How to start exporting (products)
In order to export we must first create our product or better still a range of products. A well-designed product should meet three conditions as follows:
- Proper design
- Well-designed packaging
- Certification (in terms of product and packaging material).
Market globalisation has led more than ever to their liberalisation and has provided numerous possibilities for businesses to expand there. Of course entry to the world market means not only opportunities but also risks and therefore it should be carefully studied; it should not be seen as an occasional business prospect.
The advantages and opportunities for a business which exports its products can be the following:
- Economies of scale
- Rise in sales
- Rise in profits
- Reduction of the company's dependence on the domestic market
- Gaining expertise
- Product empowerment in the domestic market.
However, except for the opportunities which come up for a business to grow and expand, there can also be challenges and threats at times which must be diagnosed in time and tackled. These could be:
- Increased production or operation costs
- Adjustments in business administration
- Long-term return on the investment
- Bureaucratic procedures.
First and foremost, it should be mentioned that the businessman will have to be aware of and take into account the following:
- Product competitiveness
- The company's human resources
- Business funding
- Expectations and objectives.
A businessman should take into account factors such as the following in order to explore the position of their product in foreign markets:
- Potential target-customers
- Features of the product itself
- The company's production capacity.
How to adjust your product for export
In many cases making deciding to export a product also means that some necessary modifications need to be made on the product itself. The methods and techniques applied to check a product's export suitability cover a very wide range of procedures from very basic, fast and inexpensive techniques to those involving complex, expensive and lengthy procedures.
It is up to the exporter to choose together with their respective representative or product distributor the extent, technique and duration of the survey which should be carried out each time.
A programme can be put in place which includes research and could involve the following:
1. Study and registration of competitive products
- Technical features:raw materials, form of product, variety, type, sizes, trademarks, colour, modifications, improvements, durability
- Quality assessment:resistance, ability, performance, appearance, suitability and ease of use
- Legal protection:design (form of product, patent rights, approvals)
- Technical features: design, shape, manufacture materials, resistance in weather conditions, ease of use and stability during loading and unloading, distribution, storage and exposure, adjustment to official rules and legislative regulations.
- Attractiveness: size, shape, suitable colouring, quality seal and label design (tag).
- Product identity: shape, colour, label, trademark
- Details: product description, composition, instructions
- Provision of services: the kind of services provided by competitive products - delivery, installation, preparation, main parts and components, training on their use, repairs, contributory goods.
3. Competitive Prices
- Consumer prices: list of basic prices - usual selling prices - taxes (value-added tax, Community or municipal taxes) - discounts (due to quantity or cash payment) - methods of payment (cash, by credit, in instalments) - discounts due to damaged goods - variety of products, market sectors and points of sale (sales outlets and shops).
- Wholesale prices: different prices - discounts - terms of payment - special discounts for wholesale importers and retailers due to products, sectors, size of the order, kind of traders.
4. Product acceptance
The exporter will have to acquaint potential importers with his/her product and discuss with them the conditions regarding the selling and movement of similar products. Hence the exporter will have a first clue and will be able to perform additions or changes to their product where necessary. Then the exporter will have to present the product to a group of wholesalers and retailers in order to hear their views and make decisions. The exporter can also ask for feedback directly from the consumers. The exporter will also have to look into:
- the size and dimensions the product should have
- the kind of outer shell the product will have to packed in
- method of packaging to ensure ease of movement inside the warehouse
- ease provided by the packaging to ensure easy refrigeration if needed
- the selling price and ease of similar benefits.
How to price your export product
Pricing export products is a procedure of particular importance, since, except for production costs, a number of other factors concerning the transport and delivery of goods to foreign markets must be taken into account. Such factors can be:
- Differences in exchange rates
- Transport of goods
- Special packaging of export products
- Goods insurance
- Commissions and other fees paid to intermediaries etc.
Demand for the product, as in local markets, is critically important in terms of pricing. For most consumer goods per capita income constitutes a market dynamics indicator; there are few products for which demand is so high that is not affected by low consumer per capita income.
Competition, as in local markets, deeply affects the selling prices of the products. The price of a new product placed in a new market can be high, whereas a product being imported into a particularly competitive market may require a reduced price to immediately gain market share.
As regards pricing though, the objectives in terms of exports to each market are also taken into account. Such objectives may be the following: rapid expansion in the market, replacement of existing products, slow but constant entry etc. These objectives, as well as the overall pricing strategy, are also influenced by the development stage of the target-market and per capita income of potential consumers.
Some alternative forms of pricing are the following:
- Static pricing - same price for all customers
- Flexible pricing - prices being adjusted to different kinds of customers
- Cost-based pricing - pricing aimed to fully cover fixed and variable costs relating to the production and export of products
- Variable cost-based pricing - pricing aimed to cover the variable costs relating to the production and export of products, whereas fixed costs are covered by domestic market sales
- Entry pricing - low prices to ensure rapid placing on the market and to discourage competitors
- Low competition market pricing - high prices of products with a wide profit margin in low competition markets.
Once the pricing strategy has been set out and the various costs have been calculated, the products shall also be priced according to the desirable profit margin set by the company.
In trying to price its products in the most effective way, the company will have to take all possible costs into account. A list including most of these costs follows:
- Marketing and promotion costs: distribution, advertisement, travels, printed advertising material, participation in exhibitions etc.
- Production costs: production cost per product, packaging or assembly cost per product
- Packaging cost: materials, model, labelling etc.
- Organisation and administration costs: transport safety, certifications etc.
