well as identify areas that your business needs to strengthen in order to improve its export activities. Don’t be daunted by the fact that you may not be able to provide an affirmative answer to all the questions. After all, that is why I am writing this book—to help you easily export in the digital age. If you don’t pass the assessment, it doesn’t mean you can’t export, it only means you have more homework to do in preparation for the end goal: export success.
One last related question that begs to be answered: Can you use your home base—your domestic operation—as a template for exporting? The answer is: it depends. That’s a tall order. You naturally want exporting to become a profitable extension of your domestic operation, but there are no guarantees. I encourage you not to count on it. A lot will depend on your firm’s orientation. For example, you might believe that because your goods and services sell well in the United States, they will sell anywhere in the world, but success will depend on your marketing approach to modifying those goods and services, if needed, to fit your selected export market. Each market is different and should be treated as such by adapting to a local country’s culture.
Tip Focus on similarities in exporting across markets whenever possible to standardize your business model worldwide and to achieve economies of scale in production.
Assessing an Export Start-Up: The “Born Global” Firm
There is a new class of entrepreneurs who have changed the export paradigm and show that it is possible to do business and succeed in world markets without having an established domestic base. The concept is referred to as “born global.” Born-global companies are run by individuals of a generation that only knows of communicating and transacting business via the Internet. Virtually from inception, their companies compete on a global scale against large, established players in the world arena. They are global by technology, not by strategy, and the individuals who start and run these firms tend to bypass rules and regulations to get things done.
Contrary to conventional methods, born-global individuals don’t build export businesses through gradual expansion into foreign markets. Rather, they leap into the foreign market and figure things out as they go. For example, a born-global entrepreneur will review the earlier assessment questionnaire, complete it on a lark, and even if their answers are all “No,” will still proceed in exporting. What they are banking on is their own tech know-how and the suitability of their product or service for the international market coupled with their own chutzpah to get them over speed bumps.
I can relate to that disruptive, adventuresome spirit. But I caution you: Rather than making progress at every step of the way during the process of exporting, there will be a lot of scary tunnels, twists, and sharp turns involved in figuring it out. That is because the leaders of born-global companies have no prior knowledge or experience in exporting—only in leveraging technology. This runs counter to the notion of using your domestic operation, one that has a history of proven success, as a template for exporting. In other words, and as mentioned earlier, don’t assume what works at home will work abroad. Big mistake. There will always be adjustments that have to be made to the changing condition of the company, the environment, and the marketplace, rather than a deliberate strategy.
If you are a start-up or are of the born-global generation, there is nothing stopping you from plunging into exporting. So skip the assessments and just go for it. Sometimes the only way to learn is by doing. If that is the case, use your passion as fuel to create new market opportunities and use this book as a guide to help you master the export process.
Remember how the chapter opened? I asked boldly: Are you ready to export? Then I provided three different exporting scenarios to help you understand how export initiatives are born. Next, I defined the difference between a product and a service export. Last, I offered a simple process to assess yourself as well as your existing business or start-up as to whether you have what it takes to export.
Now it’s up to you. You can choose to deal with a stagnant climate and growth constraints at home or experience the thrill of exporting to fast-growing overseas markets. It’s your decision. If you have the courage and mindset to export, and you are ready, turn the page. I want you wholeheartedly on this adventure with me!