22 Apr 2015

Advice for SMEs Planning International Expansion Programmes

Recently we’ve been looking at the trials and tribulations of some major retailers and brands such as Marks & Spencer and Kellogg’s as they start to expand into new markets overseas. But what about the smaller brands with fewer resources?

According to the CBI, businesses are 11% more likely to survive if they export. Yet, only one in five do. So, it’s vital for the UK economy that small and medium-sized businesses fulfil their international potential.

Below are some examples of small British brands that have attempted to export their products to new markets around the world with key learnings for other small businesses willing to take the plunge.

The Japanese don’t buy cheese graters

Don’t try and sell cheese graters in Japan – they don’t eat much cheese and rarely grate it. This was an early mistake made by a pair of kitchenware designers trying to find export markets for their young business.

Joseph Joseph’s bright-coloured designer kitchenware sells extremely well in John Lewis and since the brand’s initial faux pas in Japan it’s been selling well overseas. Nowadays, 80% of its sales are made abroad.

The founders used a grant from UKTI to take their products to an international trade fair at which they received some initial orders soon after establishing the business. But they were knocked back when they presented potato mashers and cheese graters in Japan. They’d made the mistake of not researching or understanding the market.

Further mistakes were made when they tried to launch in America with prices that were too high for the market. The brand’s key learning from that venture was to avoid using distributors where possible. Instead they had to invest time in trying to understand the market, seeing what the competition was like and developing relationships locally. The firm were also obliged to defend themselves against overseas imitators, including trademarking their products and taking legal action where required.

Now a thriving exporter, Joseph Joseph’s main strategy is to innovate. By designing highly original products they feel there is always a place for their wares in global marketplaces. Controversially, they avoid market research or focus groups. Instead they aim to design innovative products that are unlike anything else on offer. It’s been a winning strategy for the brand, which now sells in over 80 countries worldwide.

Key learnings: research your market before you approach it.

Organise your operations before expanding

One Yeovil-based engineering firm, Talon Engineering, exports to 35 countries despite having only 50 employees. They specialise in motorcycle parts but have recently targeted the aerospace industry and expanded operations.

When the company set their sights on expansion, they first needed to review their internal operations, improve efficiency and recruit a small number of key personnel including an operations manager.

They incorporated enterprise resource planning (ERP) software into their working in order to manage their business more efficiently. They also invested in some new machinery in order to target new industries for their products. The changes worked well and they were able to increase turnover after targeting new customers in the aerospace and defence industries.

Talon made use of the government’s Manufacturing Advisory Service as a source of advice for how to organise their internal operations and processes in order to manage their growth.

Key learnings: make sure you’re in good internal shape before you expand overseas.

No website: no problem!

Genesis Tilemates began to look to export markets almost as soon as the company was established and now export to over 70 countries, despite having no website. The Yorkshire-based firm makes tiling-related products, such as strips for joining tile to carpet. The first step was showing products at an international exhibition; a move that brought Genesis its first international orders. Further orders flooded in after the company bought space at other exhibitions.

The company quickly learned that international exports required them to be as professional as possible and really research and understand each market they operated in. This involved a lot of research and time spent visiting the relevant countries to gain insights.

Whilst having a professional approach was critical to developing new overseas clients, personal relationships were also important, particularly with the distributor network. The firm used a ‘sale or return’ offer to engender loyalty with their distributor network and make it easier to trial new products.

They also agree an exchange rate with their contacts and invoice in the local currency. The strong relationships they built up also helped them weather the currency storms, so that they could continue to export when the strength of Sterling was disadvantageous to exporters. In South Africa they took a different approach, using a local subsidiary to take on the market there.

The company’s approach has been to assign resources to exploring new markets and building relationships, which they feel gives them an advantage over competitors who are not investing the same efforts.

Key learnings: invest your efforts in new markets and develop your relationships.

Find the right local partner

That’s a view shared by valve manufacturers KOSO Kent Introl (KKI), who also feel strongly that you need to invest effort into a market to make a success of exporting there.

KKI started selling in Brazil indirectly but now has operations there, with a local business manager and a long-term partner agreement. It’s been necessary to register the company locally and meet criteria to manufacture at least some of the product locally using local labour. In order to access the supply chain, it’s necessary to have a presence there, which is why KKI management have always made a point of visiting the country regularly.

For KKI it’s all about spending time, effort and money to establish yourself locally. It’s also about committing for the long term – KKI has signed a 5 year agreement with a local agency. It’s essential to take the long view because of all the bureaucracy to negotiate and the need to go through product approvals and prove the company’s qualifications via accreditation. That obliges businesses targeting the Brazilian market to build good relationships before they embark on business ventures.

For KKI it’s worthwhile doing so: the Brazilian oil and gas sector is a great market for their products. Brazil is also the gateway to Mercosul, an equivalent of the European Union offering a quarter of a billion potential consumers in markets such as Uruguay and Argentina.

Key learnings: commit to the long term in any new market.


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