The right ambition, the right entry structure – and the right people: three key ingredients for export success
15 April 2015
The other day, I was chatting with the entrepreneurial CEO of a UK-based manufacturer with a strong – and widely admired – track record in exports. So, I asked, what’s the secret of his business’s success overseas? “Simple,” he replied. “We never say no to a customer.”
That kind of drive can take a business a long way. Imagine you’re based in the UK and you are manufacturing components for international oil & gas companies. One day a major customer says it’s setting up in Nigeria, and wants you to go there with it to supply equipment on the ground. Say no, and you may risk losing not just the Nigerian sales, but the wider relationship. Say yes, and you’re taking your business into what is effectively uncharted territory.
Or try picturing a different scenario. You’re sure that there’s a ready and willing market for your products in China or Korea, but you have no contacts or customers there already. How do you find them? Perhaps more important, how do you ensure that they find you?
The answers vary from business to business. Why? Because creating and executing a successful export strategy means aligning the company’s specific positioning and products with a complex matrix of considerations – including the choice of entry structure, the skills needed to make it work, and the ambition and leadership to drive it forward. So there’s no one-size-fits-all solution.
Take the possible entry structures for reaching customers in new markets. These can be broadly categorised into three levels – and any one of them can be the best choice for a particular business at a particular time. Indeed, many exporters progress between them as their overseas sales and confidence increase.
The first, ‘lightest-touch’ approach is to sell products originally made for the domestic market to similar customers overseas, often by using the internet as a sales channel and flying in a salesperson if needed. This approach may suit a business for which exports are just the ‘jam on top’ of its domestic sales. But I have clients who export up to 90% of their total production this way, so it’s not to be sniffed at.
The second level is to regionalise. This involves moving more of the value chain into target export regions, and blending expat and local staff to set up ‘hubs’ in the form of regional offices, salesforces, management structures, and possibly some assembly or even manufacturing facilities. Most of my manufacturing clients with significant percentages of overseas sales use this approach, gaining greater penetration, traction and sales in their chosen markets as a result.
The third level of exporting is to turn the target export locations into ‘home markets’, with fully-fledged local operations producing offerings geared to the needs and tastes of local customers. Here the proportion of locally-recruited staff tends to be higher, and the in-country structure largely mirrors the parent company, with finance, procurement, HR, sales, senior management teams, and manufacturing and/or assembly geared to local requirements.
Choices between these levels of export structure – and, more especially, decisions to move along the continuum from one to the next – raise a host of issues, ranging from local land availability to relative economic growth rates, and from logistical factors to the location and size of the target customer base. What’s more, as the global megatrends continue to drive ongoing economic and demographic change, these factors are constantly shifting and realigning.
As exporters shape their export strategies and entry structures in this evolving landscape, experience shows that the most important drivers of success are invariably people and leadership commitment. On people, the availability of local skills – together with supply chain links and access to customers – may well drive the choice of markets in which to set up operations, even outweighing cost considerations. And in terms of leadership, the right ambition and ‘can-do’ attitude at senior levels are vital for sustaining the momentum of exports.
Overall, to sell successfully overseas, it’s important to have a clear export strategy and roadmap for delivering it. But without the right people in the right places – whether a committed export pioneer based in the head office, or smart and loyal local representatives in-country – even the best strategy will fail. When it comes to exporting, the right structure matters. But people matter even more.