Member Article

Key considerations when planning for international expansion

As business confidence continues to grow in the wake of the economic upturn, many firms are now looking to overseas trade or exportation as a possible avenue of growth. While expanding in this way can be hugely profitable, firms must be sure to put together a well-considered and robust business plan in order to succeed. Here are a few key issues that need to be addressed when devising a sound export strategy.

Account for exchange rate fluctuations

Failure to factor in changing exchange rates can have a negative impact on business activity; reducing profit margins and making forecasting extremely difficult. Firms can choose to adopt an agile approach, monitoring changes in exchange rates and adapting prices accordingly to preserve margins. If it is anticipated that end users will not respond favourably to inconsistent pricing or the firm has agreed long term supply contracts, it may be best to employ a local procurement strategy. Engaging with local vendors, where possible, will negate the impact of currency fluctuations.

Identify the best market

While many UK firms prefer to test the water with trade in the EU or USA where the language barrier is less of a problem and business customs are more familiar, there is a lot of money to be made in growing economies. Although the BRICS (Brazil, Russia, India and China) have traditionally provided excellent opportunities for expansion, global commentators expect momentum and net growth to shift in favour of the PINES (Philippines, Indonesia, Nigeria and Ethiopia).

However, aside from calculating the potential demand for its products and services a firm must also evaluate whether there is a sufficient gap in the market, how many competitors, if any, already operate in the market and how strong are their product offering and brand? Ideally businesses should pursue international opportunities in locations where the potential client or consumer base is high and existing competitors low. Entering into an already saturated market place in competition with locally established brands is likely to be of much greater risk.

Familiarise yourself with trade regulations and legislation

Trading in another country will require knowledge regarding local taxes and business legislation. Navigating these regulations effectively is vital if businesses are to build a sustainable business model and avoid penalties. Hiring and utilising staff with existing knowledge of the specific foreign marketplace can be hugely beneficial. It is important not to rush in; completing an internal audit of trading practices will help to ensure that the firm is fully compliant and will reduce the risks of delays further down the line.

Develop supplier partnerships

Logistics companies usually offer a lot more than moving a product from one location to another, often a good partner will have insights on how to navigate customs. Make sure that you utilise the expertise of your suppliers and invite them to add value to your working relationship. Not only will this will provide vendors with extra security, the process could provide foreign firms with important strategic insights. The emphasis here should be on forging open, productive and long term relationships with suppliers, with each both parties committed to a high quality and profitable operation.

by Nigel Crunden, business specialist at Office Depot UK

This was posted in Bdaily's Members' News section by Office Depot .