Essentials To Export/Import Success
Read in 6 min. There is no question that operating an import/export business is inevitably more complicated and risky than operating business in the domestic markets. Nevertheless, experiences gained in the domestic business could help jump start an export/import operation and it can be a logical expansion of the company's domestic business activities.
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1) Careful planning with solid foundation to reach the company’s goal;
2) Commitment and sacrifice to overcome obstacles;
3) Knowledge of basic management skills and including government regulations;
4) Establishing a good relationship with buyers and suppliers.
There is no question that operating an import/export business is inevitably more complicated and risky than operating business in the domestic markets. Nevertheless, experiences gained in the domestic business could help jump start an export/import operation and it can be a logical expansion of the company’s domestic business activities.
If your company has done well in selling or buying products or services in the domestic markets, the same basic strategy can be used to successfully enter overseas markets. Incorporating and better understanding the following four key areas will help increase your chances for success in the export/import business.
1) Planning - More companies around the world are gaining international experiences and are increasingly becoming successful and profitable through exporting/importing. What all these successful companies have in common is a well thought-out export/import business plan. Planning is critical for selling or buying a product and helps prepare a company for the future. Export/import plan is a continuous process and as the saying goes Plan to Fail, Fail to Plan. It is a road map that can help the company prepare and take steps necessary to reach its goal and is extremely important for any size company that wants to approach the future with a plan of action.
Your export/import business plan should tell where, why, when, what, who and how your company will reach its goal. The key sections of your export/import business plan should include overview of your company; marketing components; financials and implementation schedule. By adding a cover page, table of contents, mission statement and references you will be well in your way to having a well documented export/import business plan. Remember, your export import business plan have to be written, having all in your head is not enough.
2) Knowledge - Knowledge of export/import mechanics is an important consideration. The knowledge that you might have accumulated through education, running your business or other means will certainly help you when running and managing your export/import business. While many export/import companies depend on carriers, forwarders, Custom House Brokers, bankers, and insurance companies to assist them prepare the necessary document; others have good understanding of the process and have in-house experts that are completely knowledgeable in the entire export/import process. Whether you do it in-house or outsource different services, as the exporter/importer on record your company is ultimately responsible to comply with government, banking, transportation and commercial requirements. The following are some of the key knowledge areas that your company should have a good understanding to help succeed in the export/import business.
Payment mechanisms - Payment options including advance payment, open account, consignment, documentary collection and letter of credit
Commercial document - Invoice, proforma invoice, sales contract.
Transportation documents - Bill of lading, Airway Bill, certificate of inspection, carrier certificate and packing list.
Shipping - Containers, weights, intermodal, carriers, less than container loads.
Government documents - Certificate of Origin, Consular Invoice, license requirements.
Customs requirements - Valuation, classification using the Harmonized Tariff Schedule, Schedule B (U.S. only), marking, other agency requirements, Custom House Brokers.
Insurance requirements - Insured value, all risk, free of a particular average, claims
Distribution channels - Agents, distributors, export management companies, direct and indirect channel, trading companies, wholesalers and retailers.
Pricing product - Landed cost, cost plus, skimming, predatory, incremental, discounts and allowances, price cuts and increases.
Promotion- Types of advertising, sale promotion, events, public relations, direct marketing, personal selling, medium to use.
Financing options - Trade finance, short/medium/long term financing, government loan guarantee programs, private lenders, angel financiers.
International Commercial Terms (Incoterms 2000) - identify the responsibilities of buyer and seller.
Countertrade - Barter, counter-purchase, offset, switch trading, compensation or buybacks.
3) Commitment - Becoming a successful exporter/importer depends upon the commitment and determination the entire company is willing to give to the endeavor. When compared to domestic transactions there are more chances that international transactions can go wrong. For example, goods might be held by Customs, payment discrepancies, documents missing, and an array of other reasons. To successfully solve these challenges requires a firm commitment by management.
It is very unfortunate that many small businesses consider export/import when their business slows in the domestic markets or have access production capacity to sell to cover their domestic losses. The same companies when domestic demands for their product increases often forget their export/import business. Such approach has no place in today?s competitive markets. As with any type of business long-term commitment is required to remain competitive and successful in the export/import business. Abandoning your export/import business prematurely because of increased domestic results reflects lack of commitment.
4) Relationship - establishing a solid relationship with your supplier or buyer is important in the domestic business and more so in the export/import business. Cultural differences play a pivotal role in buying or selling and establishing ongoing relationship. The hard sell that may be effective in the domestic market might not produce the same outcome in foreign markets or a written contract only practice that might be common in domestic transaction may offend your potential partner where business is conducted based on personal relationship and hand-shake.
In domestic business your buyer or supplier most likely speaks the same language, have similar culture, do business by the rules that are familiar to you. In the international markets however, your buyer or supplier might be operating in a different legal, political, cultural and economic environment including your buyer or supplier might think different with businesses practices that might be unfamiliar to you, speak a different language, including different payment system, insurance, documents and shipping requirements, packaging, voltage or measurement conversion system. Simply put, you will have to work hard to understand and gain your buyer or seller’s trust.
If companies are to remain competitive and profitable in the export/import business careful planning, long-term commitment, in-depth knowledge and solid relationship are key considerations to reap the rewards from successful export/import venture.
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