Exporting to the Far East
I happen to talk to entrepreneurs who are still very confused about how, starting from scratch, to export to the Far East (or, rather, the Asia Pacific), a very large area that is still under-exploited in relation to its potential.
I am still amazed to meet healthy companies, with a good product, that, in 2018 are still not structurally present in the Far East, which has 50 percent of the world’s population and the largest growth forecast for the coming decades.
I understand, however, that it is difficult to make important decisions on a subject that is not so well known, and so I have summarized my knowledge and experience in the form of an ideal path for a company that is now questioning how to proceed in dealing with Asian markets.
The numbers of the Far East
We all know that Asian markets are important, but reading the numbers provides insight above and beyond what we might normally assume.
Starting Situation
The company has a desire to increase its export share and is targeting the Far East. Company knowledge and experience in those markets is almost nil, in some cases there has been occasional sales in the past.
The first thing to do, trivial but not obvious, is to define the goal.
The goal to aim for is not to make a few spot sales, but to create a sales network, which is the basis for developing an ongoing market.
Asia is far away, culturally different, not the same as “exporting” to Europe(in my opinion it is almost ridiculous to call exporting sales to countries to which there is not even customs and the same currency is used). Asia cannot be reached by car a couple of hours, people do not have the same way of thinking and acting as we do, relationships follow different paths. I do not want to discourage anyone, of course, but it is incumbent on me to provide an objective picture.
Taking the company to export to the Far East is not a spot operation, it is an investment that aims to acquire value that will be a strategic asset; it must be done with conviction, knowing that the implementation will involve time and effort, but that the returns can be truly significant.
Any other approach, an impromptu fair, an occasional visit organized by some entity, is a waste of resources.
I want to be extremely clear at the risk of being a bit brutal. Even assuming (and not conceding) that your company is a leader in the Italian market, you should realize that it is going into a market that is 100 times larger and where it is a complete unknown. He is stepping out of his comfort zone of established relationships and mutual acquaintances to explore a new world.
To date, consumers in those places have still met their needs. They bought elsewhere; perhaps a worse product, perhaps less functional, more backward, or “just” less beautiful, but still they met their needs. Who knows, what you see as a mediocre product may be their flagship brand. If so, all the better for you, but replacing in their minds the old product with yours will still involve a lot of work; you will not find red carpets at the airport.
The right attitude is: no arrogance but no fear either; humility, willingness to learn and confidence in one's own means combined with awareness and perseverance.
Didn’t everything I wrote dissuade you? Well, then let’s start to see what can be done.
Self-Analysis: Knowledge and Skills
Knowledge. We rationalize, by writing them down, the information found in our business circle and industry knowledge.
Are competitors already selling in those areas? Do we know where?
SI: Well, the market for an imported product already exists and we can be confident that there will be a chance to carve out a space, if we are at least as good as our competitors have been.
NO: If we have definite reports of failed attempts by competitors; it is good to investigate them as much as possible, we need to understand whether the failure resulted from errors in approach or lack of market for the products. The latter is a fairly rare occurrence (it is usually at least a positioning error) but the hypothesis should not be ruled out: maximum lucidity and intellectual honesty, if the products are low-tech and low value-added in terms of design and/or image, it is better to give up, there are certainly more competitive local producers. Failure in the competitor’s approach, on the other hand, can be an asset, a mine of information about what NOT to do. In any case, we are looking for reliable sources, former employees, common suppliers/customers, anyone who may know more about that experience.
DON’T KNOW: Need information. We should allocate a budget now for an action whose sole purpose is to bring us useful information so that we can then decide on the next strategy.
Expertise. Parallel to the market analysis, we begin by asking whether the company is internally structured to meet the new challenge.
Are there resources at the sales/customer service (obviously speaking and writing at least English) to be allocated to follow up this market? Is the facility able to guarantee responses in an acceptable time frame? (indicatively we can respond to emails maximum in 24 hours and are able to send out an offer in 48/72 hours?).
Do we have sales and marketing documentation in English? What is the timeline for having additional purpose-built versions made for the target market and/or in another language (Chinese, for example)?
Let’s check that the website is up to date and ask if it is understandable even by laymen: our interlocutor may not be as technically literate as we are used to in Europe (note: it is not necessarily the case that the website is easily accessible from China anyway, but that is another matter).
Building the Sales Network
Agents
Let us immediately address a recurring and typically Italian topic.
I’ll make it very clear right now, if you really want to achieve the goal of creating a sales network, the approach through “agents,” meaning “I’m not paying you a euro, I’m giving you 4 catalogs but I’m promising you very high commissions,” doesn’t work.
This is not an “interested” belief; it is the simple and irrefutable reality.
Exporting to the Far East, in the first stage, is a pure investment, consisting of humble business development, where you go around getting to know and be known. Over a very large area! To go from Shanghai to Urumqi takes a 6-hour flight and you are still inside China; to go from Auckland to Perth takes 7 ½ hours.
