If your company would like to tackle the international market, it's time to evaluate your chances of success.
Manufacturing firms that successfully make the leap generally tend to have a firm domestic base, strong reputations and a quality product. A solid track record is also essential before expanding abroad.
But there's more to it than that. Before taking on the world, realistically examine how your skills and resources fit into a highly competitive global environment. Here are five points to consider:
Export plan: Without this, you won't get very far. Financial institutions, other lending agencies, as well as potential investors and partners won't work with a business that lacks a well-developed export plan with clear objectives. An export plan is really just a business plan that focuses on international markets. It identifies the market, goals, resources and expected results. Your industry association may be able to provide names of successful exporters in your target market. This can help you set up a network of contacts for practical advice.
Capacity: Evaluate your company's ability to meet the extra demand. You will have to serve both domestic and foreign customers. Do you have the resources, time and personnel to develop a new market, learn international bidding techniques and alter marketing and manufacturing techniques to meet foreign requirements? Make sure you can respond quickly to customers in different time zones and you need personnel with culturally sensitive marketing skills who can overcome language barriers.
Financing: You must maintain sufficient cash or operating lines of credit including:
- A cash budget highlighting your financial needs over the next two or three years. This allows you to plan the timing and amount of expenditures. Cash flow planning helps you defend against problems such as exchange rate fluctuations, exchange controls, political events and the slow collection of accounts receivable, which can take several months.
- A capital budget that provides both an overview of how much you need to complete your project and an operating plan to use as a benchmark for actual outlays and receipts.
- A source of financing to deal with possibilities such as larger-than-expected orders that require capacity expansion, and customers who default or go out of business.
Strategic pricing is a key factor in remaining competitive: Part of setting a realistic export price, and therefore an appropriate profit margin, is to examine production, delivery costs, competition and market demand.
Commitment: This is arguably the single most important element in starting an export venture. It can take several years before you start generating decent profits and senior management must be on board for the long haul. Are you willing to spend the time, effort and resources necessary to become successful?