LESSON 1:
Management Commitment
The business of exports is all about willingness to invest time, attention and capital to gain the maximum out of untapped and incompletely tapped opportunities across foreign markets.
Understood therefore that senior decision-makers of the company have to agree to some big and critical learning and decision-making, and their willingness and cooperation is a must for the success of any such plan.
To identify new buyers, search out new markets, identify products, decide on right logistics, deal with regulatory challenges, etc - these are issues that require both financial and intellectual support from the senior management of a firm. For this reason commitment of top management is essential. There is nothing more positive a start to an exports venture than the management being wholehearted supportive of the venture. Needless to say, this is the best way a firm can mentally start joining the league of successful export entities.
LESSON 2:
Engaging Expertise
Exporting to overseas markets involves much due diligence on various grounds - and trained manpower in this respect is always a big plus.
Over and above, aspects of exports like evaluating payment options, dealing with freight forwarders, custom house agents and the process of certification and documentation calls for a few professional hands. Having a specialist on board means that while on one hand your firm will be able to take advantage of his expertise and networks, on the other, his understanding of the key aspects of exports will not only enable the designing of a successful export strategy, but will also eliminate basic roadblocks for your foreign trade venture! This is a great resource to have. But foreign trade is such a vast and quick changing area that there is not such thing as permanent expertise
LESSON 3:
Feasibility Study
Perhaps the only thing that separates exports from the business of selling in your domestic market is that in exports, you sell to a foreign buyer who pays in his local currency or mutually agreed foreign exchange , while in a domestic sales, realisation is simpler. This therefore calls for special payment arrangements (on the banking front) and specific permissions from government agencies, if required, in exports. If we overlook the nuances of restrictions that various importing nations may put on Nigeria’s exports from time to time, broadly, the basics of domestic and international businesses are the same.
Therefore, having a domestic business ensures that a firm has the expertise in basic processes that are required in exports too - like paperwork and documentation, procurement to despatches, identification of suppliers to logistics players, etc.
LESSON 4:
Market Development
Exports, just like any other business activity demands a certain level of financial commitment.
Though the level of capital investment depends largely on the industry and type of product that your firm would want to export, we have identified rough estimates of required investments for a company that desires to exploit foreign markets. Investment would be required from procurement of supplies to activities needed to discover new buyers in foreign markets, from certifications and registrations to costs of participation in trade shows, from market research to new product development and marketing and advertising activities across new markets.
LESSON 5:
Product Selection
In the business of merchandise exports, selecting the product wisely is key to getting your overseas go-to-market strategy right.
Selection of the right product depends on a number of factors - including, what your competence in the supply chain of that particular product is, whether the target market you hope to export to wishes to consume that particular product, how qualified your product is in terms of quality and compliance to import norms of certain nations or blocs, whether there are policy restrictions on exports of your chosen product, perishable/non-perishable nature of product, etc. It's obvious that a company that provides the most suitable products at the most competitive prices has a better chance over rival exporting and domestic firms in any market.
LESSON 6:
Product Uniqueness
A differentiated product definitely has greater potential in exports because there are tremendous differences between various export markets for reasons related to demographics, environmental conditions, economic factors, socio-cultural factors, functional requirements of the product, etc. Flexibility in this respect is a must-have during a time when consumer is king.
LESSON 7:
Product Adaptability
It is natural to expect that if a particular country is to accept your exported product, there has to be differentiation made on the basis of adaptability of the export product - and variations may happen in form, design, colour, size, taste, packaging, etc. - and any change in policy and other related matters like trade restriction in a particular country. This process of change is known as product adaptation. Thus, product adaptability is an important consideration in the selection of the product for export.
There are obvious costs involved in the process of product customisation - but the returns are overwhelming too. You can start your homework on how best to achieve differentiation in the ways you can, albeit at a small scale to begin with. The answer to nail-biting competition in international markets is product customisation, and if your company is willing to spend on making this effort, it may prove a huge plus in the days to come
LESSON 8:
Understand and Prepare for Risks
Credit risk, cargo loss & damage, transit risks, foreign exchange risks, quality risks, natural calamity risks, logistics risks, and many others - the business of exports is fraught with such dangers. From non-paying or late paying customers to unforeseen failure to comply with foreign regulations and standards, from problematic relationships with contractors, distributors and agents to political instability and security concerns, exports is an area as wide and unpredictable as the ocean. That you are aware of all or most problems in exports puts you in a strong position to conduct business in overseas markets.