The creation of a sales network at no cost is a pious illusion: the company does not invest in the commercial development of its brand/product, and should an agent do it – for free?
And in fact, in so many years I have never heard of even one company that has built its business success in the Far East through agents, and I challenge anyone to prove otherwise. For further study, I point out Lucilla Rizzini ‘s article,“Export commissions: 3 scenarios.”
In addition, often the end customer is not practical and/or does not want to deal with imports (including for currency and licensing reasons), and therefore relies on distributors. Often you need to give technical assistance, warranties, provide installation support…in short, believe me, agents (which exist in Asia but are local signalers needed to cover the vast territory), let your local partners handle them, your company needs structured interlocutors to be successful.
*To put it bluntly, I have many reservations about sales networks made up of agents even in Italy, if it is technical B2B, which is typical of the Italian SME. Sales come at the end of a lot of work: the product must be explained so that its qualities and value are appreciated; the customer must gain confidence in the company-product system. To do this incisively you need trained and dedicated people and it takes time before a return, all of which are incompatible with an agent.
Until I have evidence to the contrary, I will stand by my view, and that is, I do not believe that there is anyone who is willing to make this investment instead of the company that will then benefit from it.
Internal Resource or Temporary Export Manager
Having gathered the self-analysis information, we have a clearer picture, not definitive, but one that can make us more knowledgeable in dealing with a professional interlocutor and have a better chance of figuring out who is the best fit for our needs. The first choice to be made is the resource who will help us define the project in detail and who will then be responsible for its execution.
This is the time when an important choice arises: hire an in-house resource or rely on a temporary export manager.
If the choice will be to hire a resource to whom you will entrust the development of the area, presumably you will find him or her either experienced in the area or experienced in the area: unlikely to possess both characteristics (in which case he or she will definitely be a middle/senior figure).
Between a person with product experience and one with area experience I would prefer the latter because it is undoubtedly faster and easier to learn the product features, while being familiar with the mindset and locations requires years of experience.
For the same level of professionalism with a professional, hiring a cadre/manager dedicated full time to the project certainly involves a higher cost (RAL of 70-80K at least) and thus this choice assumes considerable confidence about rapid sales development.
Hiring a junior saves on salary (RAL 40K) but dilutes time and increases the risk of errors in strategic choices and execution (experience after all always pays off, either up front or by the foot of the bill).
My suggestion is to start with a Temporary Export Manager, and I will explain why.
While it is understood that the expansion project is strategic for the company, and it is therefore natural that the final set-up should see an internal resource dedicated to this function, I do not believe, however, that it is convenient to start out in this way right away, and indeed the use of a temporary export manager in the first phase of the project seems to me to be more appropriate and economical.
It is appropriate because the work of the first phase is different from the work at steady state. Business development is a difficult activity, different from ordinary business management, and not everyone is suited to start from scratch. The professional (who is certainly an expert in the area and has probably already dealt with similar products) will help you, with his own expertise, experience and network of contacts (of which the company lacks), both to define the project in detail (directing the action to the most suitable countries and channels, helping to fill the gaps in tools and business organization) and to implement it.
It is cheaper. In the development phase, the work will necessarily be discontinuous, may involve changes of course and adjustments, will be made up of missions and trade shows interspersed with downtime: an employee would not be fully utilized and therefore at the same cost as a junior export manager, you will benefit from the senior professionalism of a professional.
In the second half of the project, when there are now clear ideas about the line of development, a more informed search can be made for the corporate figure destined to manage the area. At this stage the professional will perform the final part of his task: he will be the technical support in the selection of the resource whom he will then work alongside by introducing him to all the contacts he has created and passing on the experience he has gained.
Mind you, the search for and introduction of an area manager will probably be the most frequent outcome, natural I would say, but let’s not take it for granted. What if the success is consistent? It may be time to consider bringing in a resident area manager, or to open a sales representative there.
In this case, already having a professional temporary export manager who has overseen the project will prove to be a great advantage because he or she can get this development underway immediately (and you will not have made a mistake by hiring a person later found to be unsuitable for the needs).
How to Find the Temporary Export Manager
Whether you opt for an employee or a professional, I would start with a search on Linkedin, the type of figure sought is among those certainly present and there are many good professionals.
The step you are taking is critical to the success of the project, invest some time by joining some groups dedicated to export, there are many, read the speeches and browse the profiles.
Then, eventually, move on to posting an actual ad, again on Linkedin or use a recruitment agency; do not skimp on selection, it will be the human resource that will make the difference between a success and a failure .
The I4D method
If you want to significantly boost sales, there is no better solution than to aim to export to the Far East.
I4D provides companies that want to internationalize with more than 15 years of experience in the field, proven relationships in almost all Asian countries, Poland and the U.S., a method honed over time, and customization to individual client needs.
You can learn more about how we work here, or contact us for a free analysis; in any case, best wishes for fruitful expansion abroad !
