Researching export destinations can be demanding, whether you’re a new exporter looking for your first export destination, or an old hand traversing the globe. Here’s how to find your ideal export location.
Exporters forget that researching a destination is much like first starting a business: you need to find a market that best fits your product or service and sell to it. Because most SMEs usually start in their local area, they have an advantage due to the bank of unwritten knowledge that comes from instinctively knowing who their customers are.
While new destinations may seem daunting at first, it’s really about dissecting what you already know in your existing market and applying it to what you’d like to know about a potential market.
Marketing specialist Nick Scott, an International Business lecturer at the University of Western Sydney, advocates starting with hard data to determine which countries are best suited to your offering. This includes information like population size and per capita income, which you can readily obtain from the World Bank or the country’s bureau of statistics.
“Set standards. For example, any country with an average per capita GNP [gross national product] of less than $US10,000, strike from the list straight away. Have a series of criteria that you apply and whittle away until you come down to a shortlist. Those shortlisted countries will be, on the economic data, the feasible ones,” says Scott.
He encourages exporters to further shorten the list using macro information about the country to see if export conditions are favourable. This includes looking at tariff rates, currency, the structure of the industry there and existing competitors. “If you were thinking of exporting to Vietnam or Thailand and you found that Vietnam had a 30 percent duty rate and Thailand had 10 percent, that might be a contributing factor into your decision,” he explains.
“One of the primary problems all exporters have is price escalation. There are shipping charges, import costs, duties and tariff rates, a longer distribution chain, and distributors generally need about a 30 percent gross margin to make it worthwhile for them,” says Scott. “One of the main problems is the price competitiveness of their goods, the price at which foreign buyers can afford to buy their goods.”
While hard data might determine the financial suitability of a destination, it’s the data for market acceptability that will single out the most suitable destination. Market acceptability relates to both the cultural acceptability of the product or service in the country, and the critical factors that ensure the viability of the product.
Scott uses the example of exporting hearses to Brazil. In Australia hearses are black, but in Brazil they are purple, therefore hearses exported to Brazil would need to be purple for market acceptability. In other cases, such as services, there may be other barriers relating to market acceptability, for example, an Australian lawyer cannot practise until they have been admitted to the bar of that country.
It is extremely important that businesses identify their critical product factor without which their product becomes unviable, says Scott. “Unless you know what those critical factors are and see how you can address that, then you can never enter that market.” A critical product factor may be the availability of refrigerated transport for food or wine, or the ability to provide a service within a particular timeframe, hence requiring a physical presence at the destination.
Appointing a distributor or agent is a good indicator of market acceptability. If your product has been accepted, it’s because they believe they can sell it. If you can solicit feedback from these channels, it can provide valuable information on how you might alter or improve the product to penetrate the market further.
Once you’ve decided on a destination, Scott recommends travelling there several times to get an eyewitness account of potential customers. “Without this it’s very hard for the exporter to visualise market conditions, product usage, personality types or cultural obstacles,” he says. “The intending exporter is really on a journey of discovery, and visiting the country is part of that knowledge acquisition. You’re trying to figure out the trigger for why people buy your product. If you’ve never been to India and you’ve never been to Indian shops or eaten Indian food, it’s very difficult to visualise market conditions.”
And when you travel you need to get out there. “It is often beneficial to spend time outside of hotels and visit local areas to eat and socialise,” says Rhonda McSweeney, Flight Centre’s executive general manager of corporate sales. She recommends exporters spend the maximum amount of time possible meeting with local organisations. “This may range from potential partners, suppliers, banks and professional firms such as lawyers and accountants.”
Business travellers should also try and maximise opportunities in other ways, such as combining reasons for travel. “Instead of having a lengthy and expensive itinerary, you can use events as the main feature to draw people in. Conducting business meetings off the back of trade shows is a primary example of optimising travel,” she explains.
Take advantage of the professional resources and research your travel management company offers, she adds. “It’s important to find someone who knows the area and is used to sending people off to those destinations. When conducting a feasibility study, we gather a large amount of external data about the market. Key areas include the size of the market, key competitors, key suppliers and the underlying economics of the travel industry in that location.”
In addition to the Austrade network and industry associations, McSweeney notes that exporters should think about tapping into pre-existing international relationships. “We use professional and financial institutions to help identify a shortlist of potential partners in a location,” she says, referring to Flight Centre’s own international expansion.
Visiting a country will also give exporters a firsthand view of the destination’s culture on both a business and social level. Prior to travelling, McSweeney suggests exporters inquire about business customs. “Business travellers should have an in-depth understanding of basic business customs and etiquette of the country they are travelling to. When travelling to a foreign destination, people should be aware of and respect cultural and religious differences and have an understanding of social customs and local law,” she notes. “It’s also a good idea to have a basic grasp of commonly used phrases such as ‘please’, ‘thank you’, directions, and terms surrounding currency.”
