SCA-PARNTER
EXPORT CONSULTING

GUIDE
Cross-Border Business Expansion to New Markets

Prepared by
Vincent Oluoch Odhiambo
MARKET EXPANSION STRATEGIES: SCA-PARTNERS ROLE

• Understand all possible market entry strategies and vehicles;
• Understand what the company wants and needs;
• Understand the culture of the local marketplace; what works and what does not;
• Explain to the company the pros and cons of various Market expansion strategies.
• Suggest alternatives;
• Identify high-quality potential partners for client and provide detailed information about them to the company
• Arrange business meeting agendas and introductions for clients, including potential partners, government, industry associations, legal, accounting, financial, and other relevant contacts;
• Suggest possible temporary office facilities; (virtual office or Local office)
• Follow up with contacts and exporters after initial introductions.

CONTACT US
Email: info

CROSS-BORDER BUSINESS EXPANSION
Indeed, expanding into a new market is a logical next step for many growth-driven entrepreneurs. Especially now, when connectivity is paramount, remote collaboration is the norm, and online shopping keeps rising in popularity. So what does all this mean for you? This means you can enter new markets without opening offices, hiring full-time local employees, or moving your supply chain. But you’ll have to make other decisions, too. From marketing to compliance, there are a lot of things you have to think through. So let’s unpack how you, too, can expand your business into a new market and excel internationally!
WHAT IS MARKET EXPANSION?
Market expansion is the process of bringing your products or services to a new geographic region, new target demographic, or new distribution channel. In other words: you pursue revenue opportunities outside of your operating “comfort zone.” And, boy, there are plenty of ways to scale a business — from "servicing“ your products to selling an international franchise of your brand.

THE BENEFITS OF BUSINESS EXPANSION ARE OBVIOUS, TOO!

• Access to new customer demographics  Risk and revenue diversification
• More sales and profits
• Lower competition compared to the domestic market
• Ability to become the “first-mover”
• Access to more investment opportunities and capital
• Extra tax and compliance benefits

THE FOLLOWING RISKS OF CROSS-BORDER BUSINESS EXPANSION:

• Bad timing: expanding too late or too early
• Budgetary constraints: lack of financing or low cash flow
• Regulatory and compliance red tape
• Lack of market knowledge leading to marketing flops
• Subpar local distribution strategy
• Low local market knowledge

That being said, if you are bent on breaking into the new market, you’ll find your way around those risks.

HOW TO EXPAND A BUSINESS INTO NEW MARKETS AT WARP SPEED AT A LOW COST.
For ages, cross-border business expansion was strictly for the “big guns” – cash-heavy enterprises with thousands of employees. Digital changed that. You can now get your products or services in front of millions of people without having any physical footprint in the market. A localized website, strong social media presence, and a distributed marketing team can help you enter a new market at cruising speed. But…for that to happen you first need to figure out where you should take your business and how you can prime it for local success. Our set of 6 solid tips to expand into new markets explains how to do just that!

1. IDENTIFY YOUR NEXT GROWTH MARKET
   Market expansion can be cross-border, cross-channel, or cross-product — meaning you have a lot of choices. But which way should you go? To figure out which new market(s) to enter, you need to analyze:

• Target demographics
• Market conditions
• State of competition

One good framework for doing preliminary market analysis is MARACA short for Market Availability, Real-time Analysis, Customer Addressability.

But MARACA isn’t your only option. Other popular frameworks for market expansion analysis include:

• Ansoff Matrix
• BCG Growth-Share Matrix
• Value chain analysis

Also, many smaller companies also make international market expansion decisions based on cultural and geographic proximity. Breaking into an adjacent market is easier, as you don’t need as much product adaptation or localization — or an expensive new office, for that matter! But be warned, you might not get a real “taste” of internationalization by moving into the closest turf.

1. ANALYZE THE COMPETITION
   When doing target market analysis, it’s easy to lean towards bigger, more promising markets. But that’s where competition is tough, too. If your niche already has a major competitor that local customers love, you’ll need more resources to stand out. This often translates to higher customer acquisition costs (CAC), discounted pricing (and lower profit margins) and heavy investment in local operations. Therefore, it pays off to go into a smaller, but less competitive space instead – and get the “first mover” advantage there. But…this can get risky, too.

So as you do your research, ask yourself:

• How can I do better than a local well-known competitor?
• Is there a reason why no one else pursues this high-margin opportunity?
• Can I grow my global business remotely at early stages to offset the costs?
• How much will establishing local operations cost?
• What strategies could help me rapidly build local brand awareness?

