Exporters Expect the UnexpectedFind out more
Thinking of exporting? Then expect the unexpected!
Most SMEs attempting to do business in a foreign country have little experience in doing so. Yet we believe the greatest problem in doing business internationally is thinking that the business processes one is familiar with locally will work exactly the same way overseas. They will not, and the following are a few examples.
One American manufacturer decided to expand their booming domestic sales by exporting to Egypt. They discovered an Egyptian trading company and made a couple of successful, yet small deliveries in a short period of time after having collected funds from the Egyptians.
However, for their third and now a large order, the Egyptian company asked for credit terms. The US company did not carry out any risk assessment (such as trade references, revenue history, etc.), they just extended them a large amount of credit, shipped the order and … eventually lost the money. We don’t mean this was a premeditated trick—the Egyptians may have run into trouble with their own business. However, the American company wrongly assumed that if this way of doing business has been working well in the States, it would scale overseas. In this case, proper initial trading partner research and due diligence should have been carried out.
We also knew a Russian manufacturer that started trading with their Chinese partners and labelled their pallets of goods using average weights—a typical practice around most of the globe. However, Chinese customs often physically inspect containers and, in this case, they noticed a difference between the average (labelled) weights and the actual ones. Customs officials offered three options, all costly: to relabel them, to resubmit for a new customs clearance (read - reship) or to pay a fine. Eventually we sorted things out, but this mistake took place only because of incorrect assumptions about the labelling process and requirements—they turned out to be different in China.
Last but not least, we have been working with an American importer who found a South African source with a great product, amazing payment terms and, most importantly, unrivalled pricing. The US company ordered 6 containers, they allocated products to their domestic customers only to realize that the shipping costs were not included—that is more than 25K USD! Eventually, the American company had to pay for the freight. Again, the key takeaway is proper research, careful due diligence and rethinking every single procedure that you might be accustomed to in your domestic market.
Most common unexpected things for exporters:
- Being non-competitive overseas even if booming in the domestic market
- Not having proper certifications and inspections in a market of interest
- Sales channels working completely differently
- Underestimating needed infrastructure and upfront investment for it
- Different financial and payment systems
- Different hiring practices and labor laws
- Different cultures and underestimating investments for tailored marketing
Allocating prime resources
We often see SMEs treating exports on a par with the domestic market in terms of allocated human and financial resources. Companies believe that if they are successful at home, there is no good reason to fail abroad, so they pay little attention to market analysis and research. However, mistakes while exporting carry a double cost: a direct loss in the failed venture and an opportunity lost.
For these reasons, we strongly recommend employing the best internal or external experts when preparing for business overseas. Also, exporting companies should:
- Properly assess their experience in doing business abroad
- Understand that it will not be “business as usual”
- Senior Management should realistically assess their experience and limitations and expect the unexpected
- Adapt procedures, processes, policies and personnel
- Carry out proper research and due diligence
- Talk to trade commissioners in the market of interest
- Attend country specific seminars, workshops, presentations and trade shows
Point One International has been doing cross-border business in dozens of countries for decades. Get in touch with us to discuss how we can accelerate your exports learning curve and simplify your overseas experience!