However, unless you’re fluent in the destination’s language, McSweeney says to invest in a translator. “Miscommunication in any type of business interaction can kill the deal before you get started. It’s best to not go there unless it’s a true second language.”
Language is often the reason why many Australian exporters start selling to English-speaking markets. It is this ‘psychic distance’—a measure of closeness based on historical ties, cultural similarities, a common language or physical proximity—that makes certain export destinations comfortable, which taps into the instinctive understanding a business has of a market.
Australia’s multiculturalism should also provide some leverage, says Scott. “Sometimes internationalisation is assisted by the ethnic background of the company’s owner or management. Either way, new exporters commonly start with countries for which they have a greater affinity, and building on their experience then expand to more remote markets.”
Once an exporter experiences success in a market, the easier it is to make small adjustments to sell into a similar market, which means research should take less and less effort. “Most exporters would go into complementary countries. Countries that exist next to each other, particularly if they’re relatively small, generally have a lot of commonalities in culture and preferences,” remarks Scott. “If you start out with a French importer, why would you go to enormous expense and effort and reinvent the wheel by then choosing Cambodia as your next country? Why wouldn’t you choose Switzerland or Belgium? Your product probably won’t need any adaptation and there’ll be a lot of cost savings from doing that.”
Researching a destination is not just about hitting the books, but part of a greater understanding of similarities and differences in markets around the world. Whether you export to a country because someone approached you, or whether you’ve initiated contact yourself, research is the key to a sound sales strategy and subsequent longevity in an export market.
Business Travel Checklist
As part of the pre-trip planning process, FCm Travel Solutions recommends that exporters have the following:
* the visa/s required for travel to the given location
* six months’ validity on your passport
* a copy of your e-ticket receipt
* travel insurance
* awareness of time differences
* information on the safest modes of transport and accommodation
* information on risks to security as a result of natural disaster, health epidemic, political unrest etc
* required vaccinations
* local currency and knowledge of exchange rates
* understanding of cultural differences including language, standard business etiquette and any government protocols or regulations that may apply
* awareness of events or festivals that might affect business dealings
—Rhonda McSweeney, executive general manager of corporate sales, Flight Centre
The Research behind Exporting to Japan
Knowing ‘some Japanese’ is one thing. Really knowing the Japanese is entirely another. For Deep Powder Tours, it’s a case of having a foot in both camps. The snow travel operator, which specialises in organising trips from Australia to the increasingly popular Japanese snowfields, needs its largely seasonal employees to be cognisant of some language basics. But when it comes to understanding the nuances of the culture and how it can affect staff in everyday situations, Deep Powder turns to Jaymes Gleeson.
In title he is the on-ground manager of the Niseko resort area: in practice he is the go-to man when it comes to educating the staff, and in turn their visitors, on everything Japanese.
Gleeson came on board with Deep Powder Tours in November last year, at a pivotal time for the growing number of Australians involved in the ski business in Japan. While profits are good and Deep Powder has a strong reputation—having been on the ground in Niseko since 1995—there has been a growing disquiet about the behaviour of a small number of Australians visiting the area with increasing complaints of drunken loutishness and antisocial behaviour.
Enter Gleeson. While far from a one-man fix-it team, with 15 years of Japanese language instruction behind him and a background in psychology and philosophy, he can impart the kind of knowledge that six months reading a language book won’t scratch the surface of.
“Japanese people work on a whole different cultural calculus to westerners, and Australians specifically,” says Gleeson. “I can now use what I have learnt to help our staff integrate better with the local community, which is really important.”
A key part of Gleeson’s role was putting together a 100-page induction manual for staff. While much of it concentrates on the practicalities of the job, there’s also a lot more subtle content about working harmoniously with the Japanese. “For our staff, and really for anyone, effort is as important as anything. Being aware of status in any given situation determines the style [of language] that you use,” says Gleeson. “If you are not aware that these arrangements exist you are not even in the game.”
Deep Powder Tours co-founder Dale Goulding says that having someone like Gleeson, as well as another Japanese communication specialist, Sayuri O’Brien with the company, allows he and brother Glenn to concentrate on their core business. As such, he recommends businesses consider using specialists in the country they are dealing with. And while Goulding’s take is clearly from a Japanese bent, he has some words of advice that will apply to anyone looking at dealing with people from a new export destination: “Be patient,” he says. “Earning someone’s trust is the greatest asset you can have.”
—Glenn Cullen
