Attention: doing business domestically is not the same as going abroad!

ImageDoing business domestically is not the same as going abroad, new challenges and issues will arise and they can easily break your business if not controlled. Thus, it is of the utmost importance that you fully understand what is at stake and which aspects will differ from your domestic business. By listing and analysing this new challenges and differences you will be protecting yourself from unexpected costs and risks that may lead you to losses rather than profits. Sorry for me being blunt, but along the times I have seen too many amazing products and businesses failing to succeed due to this kind of mistakes – bad forecast of costs and revenues; fail to master the documents and licenses needed, payment methods, and sales conditions used in international trade.Therefore, I am here today to introduce you a checklist of domains you should cover while doing your business case for your export operation.

In order to do it in a systematized way and saving time, I like to divide the checklist into four main areas and although there is no special order or preference, I prefer to start with the Management  and HR, followed by Marketing, Operations, and end with Finance – as you can see in the figure.

Management and HR you should assess everything impacting the way you manage and organise your business domestically: extra time to start-up the export operation, new organizational needs, new decision-making processes, and new activities that you will need to implement. IP rights along with special licenses are aspects underestimated that can easily put your business in a tough position. Human Resources are also critical, assessing the key personnel and special training needs for this new venture is therefore crucial. You should start asking if the actual team is enough in quantity, skills and competences, and what kind of training they, and you, will need.

Marketing, in this area you should assess everything related to the market and the differences of going to an international market. Exporting is highly challenging because you need to find new markets and customers, and therefore it is critical to have information and data. Assessing the kind of Market Intelligence you will need, in oder to comprehend how the market operates, the customers’ needs and habits, and the local way of doing business is critical. Along with that you will also need to understand if your Product needs to be changed in order to penetrate the market. The Trade Marketing – sales materials, promotion campaigns, point-of-sale merchandising, and other materials and strategies – will probably need to be customised for the market. Along with this it is also important to understand that the trade marketing strategies and tactics will also need to be tailor-made for the market and region, and that may bring new needs. Cultural distance is a highly critical variable for any export business, understanding the market you are exporting its cultural differences it is crucial. I can tell you that this is one of the most underestimated aspects by the companies that can easily spoil the whole operation.

The third block of your export challenges checklist is the Operations side, in here I put everything related to executing on the field the business plan. Meaning, managing your production capacity and other special product customizations in time and linking it to an international supply chain that efficiently delivers your goods to the market, designing a distribution plan (distributors, reps, agents,etc) that meets your demands, preparing and handling special documentation and other needed certifications and licenses in order to be able to export and sometimes import your products into the new markets (depending on your distribution choice), and the needs for a tight project management and control of all the different variables involved when exporting. By project management I mean everything going from the moment you sell to the moment you deliver and collect the payment. A lot of small firms underestimate the importance of handling the part of collecting and sometimes delivering correctly what means not get paid in time or at all. As you know with the Incoterms is easier to be on the same page with your buyer concerning sales and payment conditions, and therefore is important to choose the correct Incoterm to use in the contract along with the correct execution otherwise it does not work.

The Financial aspects are the last but not the least export challenges in your checklist. Exporting means extra costs (trade marketing new needs, credit costs, transport costs, etc) different credit and payment methods, and extra risks (exchange rate, payment methods, default of payment, scams, etc). Thus, It is important that you understand all the changes so that you can have a competitive and profitable operation.

Be aware and prepared, and you will be fine. Good Luck!

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Do you need to forget your ethics when going internationally?

No, you do not need to forget your ethics to enter a new market. However, you do need to understand the cultural background of the country you are entering so that you can avoid problems and awkward situations. And do not forget that, if you want to go internationally, being a “cultural illiterate” can jeopardise your business. Though, if you are still asking “why do I need to learn about other cultures if I have a top notch product to offer ?” you are being silly and naive.

Before you enter a new market (country) you need to do a strong cultural analysis including how to do business locally. You should also understand that skipping it it is the same as investing in a new project without a cash flow analysis or a Net Present Value calculation. It is a huge mistake that will cost you lots of money.

I would like to highlight, though, that cultural diversity is highly underestimated when preparing a business plan to go internationally. Companies spend great amounts of money and resources on financial viability studies and exhaustive marketing studies but they normally fail to include a cultural study into the business plan. Therefore, the sooner you acknowledge the cultural and ethic differences the better. Defining an ethical code to operate internationally is rather important while expanding. The code should remain faithful to the company’s vision, believes and social responsibilities, and should include a list of guidelines to help your teams behaving in the field. Ethics is too important not to consider it while operating internationally. Do yourself a favour and include a cultural study and your ethical guidelines in the business plan before deploying your resources on the field. Good luck!