How to minimize the risks involved in exporting
One of the most common reasons why companies are hesitant to expand their business through exporting is the complexities of cultural differences. Foreign markets where business practice, language, culture and legal systems are different from what a company grew accustomed to in its own country, can be very intimidating and might lead to missed opportunities. These factors have been made worse by pioneer companies that ran into significant problems when first trying to do business abroad, because of poor market research which can lead to inefficient product offering modification. Let’s take Macdonald’s as an example: When they decided to open a restaurant in India, they had to rethink their product offering, of which a large percentage was beef burgers. For the Indian market, they had to adjust their product offering to include vegetarian and chicken burgers.
With the correct knowledge of how to gain information about foreign market opportunities, companies can limit the amount of uncertainty involved in exporting, and improve their success rate. The DTI (Department of Trade and Investment) in South Africa offers a wealth of information to prospective exporters. They also encourage exporting through the establishment of mutual agreements with existing trading partners and organize trade events that help potential exporters make foreign contacts and explore export opportunities. On the DTI’s website, information such as economic statistics (which include GDP statistics of worldwide countries) and trade statistics can be used to complete a foreign market analysis.
Another route that a prospective exporter can take to identify export opportunities is to appoint an export management company (EMC). EMC’s are experienced specialists who act as the export marketing department or international department for their client firms. South African Container Depots (SACD) is an import and export management company that offers customers a complete, end-to-end, supply chain management solution. It offers export and import companies strategic facilities and customer driven, supply chain solutions.
EMC’s can play an active role in the exporting process, by taking full control and responsibility of the exports and managing the payments, thus offering a complete export handling service with minimal involvement of the South African manufacturer. The other option is to appoint the EMC to passively manage export activities with the active involvement of the South African manufacturer, where the SA manufacturer is responsible for collecting payments.
A good EMC will have an established network of contacts in potential markets, have multilingual employees and have a good understanding of local business practices and trade regulations. One drawback of relying on an EMC is that the company can fail to develop its own internal exporting capabilities.
How to minimize the risks involved in exporting
Another popular approach to minimize the risks of exporting is to carefully devise an exporting strategy. The following strategic steps are guidelines for novice exporters to minimize risk:
- Rather focus on one market first, and familiarize the company with the requirements of the particular market.
- Focus all the company’s international staff on one project first, in order to leverage management resources to its maximum capability.
- In order to reduce the cost of potential failure, it would be wise to enter a foreign market on small scale first, and to leave expansion as a future possibility.
- In many countries, it is important to spend time building enduring relationships with local distributors and other important role players.
