Exploring your market entry options
Having researched potential markets you will have realised that different ones have different distribution structures; the set up of the industry in the area you are targeting may be completely unlike that in the UK. Gaining a foothold in the market, then, involves being aware of how it operates. For example, buyers may place all their orders for your type of product at one particular annual trade fair or exhibition. Attending will be the only way to make sales; there’s no point in hiring an agent, however efficient he or she may be. Choosing a sound market entry method can save you time, effort and money, and ensure that news of your product reaches the right buyers in the marketplace.
It is important to consider all the elements of your export project before selecting your entry method. You should think about:
- the nature of your product;
- the current (and future) state of the market; and,
- the extent of your resources.
There is no reason why exporting should be limited to one market entry method. Indeed, the best method in one market may not work in another. Many companies who export to a number of markets will deal directly in some areas, while using UK intermediaries to sell in others. As a first time exporter you are probably focusing on one key market and so it will be useful to consider the different choices open to you.
Direct versus indirect
It will be useful to first think about the advantages and disadvantages of opting for one of the two basic categories into which all entry approaches can be grouped. Obviously each strategy requires different things from your business, in terms of level of commitment, involvement and flexibility of approach. Furthermore, some may be particularly appropriate to your market, product and circumstances and others less so. However the first issue to consider is whether you would prefer to begin by using direct or indirect methods.
Direct exporting means on-the-spot selling. This will require a great deal of initial preparation and will inevitably place considerable demands on your time. You should be prepared to make repeated trips abroad, often at short notice. You may employ someone else to take charge of some part of the process such as sales or distribution, and to act as your representative in that market, or you may choose to manage the whole process yourself.
Examples of the common direct approaches to exporting are:
- establishing own branches abroad;
- through trade fairs;
- joint ventures;
- selling direct;
- via agents or distributors; and,
This usually means exporting via specialist organisations based in the UK, eliminating the need for travelling abroad, arranging transport for goods, dealing in foreign languages and coping with complex documentation. It can be a very useful way into exporting for small firms and provides a means of testing the viability of your products in new markets. However, indirect exporting still requires a considerable commitment.
Examples of the common indirect methods approaches to exporting are:
- via an export management service;
- through an export merchant;
- through the Crown Agents;
- through 'buying houses'; and,
- through confirming agents.
Where can you get more information?
There are many sources of help and advice for those choosing market entry methods and seeking partners or representatives, ranging from general information to specific assistance with your venture. It’s sensible to get as much help as possible before you make any firm choices. Sources of further help and advice include:
- UK Trade and Investment
- Department of Trade and Industry
- British Exporters Association
- Chambers of Commerce
- National and trade press
- Export clubs
- Trade associations
- Personal recommendations
With assistance from a selection of the sources of information shown you should be able to short-list a few of the entry options which seem appropriate to your venture. Make a note of why you think they might work, as well as any disadvantages which seem apparent. Don’t worry if you haven’t yet made a firm decision; in fact it is best not to be too fixed in your choices at this stage.