1. CONSIDER LOCAL MARKET QUIRKS
   The deeper you dig into your target market research, the more curiosities you’ll uncover. So it’s easy to overlook small, but important go-to-market nuances such as customer payment preferences. As you think over how to enter new markets, be sure to cover the following bases:

• Most profitable target demographics
• Consumer price sensitivity/price localization
• Payment method preferences
• Local trends and cultural references for successful marketing.

A good move at this stage is to engage local consultants to help you figure out all of the above.

1. ESTABLISH A VIRTUAL OFFICE FIRST

Market expansion doesn’t mean going “all in” all at once. Digital technologies gave us this wonderful opportunity to expand into new markets without opening offices. Instead of expanding physically to a new market, you can set up a virtual operating hub first to offset some of the go-to-market costs.

A virtual office enables you to:

• Obtain local registrations and remain compliant with regulations
• Expand your business by hiring freelancers , outsourced export managers and independent contractors.

HOW TO OPEN NEW VIRTUAL OFFICES
1. Decide if you want to register a local legal entity or open a representative office-In others – getting a small business registered can be way too complex and expensive. In that case, you can set up a nominal local office which is essentially a digital hub for fielding with local requests.
2. Get a virtual admin setup-There are plenty of providers on the market offering virtual office services. Most packages include a local mailing address, document scanning, virtual phone services, and other admin support add-ons. Again, you may not need all of this, so shop around to find the package that works for your goals and your wallet.
3. SCA-Partner offers dormant virtual office services include: a business address and telephone for website & invoicing purposes only, no mail forwarding and message services.
4. Figure out local compliance-Cross-border market expansion gets complex when it comes to taxation. Specifically, you may be subject to collect and remit local sales and use cases (e.g. VAT ) and get some of your business profits taxed in the new market. Consult with a tax advisor to get a deeper take on your obligations.

HOW TO HIRE INTERNATIONAL FREELANCERS
You need “local people” to understand the business climate, culture and consumer preferences in a new market. As an added bonus, they can help you sort out some important to-dos like product localization, document translations, marketing, etc. In case you are not ready to hire an export manager in your company you can always use SCA-Partner export services and have an export specialist working for you.

• Required roles: Think in terms of specific, scoped tasks, monthly commitments, and work outcomes (e.g. results or specific deliverables)
• Payment rates and terms: Determine how you will pay your local hires. Consider local payment methods, bank fees, and average market rates.
• Contracts: Ensure that your contract work and invoices comply with the local regulations. Most experienced freelancers can give you some insider info on how these are handled locally.
• Onboarding and team management: Consider how you’ll help new hires get up-to-speed on your project and remain engaged for the long term.

Another handy solution for all of the above? Our Export Manager Services Teams is a digital workforce management platform, designed for hiring, onboarding, managing and paying remote global talent. For a flat-rate monthly fee, One of our team will serve as your local export consultants, who will set up your distribution channels, get your sales going and expand your coverage.

1. EVALUATE DIFFERENT MARKET EXPANSION STRATEGIES
   You know your target market in and out and are ready to roll with the help of your international team. What’s next? Shape your research into a go-to market plan. The popular ways to enter a new market include:

The popular ways to enter a new market include:

• Direct export: Your core operations stay put, while you set up a local “front office” in the new market to handle business development, marketing, customer service, etc.
• Franchising: Sell a local entity the right to launch your brand using your business system. In return, you get a fixed or percentage-based payment
• Strategic partnership and co-branding: Enter a new market by partnering with a local player for product distribution or marketing
• Subsidiary: Setup operations in the new market. This is the most challenging, long-term strategy that only makes sense once you’ve tested the waters.

1. MIND THE COMPLIANCE
   Compliance is the least thrilling part of expanding a business into new markets. But it can prove an expensive one to overlook. So make sure you understand how to break into new markets without breaking any legal or regulatory rules.

At the final prep stage, research:

• Local taxation: Factor in sales taxes for products/services sold. Also, you’ll need to pay local employment taxes if you hire full-time employees over contractors.
• Product restrictions and regulations: Some countries regulate imports of certain product categories (e.g. agro produce). Or ban the usage of certain substances such as cosmetics ingredients, which your home country may allow
• Customer data protection: Customer data privacy laws differ globally and you must ensure that you are ticking all the right boxes here — or pay a steep price.

