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Building a succesful export program.

In developing export sales, your first selling job may be the most important: that of convincing your own company of the profit opportunities in international markets.

Implementing a successful export program requires careful advance planning, key elements of which include the market review and sales plan. The third key lies in selling your own company on--and organizing for--the export program. Although general discussions of these elements are widely found in marketing books, the comments in this article are closer to home, having been based on Xaloy's experience in building major export markets for bimetallic barrels and screws.

The Market Review

Assessing the potential market for your products and services requires evaluation of elements such as market size, competition, type of product demand, resources required, and distribution alternatives.

Market size. The most obvious target markets are Canada, Mexico, Central and South America, Europe, and the Asia-Pacific Rim regions. If you look carefully, you can find figures on plastics consumption for each of these areas.

Total annual plastics consumption in Western Europe is in the same ball park as U.S. consumption--approximately 25 million tons. European processors are highly sophisticated, and plenty of companies compete for their business. Although progress has been made in eliminating barriers to international trade, Europe remains highly fragmented by localized national markets, each with its own set of distribution channels.

Japan's processors use about 11.6 million tons of plastics; they, too, are in the big leagues. Despite the horror stories, exporting to Japan is possible, albeit difficult. Korea and Southeast Asia have significant processing industries and are growing rapidly. In entering these markets, you may have the somewhat easier task of competing against other exporters rather than entrenched local sources.

China is a case all its own, with enormous possibilities. Latin American markets are growing at a healthy rate, so check out opportunities there, too.

When selecting markets to enter, many factors besides size should be considered. As you come closer to final choices, you'll need to assess in detail the size and nature of the market for your product in areas you are exploring in depth.

Competition. The nature of the competition is another important factor. Who else sells in areas of interest? Are they local, or are they exporters, too? What are their strengths and weaknesses in product, service, and distribution?

To answer these questions, you start by gathering competitors' sales literature and studying it for clues. Field interviews are absolutely necessary.

Other exporters, sales agencies, and trading houses are good sources of information about the competition. But you need to interview actual users, too. Although mixing sales calls with competitive interviews goes against conventional wisdom, it's unavoidable in practice. Input for your competitive analysis must come from actual or potential customers.

What do customers need? You'll need to objectively assess product demand. What satisfied your U.S. customers may not satisfy your overseas buyers. Quality issues aside, major differences in needs are likely.

Trial orders. Desk research, networking, and missionary sales calls can tell you a lot about industry standards and customer needs in export markets. But there's nothing like the challenge of a trial order from a key customer in a target market to get your feet wet.

Taking on such a challenge requires thorough preparation and having your organization solidly behind you. An exchange of visits by your key people and the customer's is essential in such a case, whether it occurs before or after the closing of a trial order. Although costly, the investment is worthwhile for a major customer.

Plan for communicating. In preparing for the challenge of a trial order, you must ensure that you and your customer's organization are prepared to communicate. Designate at least one main contact person in each company and agree on a time window. On your side, set up rules for coverage and replies based on time windows. Doing business with Japan, for example, will mean evening work for someone. If you're in the Eastern standard time zone, the time difference is 14 hours, so it will be 6 p.m. in the U.S. when the Japanese start work at 8 a.m. the next day.

Settle the financials. In negotiating the trial order, nail down the arrangements for payment. Make sure a clear understanding exists of when payments will be made, and whether letters of credit are required. Avoid letting the issue arise for the first time after you have the order.

Resources required. Exporting is expensive, so you'll need to budget the extra costs for people, travel, investment in new relationships, and product adaptation that may be needed for the overseas market.

The people needed for an export program are not inexpensive. An export manager, for example, commands a premium compensation package. He or she needs experience, independence, sales and possibly language skills, perseverance, patience, and a willingness to make frequent trips of several weeks' duration. Technical service, inside sales, and customer service personnel also need special skills and training for export marketing.

Distribution, of which there is no single best way, requires much thought. Your needs will differ sharply from country to country, and you may not always need a local agent.

In some Asian countries, you may be able to directly manage a handful of large accounts, such as a local subsidiary of a multinational, provided you have a well-oiled inside sales and service effort. This is possible because of the excellent international fax and telephone service available today. When I first started in this business, we were still passing airmail letters back and forth for inquiries and quotations.