The unpredictability of exports business calls for a need to remain updated at all times.
LESSON 9:
Pricing
At what price should the firm sell its product in the foreign market? What type of market positioning (customer perception) does the company want to convey from its pricing structure? Does the export price reflect the product's quality?
Is the price competitive?
Should the firm pursue market penetration or market-skimming pricing objectives abroad? What type of discount (trade, cash, quantity) and allowances (advertising, trade-off) should the firm offer its foreign customers?
What pricing options are available if the firm's costs increase or decrease? Is the demand in the foreign market elastic or inelastic?
Are the prices going to be viewed by the foreign government as reasonable or exploitative?
Do the foreign country's anti-dumping laws pose a problem?
These are just some of the questions that will come to an exporter's mind when he sits down to decide on a final price for his product. The most basic version of export pricing which is popular today is cost-plus pricing, which considers everything from documentation costs, domestic and international freight, insurance, import duty in the destination market, wholesale mark-up and other related costs added to factor price (if the exporter is selling to a wholesaler-importer). If you are aware of various other permutations and combinations that helps you arrive at the final pricing (also depending on whether you are selling to an importer-seller or importer-distributor in the foreign market) which is in accordance with the destination market where you product is being shipped to, you are well prepared to make pricing one of your strengths.
LESSON 10:
HS Code
In exports, it is the whole and sole responsibility of the exporting firm to ensure that the correct Harmonized System (HS) code is used for declaration of goods. HS is the global standard for reporting goods to customs and other government agencies.
As per the World Customs Organisation (WCO), "This system is used by more than 200 countries and economies as a basis for their Customs tariffs and for the collection of international trade statistics. Over 98% of merchandise in international trade is classified in terms of the HS.Currently". In the past, many times has it happened that goods have been exported under wrong HS Codes. This mistake could cost your company money and credibility with international customers.
It is therefore absolutely necessary to know the exact HS Code under which you product falls. Why is HS Code so critical? Because it not only determines the import duty applicable on your product in the importing market, but also helps classify whether it is allowed to be exported in the first place, whether it should be physically examined, and of course, the benefits that exporters of that particular product may get in the form of incentives or reimbursements.
HS code is also used to establish basic rules of various FTAs, RTAs and PTAs such as NAFTA, SAFTA, etc. Finding an appropriate HS Code for your products at all times can get tricky. And if you get the HS Code wrong on your export invoice, you may even get heavily penalized. So it's absolutely necessary to be completely sure about HS Codes. Also, if you do not completely learn about incentives on your export product, you will lose out on many benefits that may prove a magical assistance to your exports.
LESSON 11:
Permits/ Licences
Products require the need for special permits, licences, or authorizations. On certain products/product categories, there are restrictions on exports from Nigeria and on imports (rule enforced by governments of target markets) for various reasons that could be strategic, health-related, geopolitical, etc. For instance, Special Chemicals, Organisms, Materials, Equipment & Technologies can be exported only against a license issued by the Standard Organisation of Nigeria , as per international agreements for strategic reasons.
Limitations imposed can come in the form of either quantitative and/or qualitative controls. In case of exports of not-free-to-export products that are not prohibited, the goods (on whose exports policy is "Restricted"), permission for shipping has to be taken on a case-to-case basis from the government.
LESSON 12:
Understand Acronyms
The business of exports is influenced by rules, regulations, provisions and clauses contained in Free Trade Agreements (FTAs) that Nigera would have signed in the recent past. So what is the benefit of knowing these acronyms? The value behind this information extends far beyond just being good at a round of quizzing on foreign trade - these actually do impact exports! For instance, knowing what EEG is could actually influence your choice of export product(s) and market(s).
EEG means Export Expansion Grant by the way...😀
LESSON 13:
Export Strategy
The two most common methods of exporting are indirect selling and direct selling. In indirect selling, an export intermediary such as an export management company, an agent, a merchant or an export trading company searches out overseas buyers.
These export agents, merchants, or re-marketers purchase products directly from the Nigerian manufacturer, thereafter packing and marking the products according to their own specifications. They then sell overseas through their contacts in their own names and assume all risks for accounts.