TIME TO GO GLOBAL

• Market expansion is a tantalizing prospect for many entrepreneurs. But as the saying goes, “A goal without a plan is just a wish.”
• To successfully expand your business into new markets you need to have a solid go-to-market plan. Calculate your serviceable available market (SOM), scope out the local competition, and estimate the costs of customer acquisition.
• Then build a local “support network” of consultants and independent contractors who can help you navigate the compliance complexities, understand the cultural nuances, and devise the best strategy for market conquest!

ADVANTAGE & DISADVANTAGE OF MARKET EXPANSION STRATEGIES

1. Appointing an agent
   The agent is your representative and generally does not own the goods, but takes a commission on sales.

• Advantages: Reasonably flexible. Often no payment is made until sales are made. An agent can work with some service export
• Disadvantages: The agent is always fearful of being cut out when a business becomes profitable. The agent may have competing interests. Sometimes it is difficult to break the agency arrangement

1. Appointing a distributor
   The distributor imports goods and owns them from that point. The distributor also arranges distribution and marketing.

• Advantages: You get paid on delivery of goods. A distributor often has an existing distribution system, customers, sales staff, storage, advertising, servicing, etc.
• Disadvantage: You lose control of the goods. The distributor may have competing products and may not promote your products adequately. The distributor may not have national coverage. Can you restrict distribution to regions? It is difficult to control intellectual property.

1. Set up a local company to manufacture or act as a sales subsidiary
   The entity can be wholly owned or some form of joint venture. A local business is registered and you invest in the business and control it.

• Advantages: Where you have majority control, they are in charge of all decisions and make them in the best interest of their products or services. Export can maintain branding, intellectual property, quality, servicing, etc. This is a good arrangement if you have established buyers already.
• Disadvantages: Some countries do not permit wholly-owned operations or restrict investment. It is expensive to set up and profits may not flow for some time. There are no established networks or distribution. Lack of familiarity with local procedures and norms is a barrier.

1. Direct selling to major customers
   The end customer imports directly in their own name. Selling online is a variation on this. Large retail operators may import direct and market under their ‘own label’.

• Advantages: This works well with bulk commodities or where there are few major end-users. Virtually no restrictions exist about how you expand the business from here and it cuts out middleperson costs. There are no significant legal issues.
• Disadvantages: Nobody exists to take your side in disputes or to take an interest in following up payments. Usually there is no long-term commitment to continue buying. You have no service staff to sort out local issues.

1. Acquiring a local business
   It is possible to wholly buy or partly buy a local business. This is a shortcut to setting up a local company.

• Advantages: With the right acquisition, you get established distribution systems, experienced staff, storage, branding and control of intellectual property (and possibly acquire some). This can work with some service businesses such as tourism or retail.
• Disadvantages: It is not always possible to have the same culture and networks might be tied to individuals. You inherit any staffing or business problems. This requires a lot of due diligence to know precisely what you are taking on.

1. Licensing
   Technology, or know-how, is sold in return for a fee or commission on sales.

• Advantage: Low investment is required and if it works well the money just keeps flowing in.
• Disadvantage: you could lose control of intellectual property. A good auditing system is needed to ensure that you are being paid correctly. This can be hard to enforce or could be subject to piracy by the new licensee. Licensing may require a significant investment to get the technology working properly.

1. Franchising
   A complete package is put together with manuals and instructions for every procedure. Includes branding, methodology, equipment, procedures, staffing, servicing, quality control, etc. The package is licensed or sold to franchisees or to a master franchisee that then controls the national or local network, In return for all of this, fees are paid. Some up-front; some as a percentage of sales.

• Advantages: This can work well for service businesses where what is being sold is know-how. Franchisees can own their own business and have a vested interest in making it work well. So you capture a lot of drive. This can also tie in supply of inputs, advertising materials, etc. You can realize economies of scale from franchises operating in other countries, plus the marketing benefits of wide distribution.
• Disadvantages: The business invariably needs adapting for different markets and different languages, standards, etc. Because disputes are common between franchisors and franchisees, dispute resolution mechanisms are required. It can be difficult to ensure payment of commissions and to ensure all operators abide by the rules. It is important to continue to add value through innovation; otherwise you can lose franchisees that may go into competition.