- Freight transport costs: storage, insurance, transport costs
- Financial costs: export financing costs, costs relating to exchange rate changes, costs relating to interest-rates changes etc.
How to promote your product in foreign markets
The means available for promotion abroad and in domestic markets are broadly the same for a business. These can be:
- Advertisement: particular attention should be paid when choosing the appropriate means which will have an impact on the potential consumer.
- Promotion material: a material which has been developed and distributed in the local market will probably need to be modified as regards its design and the texts it contains.
- Emails: sending emails directly to potential target-customers can only take place after having gained experience from this market and carried out an efficient market survey.
- Personal visits: personal contacts with potential customers is probably the best way for promotion. In many cases this also depends on the business culture of the target-market.
- Participation in exhibitions: participating in exhibitions contributes not only to promoting the products and the company but also to getting to know the market and its competitors. In case it is not easy to participate in an exhibition, it is sufficient for a businessman to visit the exhibition.
- Company website: every export business must have a website for advertising reasons and in order to attend to overseas customers. It is however essential to watch and constantly feed the website to ensure that the information it contains remains up-to-date. The aim is not to merely have a webpage but also to regularly update it, since a website which contains out-of-date information could do more harm than good to a company.
The Hellenic Foreign Trade Board (HEPO) S.A. as the official public body is responsible for organising the Greek participation in certain International Exhibitions abroad (approximately 45 per year) in various sectors such as food-beverages, consumer goods, industrial goods etc. Moreover, it organises about 20 business missions to target-countries, and it also invites international buyers.
For more information: tel. 210 9982100 and www.hepo.gr
How to enter foreign markets
Once the company has found the “best” markets for its products, the next think to decide is which method to use to enter the target-markets. The factors which should be taken into account to make such decision are the following:
- Competitive advantages of the products in overseas markets and potential risks.
- The company's financial dynamics.
- Restrictions and obstacles the company is likely to be faced with in its effort.
- The kind of product or service to be exported.
- Specificities relating to each market.
The methods used in general to import a product into an overseas market are considered to be the following:
- Direct exports
- Third-party exports
- Cooperation with domestic or overseas businesses
All direct exports involve selling products directly from the company to the end customer. The main advantages of this method involve the following: guaranteeing a wider profit margin due to the absence of intermediaries, setting low prices and ensuring direct contact and acquaintance with the end customers/consumers who purchase the company's products.
There are however disadvantages stemming from the fact that the company must possess thorough knowledge of the market; also there is a slow development of brand awareness and the company's reputation.
Third-party exports involve selling the company's products to an intermediary, a wholesaler or a distributor. The company can also have a representative who does not purchase its products but represents them in this particular market.
Beginning cooperation with another company in order to export products can have important advantages such as know-how transfer, risk allocation, equal contribution to the required capital, simultaneous entry into various target-markets etc.
Beginning a strategic cooperation with a target-market company may also prove to be extremely beneficial, since there are usually companies chosen with complementary products, and existing distribution networks and means for promotion are being used.
Despite the fact that direct exports may look more profitable to the company, the existence of intermediaries can save the company time and money.
A form of import into the target-market is via representatives who usually represent a specific market selling complementary products at the same time. Representatives are authorised to conclude selling agreements for the businesses they represent and they are paid on commission only when they make sales. An agreement with a representative from an overseas market contributes to ensuring instant presence for the company or its product on this market. It is usually less expensive compared with direct exports, and the company can still control the product and its selling price. Local representatives can also help the company carry out market surveys, they offer advice on freight transport issues, on how to penetrate certain categories of customers and provide information on legal, financial and procedural issues.
A second choice the businessman can make has to do with selling to overseas markets via wholesalers, who in some cases buy and resell the products and in other cases they sell on commission. They are usually specialised in specific products or categories of products. In many cases they undertake to promote the products in each market through advertisement, by participating in exhibitions, making personal sales etc.
Finally, it should be mentioned that there are also distributors, who buy the products and resell them to overseas market customers. They usually set the selling prices themselves and undertake to keep track of a product in the market. The downside of selling through distributors is that it reduces the profit margin for the exporter and the ability to control the position and price of the product. In order to choose an intermediary with whom the company will collaborate to export its products, various factors must be taken into account, since this is a very important decision and there is probably a wide variety of choices. Some of these factors can be:
- What is the sales network of the intermediary, the degree of growth and expansion over time etc.
- Which part of the target-market is covered by the intermediary and what is its relation to the company's objectives, whether there are subsidiaries or local offices in the target-market
- What is the variety and mix of products they represent or sell and their relation to the company products, whether they represent other products from the Greek market, what are the minimum sales they can guarantee, how effective are they when selling complementary or relative products
- Which method is used to store or stock the products, is it easy to contact them, how is the business organised, what services can they offer to the end customer etc.
- Which selling method do they use, how do they keep track of sales, how do they train sales staff
- What are the characteristics of their customers, who are their main customers and how many are they
- Do they provide technical support in carrying out market surveys, what are the means of promotion they use, what amounts do they invest in advertising and other promotional actions, do they intend to share advertisement costs, is there a webpage and how do they promote the products of the businesses they represent through this webpage.
Growth in foreign markets is a long-term commitment for the company and it requires particular efforts to be made, as well as resources and time. This must have been accepted first and foremost by the management of the company.
For any additional information or clarification on the above text, as well as for a more detailed analysis on how to design an export product or on exporting procedures, please contact the HEPO Information Department tel: 210 9982247, contact person Mr. Georgios Papastergiopoulos.