In direct selling however, the Nigerian(Manufacturer /Processor) exporter deals directly with a foreign buyer, it's that simple. The answer to whether your company wants to export indirectly or directly depends on the capital resources it may have for this purpose, nature of product and of course, existing conditions across target export markets. Work out your plan carefully before you decide on a particular export strategy.
LESSON 14:
Understanding Your Focus Market
Depending on your choice of export product, your focus markets will vary.
There are various other considerations to be made. Logistics cost is dependent on geographies. Tariff and non-tariff barriers in various export destinations would vary depending on the level of protectionism that exists in a particular country for its domestic producers.
Market demand fluctuations, existing politico-economic conditions, domestic competition, seasonal variations, demographic trends, future expectations, etc., are all some of the reasons why it's mandatory to undertake appropriate and thorough market research before placing all hopes on a particular set of focus markets.
It's great to finalise your set of export destinations. Knowing more about these focus markets would prove a huge plus
.
LESSON 15:
Securing A Customer Base
Depending on whether you are planning to export directly or indirectly, your customer base varies.
All said and done, you need buyers who believe that your product will serve them well - either as a consumer or as a distributor/agent.
Acquiring an overseas customer depends on how effectively your export firm is able to utilize the value of money invested in getting that customer.
It’s easy to waste a lot of money in the wrong places and channels, looking for your customers, especially in markets where domestic firms may have protectionism, costs and various inherent factors going in their favour. Given that you are decided on your customer acquisition strategy in exports, it is assumed that you have already started working on reaching out to them. If that is the case, you may well understand that investing in inbound marketing strategies such as content, building newsletters and search engine optimization (SEO) will do as much magic as participating in trade fairs and running through directories.
LESSON 16
Delivery/Transit/Lead time
Transit times and delivery commitments vary depending upon origin of your export product within India, destination overseas, market conditions, nature of goods, availability of shipping modes, etc. There are factors that influence the supply chain that have a bearing on the trust that your customers would have on order fulfillment capabilities. Besides product quality, on-time delivery is often cited as a key strength by export firms.
LESSON 17:
Shipping / Freight Forwarding
Exports presents huge opportunities; it however includes tasks that are cumbersome. To handle the process, paperwork, and regulations involved in exports, freight forwarders can make the job easy for you.
Typically, a freight forwarder is a firm that specialises in arranging storage and shipping of merchandise on behalf of its shippers. It usually provides a full range of services including tracking inland transportation, preparation of shipping and export documents, warehousing, booking cargo space, negotiating freight charges, freight consolidation, cargo insurance, and filing of insurance claims. Freight forwarders usually ship under their own bills of lading or air waybills and their agents or associates at the destination (overseas freight forwarders) provide document delivery, deconsolidation, and freight collection services.
On the other hand, Custom brokers complete all documentation necessary for clearance of goods through the customs barrier in exports. Identifying the right and reliable freight forwarder and custom broker is crucial to smooth flow of outbound shipment.
LESSON 18:
Payment
Typically there are two types of Export Credit for this theoretical purpose:
*Pre-shipment Export Credit (also called Packing Credit) and *Post-shipment Export Credit (available in both Foreign Currency and Naira). Pre-shipment Credit is a loan given to an exporter by a bank (on the basis of a letter of credit or a confirmed exports order) for financing the purchase, processing, manufacturing or packing of goods meant for shipment. As the name says, it includes financial assistance (as well as working capital requirements) that an exporter may require for all processes during the "pre-shipment" phase.
On the other hand, Post-shipment Credit includes a loan that's given to an exporter of goods from India from the date of shipment of goods to the date of realisation of export proceeds. The evidence of shipment of goods is an absolute necessity in this case. This type of credit is in most circumstances self-liquidating as the bank extends the credit on obtaining the documents of title of goods shipped. These form of credits are extremely important to learn and take a matter of on-the-job experience.
Exporters lump the two forms of credit solicitation together in their application
One big difference between exports and doing business in domestic territory is how payment is received from buyers.
In Exports, there are many forms of transactions and the scope of business and the export-importer relationship determines the payment terms. Advance payments, LC, Bill of Exchange Documentary Drafts, Open Account, etc. are various forms in which transactions occur
