Global trading presents rich opportunities
Neil Kuschel's guide to international expansion for small businesses
Monday 16 January 2012
With favourable exchange rates and the maintenance of the 0.5 per cent interest rate, more UK businesses are considering international trade as a means of expanding their business.
If you are thinking of trading overseas, the first step must always be to research which international markets you wish to enter. There are a number of territories that you probably have not previously considered. In the near future, our world trade map will be very different and economists argue that the BRIC (Brazil, Russia, India and China) markets could become larger than the world’s current six most developed countries in less than 40 years. Here are some insights into trading with these markets.
Although internet penetration in Brazil is about 40 per cent of the population, users have placed Brazil in the top three countries that spend the most amount of time online, meaning that an e-commerce entry might be the most strategic. Consumer purchasing power in Brazil is increasing and the middle class now represents more than 50 per cent of the 185 million Brazilian population, meaning that there are significant opportunities for businesses looking to target that market.
Russian audiences have a significant appetite for international brands, particularly in the luxury sector, presenting opportunities for retail businesses looking to import. The Federation of International Trade Associations (FITA) notes that Russia is open to foreign trade in spite of strict legislation and tariff policies, and it is among the 20 largest importers in the world.
Roughly a third of the size of the United States but home to one sixth of the world's population, India is a country that’s young in more ways than one. 40 per cent of India is under 19, meaning that it’s a fruitful place for businesses targeting the youth sector. Reforms over the last decade include increasingly liberal foreign investment and exchange regimes, industrial decontrol, reductions in tariffs and other trade barriers, all of which pave the way for UK importers hoping to target that market.
With a population in excess of 1.3 billion people, China is home to the world’s single largest consumer market, a market that represents approximately 20 per cent of the planet’s population. The country has formally joined the World Trade Organisation and as part of this far-reaching trade liberalisation agreement, China has agreed to lower tariffs and to abolish market impediments.
Once you’ve identified your target markets, you must research them in depth before beginning to trade internationally, including any linguistic and cultural differences which could impact your business relationships. For example, giving and receiving a business card in an Indian meeting using your right hand is a sign of respect.
Also consider shipping, as you should ensure that the right carrier and method is used to distribute your product effectively. Different countries have a myriad of regulations and customs that an experienced third party carrier can navigate; for example, it is not permitted to import dental products to Algeria.
Lastly, your overheads. From interest and exchange rates to the cost of shipping, there are a variety of cost factors that can affect your profit margins. Exporting can be financially demanding; careful planning is required to ensure that working capital is in place at every stage of the cycle.
Once you’ve decided exporting is right for your business, you should consider timings, which should be based on your company’s readiness, for example ensuring that you have sufficient stock to fulfil overseas demand, or the right infrastructure in place to get your product to market.
There are several sources of advice available to those seeking to begin the process. The UK Trade & Investment (UKTI) offers a range of services for UK exporters, including the Overseas Market Introduction Service. The British Chambers of Commerce (BCC) offers export training services, export communications reviews, and support around export documentation. DHL Express offers help and advice to businesses planning on expanding internationally through export services, including information around customs rules and regulations that govern overseas markets.
Neil Kuschel is director of sales at DHL Express. For more information, videos and advice for SMEs, visit www.freshbusinessthinking.com
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