International Expansion for Small/Medium Sized Companies

Spring 2014 Conference

International Expansion

Throughout this module the term “product” generally applies to services as well as goods

Importing principles and concepts are generally the reverse of exporting methods noted in this module

Reference is made to “organizations” rather than companies as NGOs, non-profit and government entities are also exporters and importers

International Expansion

Exporting existing products or services to “new” markets or importing “new” products or services to existing markets are major methods expanding an organization’s business

Success in the domestic (or “home”) market “spills over” to international expansion by stimulating interest of exporters/importers seeking opportunities

International Expansion

This “spill over” is due to the global visibility of websites, trade shows, advertising, and other promotional activities

First time exporter/importers typically want to exploit these opportunities – this is a “passive” market entry mode

Often the product may be sold “as is” - without modification from the home market version

Product-Market Growth Matrix

International Expansion

Selling “as is” internationally is a classic way to profitably use excess capacity

Eventually, the market may require product modification to meet local requirements:

product attributes (sizes, measures), packaging, regulatory approvals, market preferences, competitive offerings

International Expansion

Finally, the international business becomes significant and may require a product designed specifically for the market

This “active” international expansion requires a comprehensive plan

Successful entrepreneurs may have the “plan” imbedded in their brain

For the rest of us a comprehensive plan to allocate resources is vital (even for a passive market entry mode)

“If you don’t know where you are going, any road will take you there”

Start with a plan

Make a 3-5 year forecast/sales and profit goals:How much from existing markets and products?How much from new products for existing

markets?How much from “new” markets – this typically

makes you look at exporting

Why Export?

Exports can:- produce profitable sales- spread fixed costs- gain market advantages

- improve internal controls and management

- enhance access to funding

International Expansion

SWOT - a strategic analysis is a useful tool to start an international expansion plan process:

Strengths and Weaknesses are the organization’s internal capabilities and limitations

Opportunities and Threats are in the international business environment and need to be evaluated to assess market potential

Environmental Scanning

The process of continually acquiring information on events* occurring outside the organization to identify and interpret potential trends is called environmental scanning

* Events beyond management control - OT

Environmental forces affecting the organization, as well as its suppliers and customers

Start with a plan

Export plan: what needs does product/service meet? how big is the market? how do you know this?

www.export.gov

Key Market Indicators

Researching from the International Perspective

ECONOMIC INDICATORS PRODUCT INDICATORS MARKET INDICATORS

1. Total Population of the Country.

2. Gross National Product.

3. Per Capita GNP.

4. Exchange Rate Performance.

5. Balance of Trade with the U.S.

1. Unique Characteristics and/orManufacturing Process.

2. Ability to Modify Product to Meet Mandatory Foreign Standards.

3. Training Needed to Use/OperateProduct.

4. Product Support Required After Sale.

5. Special Storage/Shipping Requirements.

6. Export Licensing Requirements.

1. Overall Size of the Market in Dollars and Units.

2. Total Number of Potential End-Users or Customers.

3. Competitors Share of the Market in Dollars and %(Domestic and Foreign).

4. Transportation Infrastructure.

5. Product Competitiveness/Uniqueness in the Market.

6. Level of Import Barriers/LocalGovernment Restrictions.

7. Language and Business Culture.

How to Export?

Export readiness:Top management commitmentAdequate resources:

managementfinancialproduction capacity

Get Resources

Who is in charge? How are you going to measure performance against

the plan? What resources are required:

People Cash

Start with a planHow do you find this stuff out? Analyze home market and question what

you know about the home market

Contact USEAC product specialist

Use “slave labor”* to conduct investigations of the stuff you need to know

* Local college students