1. Forming a joint venture
   An agreement is signed whereby a new business is established with inputs from you and from a local entity. Contributions can include cash, or know-how, or business premises, distribution networks, staff, etc. Ownership and profits are divided according to agreed formulas, which are typically based on percentage contribution to the joint venture.

• Advantages: This can be a way of entering the market with relatively low capital required, where you supply the know-how or product and their partner supplies the local premises and networks. You can split ownership so that the majority is locally owned, but no one shareholder (apart from you) has more than perhaps 25%. You get access to existing local networks and contacts and exert some control over the business and quality, branding, servicing, intellectual capital, etc. you have some control over getting paid and a better understanding of what is going on in the market.
• Disadvantages: A local joint venture may not do a good job with marketing or delivery of their networks, etc. You inherit their local business image, which is fine if it is a good image but difficult if it is a bad image. There is some control over getting paid and a better understanding of what is going on in the market.

1. Selling online to consumers
   Products or services are advertised online, orders are taken online and physical products are delivered through the mail or via local warehousing. Or, in some cases such as translation services, the product can also be delivered online. Tourism packages, travel, accommodation and ticketing also lend themselves to this kind of marketing.

• Advantages: Selling online is generally suitable for a range of relatively low-value products such as books, electronics, clothing, toys, etc. But the technique is growing rapidly. This enables you to sell directly to the end user (consumer) with no middle-people taking profits along a distribution chain. Payments can be ensured with systems such as PayPal.
• Disadvantages: Online sales typically involve numerous small transactions and a lot of servicing with individual consignments. After-sales servicing may prove difficult. Online sales require good technology and communications. You have to handle all disputes yourself – maybe in a foreign language. Online sales are unsuitable (in most countries) for distributing perishable items. (However, Japan and several European countries have effective and efficient systems for perishable distribution.)

In many markets, local commercial law protects distributors:Export Consultancy firms (SCAPartners) need to brief themselves on the local laws that apply to distributors and agency agreements, and laws applying to local investment and setting up joint ventures. They should be familiar with the terms and conditions of such agreements, and determine the norms that apply within the market. They need to be aware of legislation related to restrictive trade practices, price fixing, monopolies, money transfers, abuse of dominant market positions and similar issues. Cultural factors will also play a role. Ideally, this information will be available as handouts to clients. Export Consultancy firms (SCAPartners) should also have lists of legal firms, accountants and business specialists to whom they can refer clients for more expert and specialized advice on setting up a business. When advising sellers on a market entry strategy, the Export Consultancy firm (SCA-Partners) should place all the facts before the client and make recommendations based on knowledge of both the seller and the local market. The participants in the transaction take the final decision. If business arrangements deteriorate, for whatever reason, the Export Consultancy firm (SCAPartners) should not be in a position to be legally liable. A combination of factors governs the options available to an exporter. The Export Consultancy firm (SCA-Partners) must take the following into account when advising on entry strategies.

Market Characteristics

• Local legislation;
• The need to provide local after-sales service;
• 24-hour delivery demands;
• The need to maintain local stock;
• Regulatory standards and practices;
• Nationalistic attitudes;
• Availability of suitable distributors or agents.

Resources available to the exporter
How much is the exporter prepared to invest? An exporter with cash resources could consider creating a subsidiary sales company, appointing a resident sales representative or an acquisition. These options are not available to the vast majority of small exporters due to resource limitations. The exporter also needs to consider how much ongoing support the import business is going to need and the cost of providing this support.

Local expertise
Local expertise in a particular line of business may be hard to find. The most attractive distributors may be working for the exporter’s competitors. The exporter may be forced to open a local sales office or appoint an inexperienced distributor and invest in training If the exporter is short of cash, it will be difficult to invest in an on-the-ground business. The exporter will need to rely on an agent or sell directly to end-users. Using agents or distributors, however, brings the risk of losing control over how the business is developed and operated. There may also be a leakage or loss of intellectual property. These are difficult decisions and tradeoffs that an exporter has to make.

CHARACTERISTICS OF MARKET EXPANSION STRATEGIES

Using an Agent

An agent does not take title to the goods. Agents act as ‘matchmakers’ between buyers and sellers and take a commission on successful sales. In some cases, they may be paid a salary or retainer. From an export consultancy firm (SCA-Partners) perspective, agents are easy to find.

It is difficult to know whether any one agent would make a good representative. The main characteristics of success appear to be drive to succeed and tenacity. Other characteristics include: a good financial record; referrals, especially from buyers; other products that the agent represents; the size of the agent’s operation; and whether they handle competing products. Does the agent have too many products to do justice to another one?

