3 essential steps for entering a international market

“Exporting offers great opportunities for Canadian businesses, but you need a good export plan,” says Bill Macheras, Manager of the Info-Centre at Global Affairs Canada and a long-time Trade Commissioner with the Canadian Trade Commissioner Service.

Macheras specializes in advising exporters on how to develop their international business. “Many business owners have no strategy and chase every lead. With a strategic approach, you can be proactive and improve your results,” he says.

Macheras, a Certified International Trade Professional, suggests three essential steps to enter a foreign market. The advice below also includes recommendations from BDC’s expert advisors.

1. Review your company

Take a careful look at your business to make sure you’re ready to expand internationally. Be sure to review these elements:

Capacity to expand

Do you have the capacity and resources to start exporting? You need the financial capacity to make a long-term commitment to the venture. You should also think about your capacity to expand your workforce, production and support functions to accommodate expected sales growth.

Leadership

Are the owners and senior managers on board? Are you ready to get the outside expertise you’re missing? You may need to appoint a senior dedicated executive to manage the international business. “Without a dedicated executive to handle exports, the CEO may get stretched and neglect other tasks,” Macheras says.

Your team

Do you have adequate marketing, sales and other human resources? Think about any training and other gaps you will need to address—for example, to operate new equipment or systems, or to communicate in the target market’s language.

Product or services

How will you stand out against the competition in a foreign market? Are you ready and able to adapt your offering to the needs and tastes of international customers? Just because something sells well in Canada doesn’t mean it will do so elsewhere.

“It’s important to research beforehand what kind of retooling and hiring you may need to start exporting,” Macheras says. “You can then put the resources in place before you get orders. Many businesses make the mistake of wanting to see orders before they make any investment, but this can lead to delays in fulfillment and shipping and hurt your reputation.

One example that comes immediately to mind is an Ontario-based manufacturer that had to retool its entire production line to produce in metric to meet European Union requirements. The company’s manufacturing line had been entirely in imperial, which it had been using for years to serve its U.S. customers.”

Macheras says it’s “quite common” for Canadian businesses used to operating at a Canadian scale to become overwhelmed when they get their first large international order.

“The company gets a buyer, but the scale is completely off the charts and the price point is much lower because of the volume. They may have to turn down the order or ask for it to be scaled down, which affects their credibility. Or they have to scramble to fill the order by hiring new people and buying equipment in a hurry. This can be avoided if you do your research beforehand,” he says.

2. Develop a market entry strategy

The next step is to develop a market entry strategy. This typically involves these elements:

• Set clear goals. Decide on:
  • your business goals and targeted level of sales
  • the specific product or service to export
  • the target market
  • major action items, a timeline and your budget
• Do preliminary research on your market. This should include:
  • size of the market
  • competition
  • your unique value proposition
  • regulatory, certification, trade and other barriers and opportunities
• Choose your mode of entry. Options include:
  • using a distributor or agent
  • acquiring or partnering with a local business
  • opening a physical presence
  • selling through online marketplaces
  • offering direct e-commerce sales
  • selling indirectly through another company that exports to the target market
  • a blend of several channels
• Consider financing and insurance.
  • Think about what financing you may need for your investments in the venture to ensure you don’t eat into working capital. Also, consider insurance for such things as shipping losses, non-paying foreign customers and contract cancellations.

“If you strategically narrow down your market and spend resources there, that’s when you can get significant export sales,” Macheras says. “A lot of entrepreneurs make the mistake of trying to service all over the world. They’re used to domestic business where you don’t turn down that purchase order and sell to 20 different markets, making $1,000 here, $1,000 there. They go very wide and very thin. Instead, you should go narrow and go deep.”

He offers these additional tips:

• Use free online trade data tools, such as Trade Data Online, to find high-potential target markets where Canadian products are valued and competitive.
• Once you settle on two or three strategic markets, you can visit trade shows or other business events in each market to make contacts and learn more before making a final decision. Cut costs by attending virtual events or participating in government trade missions, which are subsidized and often cheaper than privately run missions.
• Consider countries that have signed free trade agreements with Canada, which can offer a safer investment climate, reduced tariffs and easier movement of goods and people.
• Explore foreign government procurement as a potential source of export orders.

3. Prepare and execute an export marketing plan

Finally, create and implement an export marketing plan (sometimes known as an export plan). This is where you work out specifics of your venture. It typically covers:

• More detailed research on your target market, including:
  • target customer characteristics
  • local consumer needs and trends
  • specific regions or segments to target
  • cultural considerations
  • potential partners and buyers
  • details on regulations and certifications you need to meet

For help with this research, visits to target markets and finding partners, Macheras recommends contacting bilateral chambers of commerce, industry associations, and government trade-promotion agencies, such as the Trade Commissioner Service.

• Needed adaptations to reflect local needs and customs. You may have to adapt:
  • product features
  • packaging
  • labelling
  • pricing
  • branding
  • business practices
• Logistics needs, including:
  • transportation of products
  • documentation
  • packing
  • storage en-route
  • customs clearance

Logistics is a highly specialized function and may require you to engage in-house or external expertise, such as a freight forwarder, customs broker and carriers.

• A promotion plan. This may consist of:
  • website and social media marketing
  • ads
  • media kits
  • brochures
  • business cards
  • testimonials
• Monitoring your efforts. It’s important to pick a few key metrics and regularly monitor them to stay on target and optimize.

A critical element for exporting success, Macheras says, is having local expertise and partners to help untangle the complexities of international business.

“Canadian companies often underestimate things like the amount of documentation required to enter a foreign market,” he says. “This is when it’s key to have a good local partner and someone in the company who can speak the language of the target market. This will really help resolve problems and ease communication.”

Macheras recommends tapping Canadian university MBA programs, which often have many students with solid international knowledge. “They’re a really underutilized resource for Canadian companies,” he says.