Are You Ready for Export?
Exporting can improve growth and profit. It is a complex and demanding field. Which may not suit every company.
Following are some of the basic important steps, which companies interested in export should consider.
Time to Export
Developing export markets can be costly in terms of time, money and resources.
Does your company have the commitment required to make a success of export? Entering new markets and developing them usually takes considerable time and effort.
You must take a long-term view. Consider the time and resources required to break into a new regional market in Australia. That time and cost can be multiplied several times when you are looking at an overseas market.
Know your product and its marketing advantages. What is unique about it? What does it compete with? Price, whilst important, may not be the deciding factor.
You may need to change product design to suit different markets. You will need to have good product literature available. Consider whether your product or technology is more suited to a licensing agreement.
Check with Quarantine, Customs or a freight forwarder that your goods are not restricted for export or require a permit or license.
It is useful to have a strong marketing background. Does your company have solid marketing knowledge and experience gained by selling in a number of Australian States?
If your product has limited exposure in Australia, it might be more cost effective to expand at home before developing export markets.
Generally speaking, success in export markets is built on a solid domestic base.
A new export thrust will take considerable management time. Does your company have the production capacity to develop export markets or can the existing capacity be expanded if required?
Breaking into new markets usually requires considerable funds (air fares, accommodation, advertising, sales promotion, new brochures, training of overseas sales agents etc.).
Does your company have the financial strength to commit significant funds for the year or two it may take to develop a new overseas market?
The amount of money required depends on the nature and size of the export company and of the complexity of the markets they wish to enter. Markets such as the USA and Japan are generally the most expensive.
However, it is possible & if you manage to make the right connections quickly in a market like New Zealand, that the costs of exporting are not significantly greater than for distribution to another Australian state.
Export advice and assistance
It is essential that you discuss your plans with experts from the appropriate fields.
Check to see if your company will be eligible for financial assistance under Austrade's Export Market Development Grants scheme
Discuss your plans with the international department of your bank to ensure that all financial aspects are covered and viable & gain an understanding of international trade finance.The major banks publish an excellent range of guides on the subject.
VECCI can provide advice on Government assistance schemes as well as conducting overseas market research and business matching.
The Export Council of Australia provides an extensive range of courses covering various aspects of the exporting process such as getting started, international marketing, negotiations and trade documentation and payment methods. Become familiar with the common terms used in international trade. INCOTERMS,
You have the commitment, production capacity and financial resources but not the personnel. Then consider using the services of:
- export Merchants - who buy directly from you in Australia and export the goods in their own right.
- Export Agents - who, on a commission basis, arrange the export of your goods complete all necessary paperwork and assist in sales promotion.
- Export Consultants - who provide market research facilities and specialist advice to exporters on matters such as export management, marketing techniques, export incentives, pricing policies and other services similar to export agents.
- Export planning - Preparing a Company profile
If you do not already have a company profile, one should be prepared. Overseas customers may require detailed information about your company before they are willing to place an order. A company profile is the most professional way of presenting this information.
A company profile should include: brief company history, recent achievements, a summary page containing all the essential details (i.e., addresses, telephone, email, key personnel) and information on the product(s)/service(s)) you offer (only a summary is necessary).
You should include printed literature if available, typically, company profiles are between three to 10 single sided pages. They should be easy to read and well presented. Colloquialisms should be avoided at all costs.
Selecting a market
When choosing a market, consideration should first be given to your product or service. For instance, who is likely to purchase or use your product or service? If you are producing computer software for the banking industry you may wish to choose a country, which is known as a banking centre like Singapore or Hong Kong.
If you are producing a luxury well, you may want to target a developed country. Programs such as Export Access can help first time exporters select a market. It is advisable that first time exporters concentrate on only one market to start with, two at the most.
Many new exporters start with markets closer to home such as New Zealand, Papua New Guinea, Fiji or Singapore. If you choose a larger market like the US or Japan it is advisable to select a region or city rather than the whole country to begin your export program.
Once you have selected a country, market research should be conducted. You should consider:
Size of market (this will help gauge probable demand) Whether the country selected already imports the product, and if so from where?
Competitors you encounter in the domestic market could well be the same as those you encounter in the foreign market Import regulations, tariffs, embargoes, quotas and other local charges
Other barriers to import such as import licensing
- Local taxes on the product
- Regulations such as quarantine, labeling, packaging requirements, consumer protection rules and products standards
- Geography (to help you determine major metropolitan area and port locations) Political and economic stability
- The social and business culture. Major accounting firms provide a range of country specific guides.
- VECCI, Austrade, the Department of Foreign Affairs and Trade, Chambers of Commerce overseas and foreign Consulates and trade development offices can assist in conducting market research. Both Austrade and DFAT have publications on specific markets.
Further, Austrade can conduct detailed market studies based on a specified product or service. The Australian Bureau of Statistics (ABS) can be of assistance with Australian export statistics to a particular country.
Finding an overseas customer
After completing the market research, you should have a good indication of your product/service potential in that market. Overseas customers must now be found. As there are several ways to distribute your product overseas, consideration should be given to the type of customer you want.
Will you sell your product through an agent, distributor or the end user? An agent is usually appointed to handle a region, entire country or group of countries. They normally carry no stock, but handle the exporter's stock, which is forwarded to end users and dealers.
As the exporter's representative, the agent is paid on commission. It is the agent's job to find and maintain the outlets in their territory.