Agents do not require a big investment by the exporter. However, they generally do not offer after-sales service or other services that buyers seek. As always, the final decision should be left to the exporter, who must feel comfortable with the agent.

Clients should be advised to negotiate proper agency agreements. Note that in many countries, agents have legal protection against dismissal or the dissolution of an agreement. Exporters who have signed an agreement in haste may find it hard to extract themselves, if they wish to develop the business in another way, such as a joint venture.

Most agents will demand exclusive rights to sales in the whole country and demand commissions on any sales whether or not they helped initiate the sales. This can cause tension and should be considered before the agent agreement is signed. Clients should be advised to be very wary about giving exclusive rights to market over the whole country. It can be very restrictive for the exporter. Often agents do not have the networks to market adequately over a large area. Different agents for different territories enable the exporter to measure their relative efficiency.

Using Distributors

Using distributors as a business partner is probably the most common market entry strategy, particularly for exporters of goods. They have local market knowledge and selling skills unique to the local market. Distributors provide market coverage at low cost and low risk. With the correct distributor, the exporter can have a strong presence in the export market.

The bulk of work will be identifying distributors for exporters. Research to identify potential distributors and business partners, followed by an itinerary for the exporter to meet them, is arguably the most valuable service provided by an export consultancy firm (SCA-Partners). A personal visit to the market to identify distributors is the primary method used by successful exporters.

A distributor purchases and takes title to goods, compared to an agent who does not. Distributors sell goods and provide services such as warehousing, delivery, credit, order processing, technical, after-sales and repair services, and spare parts. They make a profit by selling to a third party at a mark-up. The mark-up depends on the product and market conditions.

Characteristics of a successful distributor-exporter relationship include:

• The level of trust between the two parties;
• Clearly defined business parameters, for example, agreed sales volumes;
• Frequency of market visits, particularly those that support the distributor’s sales efforts;
• Frequency of other forms of contact;
• A genuine effort to understand the distributor’s problems;
• The level of joint decision-making.

Disadvantages

A distributor blocks the exporter’s direct experience of the market. The exporter may have limited or no contact with the distributor’s customers. In addition, the exporter has no permanent presence in the market, and limited control over the distributor’s market strategy, which is a disadvantage when supplying a branded product. Even if there is reference to a marketing strategy within an agreement, in practice there may be very limited control. Other disadvantages include:

• Distributors’ loyalties always lie with the customers;
• They may be less growth-oriented than the exporter;
• Distributors serve multiple suppliers; the exporter will be one of several. The exporter will have to compete for attention and resources;
• They may be short of finance;
• They may lack marketing and management skills and require training and assistance from the exporter

What do distributors worry about?

Distributors worry that the exporter will no longer need them when sales reach a certain level. They also worry that an exporter will supply some customers directly, bypassing them and reducing their profit. They worry about the lack of long-term commitment on the part of the exporter. These worries encourage the distributor to allocate a minimum amount of resources to the exporter’s product. Both parties, exporter and distributor, must make money from the relationship.

The exporter, on the other hand, must ensure that the distributor allocates the maximum amount of resources to the development of the market. The exporter has to encourage the distributor to spend money on developing the exporter’s product.

There is an obvious tension between these objectives. The concerns may not be articulated, but they will always be in the distributor’s mind.

The primary cause of a deteriorating relationship between the two parties is lack of communication. This issue can be resolved by the exporter implementing a distributor support programme which commits the exporter to the success of the distributor.

Finding distributors

The relationship between the distributor and exporter is created and developed over time. Export consultancy firms (SCA-Partners) may have to advise exporters how to implement a distributor support programme, designed to develop and improve relationships with distributors.

Finding good distributors is hard work. In many instances, they work for the exporter’s competitors. How can a busy Export consultancy firm (SCA-Partners) afford the time? There is no simple answer. In terms of priorities, if an exporter is at the point of appointing a distributor, there are few more valuable services that an Export consultancy firm (SCA-Partners) can provide than the short list of well-vetted potential distributors or other potential partners, such as joint venture partners.

