Export

Exporting can be an excellent way to enter new markets.  It is relatively inexpensive, as compared to building a presence on the ground, but that doesn’t mean you can skip the hard work required to insure a successful launch.  Much of the groundwork should seem very familiar to you.  It’s the same activities you would undertake when thinking of selling your products in New Jersey!

Before you start, it is important that you understand any restrictions that the US imposes on the export of your product to your target country.  Some products are prohibited from export to any country while others are permitted to only certain countries.  You (and only you) are responsible to insure that you are in compliance with export regulations.  Failure to comply will expose you to fines, seizure of goods and permanent loss of export privileges.  A great place to start is to consult the Bureau of Industry and Security website: http://www.bis.doc.gov/licensing/exportingbasics.htm.  You might want to engage the services of a Customs Compliance Attorney to make certain you are following the rules to the letter.

Assuming that you are actually permitted to export your product(s), due diligence should begin with a careful and complete market analysis.  Who are the prospective customers for your product and how can you segment the market to identify effective marketing strategies?  The US Commercial Service can be a big help in this regard.  From their website, you can access a “Market Research Library containing more than 100,000 industry and country-specific market reports, authored by our specialists working in overseas posts.” http://export.gov/mrktresearch/index.asp

Who is the competition?  What drives them in terms of future goals and assumptions about the marketplace?  What are they doing today, what products do they sell and what is the lifecycle stage of these products?  What is their current strategy and what are their capabilities?

What about your strategy?  The three basic strategies still apply.  

• Cost leadership, the ability to produce the product at a significantly lower cost than the competition
• Differentiation, having a product that is unique in the marketplace
• Focus, finding a particular poorly served segment of the market and specializing in serving that segment.

Congratulations, you’ve identified a promising market for your products.  Now it’s time to face a whole bunch of other issues that you have never had to face before:

1. 1.       Find a business partner in the target country who knows the marketplace, speaks the language, and can handle the distribution of your product.  Once again, the US Commercial Service comes to the rescue.  Their Gold Key Matching Service “can help you find potential overseas agents distributors, sales representatives and business partners.”  They will set up pre-screened appointments for you to meet these potential partners easing the chore considerably. http://export.gov/salesandmarketing/eg_main_018195.asp

1. 2.       Logistics is critically important in the success of your initiative and you will find that there is a mind blowing array of modes and prices available to you. 

a.      Will you be shipping full containers or LTL?

b.      Are you shipping via truck, train, ship, air or some combination?

c.       Etc.

A good export broker can help you to navigate through this maze and design the best solution for you.  Keep in mind that conditions change rapidly and it’s important to review this on a regular basis.

1. 3.       Financing the export transaction can be a tricky business. 

a.    How will you get paid and how can you insure that you will get paid?

b.   Will you do a credit check?  Negotiate a formal contract?  Use Letter-of-credit?

c.    Will you require payment in advance or on delivery?

d.   Transit times, especially on the water, can extend to many weeks.  How will you handle your cash flow during this time?

e.   Will you be billing the customer in US dollars or in their local currency?  If the local currency is to be used, how will you handle the currency exchange risk?

f.     What tariffs will be imposed by the target country?

Getting your banker involved (specifically one with international business experience) can help to make this happen.  The government provides loan guarantees and direct funding.  Check out http://export.gov/finance/

All this may seem a little daunting, however, if you take it step by step you can easily navigate your way towards your desired goal..

Happy Exporting! 

Suicide Squeeze

One of the most exciting plays in baseball is the ‘suicide squeeze’. It requires timing and skill and when properly executed is very difficult to defend against.   The play starts with a runner on third with less than 2 outs and fewer than 2 strikes on the batter.  As the pitcher begins his throw, the runner breaks for home.  The batter must bunt the ball in fair territory.  If the bunt is far enough, the fielders have no choice but to throw out the batter on his way to first, allowing the runner from third to score easily. 

The two critical components of the play are the timing of the runner and the skill of the batter.  If the runner starts too early, he can be picked off at third.  If he leaves too late, there is a better chance for the defense to throw him out at home plate.  If the batter does not make contact with the ball, the runner is very easily tagged out.  He is under enormous pressure to make sure he puts the ball in play.

To defend against this play, the opposing team must anticipate the possibility and take measures to foil it before it begins.  There are two possible defensive plays that they can try.  The first, assuming the pitcher has a quick move, is to throw the ball over to the third baseman instead of pitching.  This will force the runner to stay close to third and perhaps lessen the possibility that he will run.  The other defense would be the pitch out (throw the ball to the catcher outside of the strike zone putting him in a position to throw out the runner while making it impossible for the batter to hit the ball) guessing right can turn the runner into an easy out.

In the current economy, managers are hesitant to invest in their business.  They face a great deal of uncertainty and just like the baseball manager, trying to defend against the squeeze play they need to develop a strategy to give their team the best chance of success.  This requires decisive action.  The passive manager is doomed to lose this battle.

Business decisions are always a question of risk versus reward.  The amount that we invest in developing and implementing contingency plans is (or certainly should be) based upon our assessment of the risks we are taking by not planning for such a contingency.  The most important thing is to assess the risk.  Once we have carefully considered that risk, we may yet decide that no action is necessary.  However, skipping the assessment of the risk is without a doubt a losing strategy.

Risk assessment is a continuous process.  As conditions change, risks that were minor in nature previously suddenly become much more serious.  Conversely, those that are serious risks today may become less so in the future.

A classic example of this phenomenon occurs when a small manufacturer suddenly wins a contract with a major retailer.  The retailer is likely to specify very precise shipping requirements including specific delivery times, exact labeling requirements, and more.  For the manufacturer, late delivery or labeling mistakes which were hardly a cause for much concern suddenly carry the risk of significant fines and penalties (chargebacks) which can quickly wipe out the contracts profitability.  Management must seek ways to reduce the risks of such errors through close scrutiny of the operations and continuous improvement.

Through understanding of the risks, a good baseball manager can implement a strategy which will keep the run from scoring.  A business manager has the same opportunity.