If you decide to work with an agent or distributor, respect the relationship. If you learn later that you made a poor choice in selecting an agent, you may need to replace him or her or simply terminate the relationship. Avoid end-running your partners; end runs only create rancor and disputes that will distract you from the main task at hand.

When you've mastered the various aspects of your market review, and you believe the opportunity justifies your moving ahead, you'll need approval from your company's top management and board of directors. Export sales development is a major undertaking, requiring a major commitment of your company's resources, so a high-level "buy-in" from your organization is essential.

The Sales Plan

When you have the top-level buy-in, you can begin putting together your sales plan. You will draw on all that you learned in your market review and nail down arrangements for several key aspects, including identification and solicitation of key customers; organization of technical support; and training your distribution channels.

Key customers. As in your domestic sales effort, key customer selling in crucial. Who are they, where are they, and what is the opportunity? How will you get in?

Foreign plants of multinationals, especially those with whose U.S. operations you have a good track record, are good targets. Build on your relationship with U.S. contracts by working hard to obtain introductions to their overseas counterparts. Testimonials from domestic customers are a valuable first step in gaining the confidence of key export prospects.

Networking. Don't overlook any networking opportunity. If you're in the machinery business, resin suppliers' sales agents should be part of your sales plan. Here at home, establish contacts with subsidiaries and agents of companies based in countries of interest to you.

Technical support. Be sure to plan and budget for technical support. Identify the people who will provide it, and get the resources they'll need to do the job.

Training the distribution channels. Tools for training your agents or distributors are vital, so it's important to spend the money to do it right. Videos, slide presentations, and overheads are worth the investment; some of the materials can also be used for presentations by your agents.

When sending or taking videotapes abroad, keep in mind that all VHS formats are not the same. VHS tape from the U.S. will not play through a player hooked to a PAL-standard TV set. The PAL standard, however, is widespread in other countries. Be sure to check the standards that apply in your target markets, and have your tapes converted to PAL for use where required.

Also take into account the need for periodic refreshers for your agents and distributors. You'll need to budget for regular visits and communications.

Selling the Organization

Selling to your own company the idea of exporting is a tough, long-term job. Even if you have the CEO's support, you'll need to get many other people in the company on board--management and others in inside sales, customer service, manufacturing, engineering, finance, and administration, among others. It's also a given that the selling job is constant, especially in the early stages.

The export manager must have a cogent answer to the simple question, "Why export?" He or she also needs a great deal of patience to answer it time and again.

Why export? The answer should be tailored with specific references to your products and numbers. Following is a generic explanation.

"Exporting represents a terrific opportunity for us. Possibilities for more U.S. business are limited, and competition is keeping margins low. The Southeast Asian market uses $X million worth of products like ours annually, and it's growing an average of 12% per year. We've got a better product than overseas competitors, and we can get higher margins. This is an $X million profit opportunity in three years, and we can get $Y million in five if we all pull together."

Sales responsibilities. Your inside sales people should be the most easily convinced, but convincing them will require some effort. Getting people to put themselves in the shoes of the overseas customer is amazingly difficult.

Global speak. Although English is the language of international business, the langauge we speak among ourselves is often quite different. Learn to express ideas simply and directly and train your people to do the same. In speaking to overseas customers and agents, learn to avoid rapid-fire "company-speak" and expressions too tightly tied to the American scene. Telling someone that you'll go the "whole nine yards" wouldn't make sense to many of our overseas friends, but they would understand a statement like "We will do whatever is required to resolve this matter."

Administration and accounting. It's vital to get your financial people on board and keep them there. The international department of your bank can help; formal training in international trade is also available. When customers visit, make sure the financial people get to know them.

Is all the effort worth it? In 1992, exports accounted for more than 15% of Xaloy's business despite the slowdown in global markets.
COPYRIGHT 1993 Society of Plastics Engineers, Inc.
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Title Annotation:Exporting
Author:Hoyt, H. Gunther
Publication:Plastics Engineering
Date:Sep 1, 1993
Previous Article:Global markets.
Next Article:Marketing challenges facing the plastic industry in the '90s.

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