The following methods will help identify distributors:

• Observe how competitors operate in the market and approach some of their distributors;
• Speak to major customers or potential customers, buyers and purchasing personnel in the marketplace and ask for their recommendations. After a number of such calls, the same distributors will be mentioned;
• Meet potential candidates at a trade fair;
• Check the Internet by using the most popular search engine in the market territory;
• Check trade directories. But do not exclusively rely on trade directories as a source. Many entries in trade directories are paid for. A trade directory will give a distorted view;
• Check trade fair catalogues. They are a rich source of information;
• Consult with a chamber of commerce and specialized trade associations;
• Check specialized trade magazines – another rich source of information.
• Hiring the services of a consultancy firm ( SCA-Partner’s Partner Search plus Virtual Meetings)

This process takes time. Export consultancy firms (SCA-Partners) will need at least four weeks’ notice to identify a group of suitable distributors for an exporter, interview them, and set up an itinerary for the exporter. Be methodical. Rushing the process results in mistakes, including overlooking vital pieces of information. Remember that chambers of commerce or trade associations will only recommend candidates from within their members. In some countries, membership in the chamber is compulsory for all businesses.

Selecting distributors
An exporter should never be introduced to a distributor or importer until the Export consultancy firm (SCA-Partners) has vetted the company. The exporter should always visit the potential distributor’s offices and place of business. A walk around an office, factory or warehouse may be all the exporter needs to do to get a picture. The process of appointing a distributor could potentially be completed within hours. A mistake could take years to unravel.

Export consultancy firm (SCA-Partners) may take into account the following when advising their exporter clients:

• Very large distribution companies are not always the ideal choice. Consider small and medium-sized companies that may try harder;
• Can the distributor give sufficient attention to the exporter’s product? This is a reason to select distributors with few products;
• Avoid companies that handle competing products, unless the exporter is trying to dislodge a competitor;
• A distributor that supplies two or three key major accounts of interest to the exporter is a prime target;
• Distributors that handle complementary products or services are prime candidates;
• Referrals and recommendations from buyers and distributors of non-competing products are good indicators of a distributor’s reputation and standing;
• Attach a high premium to market knowledge, technical capability (in the case of engineering and technical goods), enthusiasm, genuine commitment and drive for success.

Supplying background information

Export Consultancy firm (SCA-Partners) should provide the exporter with a short brief on the distributor prior to making the introduction. If tailored, paid research is conducted, spend more time supplying background information. It is time consuming, but extremely valuable to the client.

There will always be gaps in available information. Sometimes information is freely available. Often it can be extremely difficult or impossible to get. It depends on the market, cultural issues, and nature of the business. Many are private companies and will not disclose financial information. References and referrals from major end-users and potential end-users of a product are valuable.

Background information includes:

• The distributor’s geographical area and market segments. For example, in a large market, such as Sub-Saharan Africa, both the Export consultancy firm (SCA-Partners) and the exporters should be very sceptical about claims that the distributor represents the whole continent. Each country will be different.
• What products and accounts does the distributor handle?
• Who are their key customers or outlets serviced? Are their trade contacts impressive?
• References or referrals from end-users or customers are some of the most valuable pieces of market intelligence available.
• What size is the distributor in terms of turnover? Get information about its history and growth. A distributor in a new product range typically is willing to share this information.
• How many sales people are employed? How experienced are they? Will they need training by the exporter?
• What warehouse, storage, or showroom facilities does the distributor have? Visit and confirm. It is the exporter’s responsibility to explore financial arrangements, forms of payment, form of commission, and period of appointment. With time, export consultancy firms (SCA-Partners) will gain experience of the norms in the market and should be in a position to give the exporter some guidance.
• How will the exporter measure the distributor’s performance?
• What is the exporter expecting from the distributor? How much business and in what time frame?
• The exporter should have a clear exit strategy if sales targets are not met and the relationship does not work. This is not always easy. Local laws may make dissolving the relationship difficult. If in doubt, seek local legal advice.
• Many countries have directories with information about turnover, company size, products handled and companies represented. Do not make a recommendation solely on this information, as it could be incorrect or misleading. Seek corroborative evidence. Financial information is available in the Company’s Offices where companies are required to register by law.
• Check the distributor’s website if it exists. Check references to the distributor using local Internet search engines.

If most of the information above can be provided, the exporter will be in a position to make informed decisions. The exporter will need a formal legal agreement with the distributor.

Distributor support programmes

A distributor support programme, organized by an exporter, supports a distributor’s efforts in the marketplace. Activities are designed to motivate the distributor and build a foundation for a good relationship based on mutual respect. These programmes can develop distributors, but take time, effort, attention to detail and investment in the relationship. Frequently this type of support to distributors is entirely overlooked. A distributor support programme contains some or all of the following elements.

