The attraction of foreign countries for companies is often very powerful, and many are those who wish to conquer new markets outside our borders. How to go about not leaving feathers there?
Before even thinking about setting out to conquer new markets, it is essential to have a solid foundation. “Starting to export is the equivalent of starting a business from scratch. The company must therefore already be profitable and have sufficient resources,” says Jean-François Ouellet, professor, entrepreneurship and innovation, HEC-Montréal. Let’s not forget that it takes about three years for a company to start reaping the rewards of its exports, so it must be strong!
Analyze the market
It is not because a product sells well here that it will have the same success elsewhere. This is why Mr. Ouellet advises entrepreneurs to carefully analyze the desired market and learn about it before even trying to enter it. In addition, business fairs, trade fairs, chambers of commerce, etc., make it possible to directly meet people who are already doing business in the country that interests us or to be put in contact with them.
“However, nothing beats a site visit and a good handshake! to feel the pulse and become familiar with the local culture, says Mr. Ouellet. In this area, the differences can be huge from one country to another, so beware of the odds. For example, in Japan, it is fashionable to take a long look at the business card given by your interlocutor, and not to put it quickly in your pocket. Find out!
Either way, don’t rush or make hasty decisions. “Successful exporters are those who took their time,” says Normand D’Arcy, Director, International Services at National Bank.
Test the waters
Another essential resource: your financial institution. “At National Bank, when a client company intends to do business abroad, an international trade manager is assigned to it. The latter will assist the client’s account manager in analyzing his strategic plan, studying the issues and proposing solutions,” explains Benoît Marcoux, Director, Derivative Products, Business Solutions and International, International Services at National Bank.
The bank has several offices abroad, in addition to having developed partnerships with major local financial institutions, which makes it possible to share experiences.
To test the waters before making the leap, Jean-François Ouellet recommends using the Web, an inexpensive method to assess market potential. We can, for example, obtain lists of customers and communicate with them by e-mail to find out if our product is likely to interest them. “Doing several thousand mailings will give you a good sample of responses,” he says.
Benoît Marcoux emphasizes that the entrepreneur must remember that exporting will require adjustments to business processes. “These are not usual transactions for the company, we are changing the paradigm and the environment. We must therefore make certain adjustments, particularly in terms of marketing and merchandising. »
Normand D’Arcy recommends involving his financial institution in his project as soon as possible, even before signing contracts with foreign clients. “This reduces risk from the start. We can give advice, provide financing to support production or help support longer payment terms for example. »
As for the currency conversion rate, it can work in favor of the exporting company… or against it. “For several years, there has been high volatility in the currency markets, which sometimes results in variations of 10 to 20%, which considerably reduces the profit margin of an exporter or eliminates it. To guard against this, you can sign a forward contract, i.e. agree on a pre-established exchange rate on a given date,” explains Mr. Marcoux. Such an agreement therefore makes it possible to fix the exchange rate that will be used at the time of delivery.
Another element to consider in its planning: the different payment methods. “In the United States, the open account is generally used, whereas in Asia, it is rather letters of credit”, indicates Mr. D’Arcy. They each have their terms, it is better to know them to avoid unpleasant surprises.
5 STEPS TO SUCCESS
- Discuss their plans with their financial institution.
- Assess the company’s ability to adapt to change.
- Deepen your knowledge of the culture of
- local business and assess the potential of the target market.
- Implement financing and risk mitigation processes, among other things, with its financial partners.
- Stick to the plan you set!