Benefits of Outsourcing Your Export Management
“To succeed in the United States, you have to do everything right from A – M. But to go international, you have to do everything right from A – Z. A lot of factors come into play that are not present in a domestic market,” says David Cisneros, sales and marketing manager for Western Export Services, Inc.
His company is a one-stop shop in export management services for North American clients seeking to distribute their products into 15 key countries in the Pacific Rim, Latin America and Europe. Unlike brokers that just give advice and move products around from one country to another, Western Export Services (WES) is a total solution. WES, in effect, becomes the international office of its clients — not like a broker or an outsider, but much the same as an internal professional group handling export functions, and in the same professional manner as the company would handle its sales and marketing and distribution functions in the U.S.
Studies show that most American companies that are exporting their products are not doing their homework on the wide range of export issues, including packaging or shipping the products as effectively as they could, doing due diligence on the companies they are working with, protecting their trademarks and building their brand effectively in the other countries.
WES’ founders were originally lawyers who became more interested in building international markets for American companies. They opened an office in Tokyo in 1989, lived in Asia and participated in trade shows for over 13 years. They developed highly successful international relationships and, more importantly, came to understand that North American brands and products can’t be successfully marketed internationally without understanding the market issues and how to be competitive in a particular market.
Risks of Doing it Yourself
WES’ typical client is a mid-size American company with $50-$400 million in sales. Its clients have a strong brand and sharp products and are in demand in the U.S. and other countries because they are uniquely American (or Mexican or Canadian). The clients also have the financial resources to cover necessary expenditures involved in the complexities of building their brands in an international market. Because they outsource the expertise and day-to-day export processes to WES, they reap the benefits of WES’ international experience.
With their greater populations, countries outside North America are prime targets for product sales. But, unlike large companies such as Coca-Cola and McDonald’s – who have done their homework to understand the complexities of other markets – many companies just assume their products will do well overseas.
Cisneros explains exporting requirements fall into five primary areas — financial, legal, sales and marketing, relationship development, supply management — with numerous issues within each.
For example, pricing strategy is a key factor for effective international sales and marketing strategy. Companies not only must have the resources to watch a particular international market to see what competitors charge, but they also must be able to analyze costs beyond the factory price. The product must be shipped to the other country, clear customs, pay duties, be delivered to a local warehouse with various costs involved there, and then delivered to the location where customers will buy the product. Reasonable margins must be given to everyone along the supply and distribution chain. Yet, it must still end up with a competitive price on the shelf, in comparison to a Japanese domestic product or other imported product.
WES works with North American companies on all aspects of supply management. For example, analysis must be done on the competitiveness of the product in international markets. Changes may need to be made to its product to make it competitive outside the U.S. market. It might need to be smaller, packaged differently, and ingredients might need to be altered because of import restrictions.
WES provides other supply management functions, such as ensuring the most cost- effective shipping and logistics arrangements for its clients’ products. Because WES moves a significant amount of freight internationally, it enjoys very competitive shipping rates.
WES also works with key importers to establish the most appropriate sales and distribution niche for product. WES works to build its clients’ brands in other markets by working with importers and agents to develop and implement long-term marketing plans. WES builds relationships with the companies that handle its clients’ products and makes sure the business works well.
They handle the reporting issues, ensuring effective information sharing among the agents and the supplier. Cisneros emphasizes the importance of this aspect of service, saying that most of the time, export programs fall apart because of a lack of good communication and reporting. As an international office, WES usually interfaces directly with its client’s president, CEO or the domestic vice president of sales and marketing.
Financial transactions are another key factor, and WES usually handles its clients’ international financing, including accounts receivable. Open-payment terms often don’t work well in international markets, when it sometimes takes 30 days to ship the product. WES’ proprietary financial systems are structured to benefit both the supplier and the buyer. They also watch changes in international currency valuations and seek ways to ensure their clients remain competitive.
Legal risks are particularly complex. Cisneros explains, “If your relationship fails, are you going to go sue in Japan or sue them in Chicago and then try to get a judgment transferred to Japan? Agreements take on a different meaning internationally in terms of defining rights or obligations.” He says it’s also not unusual to find an American company has gone international without registering its trademarks in other countries — only to find someone else has registered its brand. WES works with its clients and international trademark professionals to establish an international trademark policy and plan.
Performance-Based Contracts
WES’ goal is to build long-term successful international business for its clients. Because a brand and market can’t be built overnight, contractual agreements tend to be for longer periods. The fee structure is performance based.
WES begins an export management relationship by developing an appropriate action plan to meet a client’s international objectives. It includes strategy recommendations for target countries and covers all aspects of international development.
The company’s newly implemented transactional Web site will debut in September, making it possible to handle information sharing, and order and shipment tracking. But a supply management program is only as effective as the capabilities of the company in the other country. Since Internet applications and information systems are in different stages of adoption in various countries around the world, this is a multiple-stage development.
WES’ sophisticated, flexible approach and expertise helps companies increase the value of opportunities in international markets. They do it all – from A – Z.
Lessons from the Outsourcing Primer:
- The complexities of marketing a product in another country require expertise beyond the usual capabilities of a mid-size or small company. Outsourcing to an export management service provider is the ideal solution to ensure success.
- An effective export management program should be a total solution and include more than shipping, sales and advice.
- Where technologies and information sharing involve companies in other countries with different technology adoption rates, outsourcing is the ideal solution to eliminate technology difficulties.