• Cost sharing. A commitment to a programme of activity where the exporter agrees to pay some of the promotional costs is an excellent way of generating cooperation and ensuring the product gets attention.
• Communication. A commitment to a quick response to queries. The exporter might commit to a 24 hours response time. If the export markets are in the Middle East or parts of Africa, where the weekends are Thursday afternoons and Fridays, the exporter might agree to offer a weekend service. In Asia, exporters might consider shorter response times.
• Keeping the distributor up to date. Inform the distributor about new products, changes to products, shipping and personnel changes within the exporter company. This helps promote the concept of a team.
• Establishing trust. One of the main contributors to distributor dissatisfaction is where the exporter circumvents the distributor and deals directly with customers in the distributor’s territory. The exporter might agree with the distributor to reserve one or two major customers for direct contact. However, this is rarely a good idea and usually contributes to undermining the relationship.
• Trade literature and brochures. Support the distributor’s sales effort by providing catalogues, sales brochures and promotional material. Consider providing print film, photos and layout for brochures and catalogues that can be overprinted in the local language. Frequently brochures and sales literature are downloadable from the web.
• Website. The exporter’s website should contain information on the distributor. Enquirers should be referred to the distributor’s website.
• Market visits. A visit to the distributor should take place at least once per year. The occasion should be used to discuss market trends, the activities of competitors, customer needs, new product developments, etc. The exporter should take the opportunity to accompany the distributor’s sales representatives on visits to key customers.
• Pricing. A distributor who is making money is motivated. Price the product to provide a genuine financial incentive.
• Asking for advice. Actively seek the distributor’s opinion on topics such as market trends, product preferences and design changes.
• Appreciation. Show appreciation for a job well done. Holding a sales conference in an attractive location to which the distributor and distributor sales personnel are invited is an example.
• Training. Providing training for the distributor’s staff, such as sales representatives and service engineers.
• Visits from the distributor. The exporter should actively encourage the distributor to visit the exporter’s plant and should be treated well on such visits.

Sales Subsidiary

A sales subsidiary might be an option for some exporters where the following conditions apply:

• When the exporter cannot locate a suitable distributor. In specialized industries, this occurs frequently. There may be no other choice than to consider creating a sales subsidiary;
• When sales or potential sales within a market are sufficiently substantial to enable the exporter to cover costs and make a profit, a sales subsidiary may be the best option

Direct Selling

In direct selling, there is no middle-person or broker in the supply chain. The rapid growth in Internet shopping is a form of business-to-consumer direct selling.

Direct selling is common in the engineering, electrical, electronic industries and with most commodities. It is often used when the exporter has a small number of customers in a market with large buyers. The export consulting firm (SCA-Partners) needs to understand when direct selling is possible and when it should be recommended.

Major department store chains in developed countries may not purchase goods through a third party. Margins may be so tight that a commission makes the product uncompetitive or reduces the store’s profit margin.

Large engineering companies, original equipment manufacturers and major department store chains may insist on visiting the exporter’s manufacturing facility for quality control and other issues. This vendor inspection or vendor audit could involve a visit from one individual or a group of individuals composed of technical, financial and transportation specialists. They are likely to check on purchasing systems; quality control procedures; traceability of raw materials; logistics; security of the purchaser’s proprietary information (for example drawings and designs); and backup manufacturing facilities. Some multinational engineering companies publish details of what they expect from a new vendor audit. This information can be found on their websites and is worth consulting.

Commodity traders and brokers will deal directly with the exporters and suppliers. Frequently they employ their own quality control personnel to check on products before shipment.

Acquisition

Large exporters often consider acquisitions. Export consulting firms (SCA-Partners) are unlikely to become involved in this process, though in some circumstances it is an option for achieving market access. Buying an existing business brings instant access to networks plus skilled staff. The business does not have to be large; it can be a small or medium sized enterprise. A challenge is for different cultures to work harmoniously together. Investing in training and learning on both sides is probably necessary.

Franchising

Franchising is a form of marketing and distribution in which the franchisor (the exporter) grants the franchise to an individual, company or a group of individuals (the franchisee). This is the right to run a business selling a product or providing a service under the franchisor’s (exporter’s) business format. The business is identified by the franchisor’s (exporter’s) brand or trademark.

