Rising to the challenge
“We have a long-term development strategy to achieve a strong presence in global markets. This is important as it allows us to be far more competitive, whilst giving us access to new technologies, manufacturers, skills and materials, all of which feed our creativity and influence new product development.”
Richard Liddle, Founder and Managing Director, COHDA Design
Exporting may be a challenge, but the potential rewards are huge. Following are some of the most commonly cited hurdles to doing business internationally, and advice on how to overcome them.
Entering an overseas market may require both financial investment and an increase in manpower. Timescales can also be an issue, with short-term ‘pay back’ not necessarily guaranteed.
It’s advisable to discuss your financial position with your accountant and bank manager before committing to exporting. It is also important to take the long-term view and build appropriate timescales into your projections. Customers and partners in high-growth markets, for example, tend to put an essential value on relationships and it is unusual for a return on investment to emerge within the first year.
Legal, regulatory and intellectual property issues
The barriers to success which exporters talk about most are legal and regulatory issues. Some firms also say that intellectual property (IP) protection can be an issue. The Intellectual Property Office (IPO) can help in this area. See ‘Who can help me export?’ later in this guide.
Adopting the right mindset is vital to overcoming such hurdles. Every country has its own trading, taxation and IP systems and you will need to be willing to get to grips with those systems and adapt to them. So doing your homework is vital when planning market entry.
Managing overseas risk
Political and economic developments, cyber risks, bribery and corruption – these are some of the issues your business could face when you begin to trade overseas or expand into fresh markets.
UK Trade & Investment and the Foreign & Commonwealth Office bring together authoritative, accessible and topical information online on countries and the key issues related to their political, economic and business security environments.
This can help you identify and understand possible risks – and guard effectively against them.
Language and cultural barriers
Every market is different, and companies need to be sensitive to local ways of doing business, even in different regions of the same country. Lack of awareness and knowledge of local cultural norms can impede the development of a business relationship.
Being able to speak the language of your potential customers can help to establish mutual confidence. If you don’t speak the local language, you could consider investing in foreign language training for your staff. Alternatively, you could employ a translator or interpreter. It can also help to have your promotional material translated. It’s a good idea to avoid colloquialisms and metaphors in promotional material – they could be embarrassing in the local language.
You should conduct research into your target market to establish local considerations. These may include product or packaging modifications to enable your product to conform to local cultural demands. Or it could be that local sales and marketing channels for your particular product are different from those in the UK.
Getting international transport right can be complicated and depends on the agreement you have with your customer or supplier. Your obligations should be clearly set out in a written contract using Incoterms – standard trade terms which state who is responsible for transporting goods, insuring the goods during transportation, paying duties and customs clearance.
The best mode of transport for your goods will depend on the type of goods and how quickly they need to be delivered. You may need more than one mode, for example, sending goods by lorry to a port in the UK and then by ship overseas. In all instances, the goods will need suitable packaging and labelling for transportation. You should clarify in advance who will be responsible for UK customs procedures, for freight and insurance, and for customs clearance in the customer’s country – and use the correct Incoterms to describe this in the quotation and written contract.
Most companies use a specialist freight forwarder to handle transport. Confirm exactly what they will do and whether they can handle all documentation and other procedures. Look for a forwarder who exports regularly to that destination. They can ‘consolidate’ your goods with other consignments in a single container to reduce costs.
The risk of late or even non-payment can sometimes be greater when doing business internationally. Ensuring you get paid for overseas sales is a combination of assessing risk, settling on acceptable payment terms and methods and considering insurance to protect yourself against problems.
Help is available from UK Export Finance (formerly known as ECGD).
To minimise the risks of nonpayment, you should research the market conditions in your target country and the credit worthiness of potential customers before you start trading.
There are also currency issues you need to consider. In some countries where there are restrictions on access to foreign currency, your customers may face problems getting currency to pay you. In this case, it’s worth insisting on a (confirmed) irrevocable letter of credit that secures payments according to the terms of the credit and often at an agreed rate.
Businesses which sell on credit to foreign customers can use factoring or invoice discounting to free up cash flow. Export factors specialise in the collection of money from overseas. The factoring company pays you a percentage of the invoice value up-front and the balance (less their percentage) once they have collected payment.