They are involved with the advertising and promotional programs. Further, they may be needed to prepare documentation for importers where complicated import licences are required by the government.
- Distributors buy product directly from the exporter for their own inventory and are responsible for the sale and, in many cases, after-sales service.
- Guidelines for drawing up commercial agency and distributorship agreements are available from VECCI. Seek legal advice before entering into commercial partnerships.
- Other direct selling options include: to the end user, retail chain stores; government organizations or to users via online orders.
Obviously, your method of distribution will depend on your product and how it is distributed in Australia.
If your product requires assembly or after sales service, a distributor may be the best method.
If you produce large, capital equipment, selling to the end user may be more appropriate. The same organization, which can assist you with overseas market research, can help you locate foreign contacts.
Making a connection
Potential customers should be contacted by email. If the customer is an agent or distributor, who handles a number of clients other than yourselves, you should ensure that the information you provide is not going to be used purely as market research for your competitors.
The initial contact should include a brief overview, a description of your product(s)/service(s)) and/or a brochure. It is not necessary to send a company profile or price list at this initial stage.
Interested parties will come back to you for this information. At this point you should think about planning a market visit. This is an essential part of every export program.
Not only will it give you the opportunity to meet face to face with potential agents and/or distributors, but it will also allow you to see firsthand the market opportunities, to investigate local pricing, observe the competition and get a feel for how business is conducted in a new environment.
Being aware of cultural sensitivities, customs and business practices can help in the marketing, sales and the negotiation process.
Further, it will provide you with the opportunity to make more contacts in the market.
Preparing a quotation
It is important to be as specific and accurate as possible when preparing a quotation for an overseas customer.
Elements to be included in your export quotation are: Product description and specifications, including part and model numbers; quantity; unit price basis; payment terms; point of embarkation and destination; shipment method (air or ocean): packing details (if available); documentation provided and delivery.
It must also be made clear in what currency you are quoting. Your research should indicate what the market price for your product is.
Remember, it is always easier to lower prices than it is to raise them.
A quotation can be prepared on a email letterhead or as a proforma invoice (formal export quotation), which is often required by the customer to obtain an import licence.
To avoid any confusion the prices should be always quoted on the basis of a stated Incoterm.
These trade terms are used to specify the division of obligations, costs and risks between the buyer and seller during shipment of the goods, and are accepted worldwide.
To ensure that the prices are clear, along with the abbreviated Incoterm, reference should be also made to a named place, port of shipment or port of destination (FOB Melbourne port of CIF San Francisco, California, USA. Incoterms 1990).
If you are arranging for shipment of the goods, a freight forwarder can recommend the best and most economical method of shipment, as well as provide a quotation for all transportation costs including documentation.
The nature, size and weight of your product will determine if it will be shipped by sea or air. If you do not have your own insurance, the freight forwarder can arrange it. If special packing is required for export, make sure the cost is included in your quotation.
The customer, on the other hand, may prefer to arrange the shipment him or herself. If this is the case, you may only have to provide prices ex-works or delivered to a specified warehouse or port (FOB).
Another important element in your quotation is the terms of payment.
After all, you want to make sure the overseas buyer will pay you. The most common methods of payment are: Open account, prepayment, documentary collections, and documentary letter of credit.
Receiving and processing an order
When an order is received, it should be checked thoroughly to make sure it is acceptable to you. The order should be checked and acknowledged and any changes required, including payment terms, notified to the customer. Once you have accepted the order there is little you can do to change it.
Further, if payment is by documentary letter of credit, this should be checked to ensure that you could comply with its terms and conditions.
If you cannot, you need to ask your customer to amend the letter of credit. After you have checked the order to your satisfaction, an order "acknowledgment" should be sent to your customer.
This will advise them that the order has been received and is being produced. Further, you should retain the terms of sale.
As the order is processing, you should keep your customer and freight forwarder appraised of delivery so they can plan and schedule its shipment. Once the order has been shipped you should inform your customer of all shipping details.
Certain documents must accompany your shipment to allow the importer to clear the goods through customs at the country of destination.
Your freight forwarder can advise you of these. Specific documents may also be requested from your customer or will be specified in the documentary letter of credit.
Among the most common documents are:
Commercial Invoice - often these must be prepared in accordance with the buyer's instruction, for example they include details of the number of packages, weight(s) and volume of the goods being shipped.
Invoices should be manually signed and dated:Packing list,Weight list
Airway Bill (AWB) - issued by the airline as a receipt for your cargo and confirmation of dispatch of your goods.
Certificate of Origin - certifies the country of origin of the goods. Bill of landing (B/L) - is a legal document under which cargo is accepted for carriage on board a vessel. It acts as a receipt for goods and confers ownership of the goods.
Your freight forwarder can take care of all export arrangements with the Australian Customs Service.
Depending on the method of shipment and payment, original documents must be sent to the customer with the shipment, by air, registered or express mail or through the banks.
How should I, label my goods?
The labeling of cargo is often overlooked, when preparing the shipment. The labeling process identifies your cargo from other shipper's cargo as being uniquely yours. It also supplies important consignment information to the cargo Handlers.
The labels should clearly state your Consignment address with phone number, fax numbers and contact person, the labels should then be securely attached to each cargo piece. Your cargo labels should be numbered 1 up.
For example, you have 10 cargo pieces, then each piece should be marked 1 of 10, 2 of 10, 3 of 10 ECT, ECT. This numbering method identifies to each person involved in the cargo transport chain that there are 10 cartons belonging to this shipment.