Business procedures are documented, patented or copyrighted where possible, trade secrecy agreements are signed and the franchisee pays an up-front fee and a percentage of profits. Franchise agreements are formal and detailed by the nature of the business model.

Entering a market by licensing technology to a licensee or by franchising is an option available to many companies. It is an interesting model for service companies to deliver their service at a distance. Franchising is probably best known through the fast-food industry, but other successful models include entertainment, training organizations and dog-grooming services.

Various models exist for franchisors to enter a market. They can sell to a master franchisee that then controls the whole network within the country. Or they can fill this role themselves. Basically franchisors want to harness the energy of self-employed owners working to ensure the individual franchise operations are successful and profitable.

Joint Venture

A joint venture is a cooperative arrangement between two or more individuals or businesses in which each agrees to share control, profit and loss in a specific enterprise. There are many variations in the way this can be set up, but frequently it is a separate business entity, separated from the other business activities of the partners.

In international trade it is a common vehicle where the local party provides knowledge, contacts, perhaps business premises and staff. The other party (the seller) provides intellectual property or knowledge.

From the perspective of an export consulting firm (SCA-Partners) , finding a company with which a joint venture can be developed is a similar process to finding a distributor. In some circumstances, the joint venture is developed with companies that might have been distributors except that the seller wishes to have more control over the process.

Before starting a search for suitable joint venture partners, the export consulting firm (SCAPartners) needs a thorough brief about what the exporter is looking for. The same processes apply for identifying distributors, drawing up a short list of potential candidates that meet the specifications and making the introductions.

The client needs to seek professional legal and accounting advice when creating the legal framework for the joint venture.

Online Selling

Online selling is burgeoning. Initially it made its mark with the Amazon site selling books, but online selling is occurring in every commercial domain. Commodity trade has largely moved online, supplemented by quality testing and audit procedures.

Online stores are particularly suited to small businesses operating in a niche market or offering well-defined products and services, which can be set out in a catalogue. An online store contains three main components:

• A product list or catalogue with information, pictures and prices about products;
• A product selection mechanism usually referred to as a shopping cart or shopping trolley;
• An ordering and payment mechanism. Orders are sent by e-mail to the merchant and several methods of payment can be offered, typically by credit card or PayPal. Sellers can also receive e-mail orders while continuing to use traditional payment methods such as money order or cheque payments. It is crucial that the online business is protected from risks such as hacking or viruses. It also needs to provide clear consumer information on processes such as ordering and payment, returns, refunds, warranties, and privacy and security.

Some of the advantages of an e-store include:

• It is possible to promote products, services, organization, events, ideas or professional skills;
• The store can work 24 hours a day, 7 days a week;
• An unlimited number of people can be shopping simultaneously;
• There is no need to maintain a large staff;
• Both the local and international market can be captured without the need for offshore premises;
• The catalogue of products and services can be expanded as the market demand develops;
• No rent or utilities expenses are necessary, just web hosting and web maintenance;
• No shipping costs are involved for selling downloadable items such as e-books, music, documents and videos.

Some of the disadvantages include:

• Nobody knows the e-store exists. Offline and online Internet marketing is needed. Offline marketing includes advertisements in newspapers and other traditional advertising channels. Online marketing includes advertising on social media sites or through search engine companies.
• Some people are afraid of buying online and are reluctant to give out credit card details.
• Local and international clients tend to be demanding in terms of product inquiries.
• Customs officials may reject some items resulting in problems for both buyer and seller.
• Competition from other online sellers can be intense.
• Having an online shop requires constant updating, technology development and enhancement, research of competing sites and much more.

Most online sales are unrecorded in official trade statistics because systems are not in place to capture relatively small transactions.

E-marketplaces

These online trading communities may provide sellers with greater access to suppliers and buyers, a more open trading environment, and the potential to expand their business in a more controlled way than via the open Internet.

MARKET EXPANSION STRATEGIES: SCA-PARTNERS ROLE

• Understand all possible market entry strategies and vehicles;
• Understand what the company wants and needs;
• Understand the culture of the local marketplace; what works and what does not;
• Explain to the company the pros and cons of various Market expansion strategies.
• Suggest alternatives;
• Identify high-quality potential partners for client and provide detailed information about them to the company
• Arrange business meeting agendas and introductions for clients, including potential partners, government, industry associations, legal, accounting, financial, and other relevant contacts;
• Suggest possible temporary office facilities; (virtual office or Local office)
• Follow up with contacts and exporters after initial introductions.

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