With 95 percent of the world’s consumers located outside of the United States and foreign competition increasing domestically, selling internationally can help U.S. companies of all sizes increase their competitiveness and achieve real business growth. All too often though, new-to-export companies will spend precious time and resources developing markets that may not offer the highest growth potential. By investing the time and effort upfront, you can position your company for success in the global marketplace by developing an export plan.
New-to-export companies should give consideration to two points when thinking about expanding internationally: (1) your company’s export readiness, such as management support for going global, the resources (time, personnel, and financial means) needed to develop a new market, and a realistic understanding about the length of time it takes to develop a new market, and (2) the export potential of your product or service.
An export plan can help companies answer these questions. An export plan is a business plan for your international business, and it will become part of your company’s overall business plan. Just like a business plan, an export plan helps you understand the facts, constraints, and goals around your international effort. A written plan provides a road map for your business to help your company respond more efficiently—and confidently—to international inquiries, can help you optimize your business operations for exporting, and may be required if you seek financing to develop your export operations such as a working capital loan. An export plan will take into consideration the following elements: the export potential of your product or service, identify potential customers, export pricing, production, financing, and resources.
Four Basic Steps to Create an Export Plan
1. Identify the export potential of the good or service to be exported:
Generally, the success of your company’s goods or services in the U.S. market is a good gauge as to the success of your product or service overseas. Another factor to consider is the uniqueness of your product or service. If your product is a first of its kind or technologically advanced, there is a good chance this will translate to success overseas.
2. Identify target markets:
Where can you successfully sell your product? Here, you will consider which countries have a demand for your product or service.
- What is the competitive environment in your target market?
- Does the target market require product registrations or certifications, is a license required for export?
- What about Free Trade Agreement countries? A Free Trade Agreement is an agreement between two or more countries where the countries agree on certain obligations, which typically include reduced tariff rates and improved market access. The United States has 14 Free Trade Agreements with 20 countries. These are often the first export markets for U.S. companies because of the benefits they confer. For example, Canada and Mexico are among the top U.S. export markets and Pennsylvania’s top two export markets. With English being one its official languages and its geographical proximity, Canada is the first export market for many first-time exporters.
3. Decide on a pricing strategy:
Conducting a landed cost exercise will help you determine your competitiveness in a target market. The landed cost—or total delivered cost—is the total price of a product once it has arrived at a buyer’s door. At a minimum, the landed cost includes the original price of the product, marketing, all transportation fees (both inland and ocean or air) plus duties and taxes. Once you add these costs to the original price of your goods, can you sell your product in the target market? The landed cost of a product exported from the United States to Brazil, for example, can be double the original price.
4. Define a strategy to find foreign buyers:
To find foreign buyers, you will need to understand your customer profile and what marketing and distribution channels are needed in each market to reach your customers. Market entry strategies can include direct sales to an end-user, cross-border eCommerce, indirect sales using a local sales agent, representative, or distributor, or any combination of these.
Keep the plan simple and dynamic. Initially, the plan only needs to be a few pages long. As you gather additional information and insights, the plan will become more detailed. A sample export plan can be found here: https://www.trade.gov/sample-export-plan.
Think of the Pittsburgh office of the U.S. Commercial Service as a your one-stop-shop to connect you with the resources you will need to develop and implement your export plan. Please visit our website at https://www.trade.gov/pennsylvania-pittsburgh or contact our office at (412) 644-2800.
LeeAnne Haworth is a Senior International Trade Specialist with the U.S. Commercial Service Pittsburgh Office.