An Introduction To Exporting

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Introduction

Exporting, or marketing to outside markets, is what turns small companies into large companies, and large concerns into multinational operations.

In itself exporting is a simple concept, and many excellent sources of advice and information are available to that person considering taking his or her products and services to foreign markets. Nevertheless many firms never consider the potential o

f exporting, all too often because their proprietors believe the situation will present countless and potentially insurmountable difficulties.

Exporting can in fact lend itself well to operations large and small, and can provide a greatly increased market for all manner of products and services as most mail order dealers will realise from a browse through the several international opportuni

ties magazines and newsletters available today, in which mailing lists, dropship services, and countless other services are advertised on a regular basis. Where products and services are suited to marketing entirely by mail, then exporting is little

more complex than making your intentions known at the post office counter and letting the postal services do the rest. Where products are large and bulky - perhaps also expensive - then the exporter might enlist the services of any of a number of

specialist export services able to help in all stages of the export process, from market study to soliciting orders, and from shipment to receiving and processing payments to suppliers.

That title 'An introduction to Exporting' is just that; an intention to provide nothing but a simple understanding of an equally straightforward process, one you might utilise to full extent for whatever goods and services you currently offer or migh

t consider offering in the future.

Why Export?

Businesses enter the field of exporting for many and varied reasons, not the least of which might be to extend the market for a product that has proved popular on a domestic level. If the product or service is applicable to a wider market and it has

been tested in the UK, chances are exporting it will prove similarly profitable. Not so good a marketing strategy however, is the decision to export something because it has not proved popular in the domestic marketplace.

Some businesses begin with export marketing included in their corporate plan; others slip gradually into exporting, perhaps having been approached by an overseas buyer with whom a profitable business relationship emerges, and it subsequently becomes
clear that other exporting avenues might also prove profitable.

Advantages of Exporting

* Increased market size.

* Market suitability. Some products might be more suited to
certain overseas markets than to the UK. This might
perhaps best be illustrated in terms of luxury goods
which the domestic market might not be able to afford but
which might find a ready audience in more affluent
locations.

* Currency benefits. Changes in exchange rates can prove
advantageous when selling to a customer against whose
currency sterling is weak.

* Protection against a downturn in the domestic market.

* Protection in the event of world recession since it is
unlikely that all countries will be equally effected.

* Economies of scale from manufacturing in larger batches.

* There is the option of exporting without being a
manufacturer, for instance where one operates as an export
merchant or export agent and sells goods bought from
British manufacturers.

* Some British services are much in demand in worldwide
markets, examples being design, financial and managerial
consultancy services, engineering, computer software
provisions, and so on.

* On perhaps a less business-like note, opportunities for
foreign travel can prove stimulating and refreshing to the
entrepreneur used to operating in purely domestic markets.

Disadvantages of Exporting

* Sometimes higher costs of travelling abroad to obtain
orders. High management fees, shipping charges, agent's
fees, etc., can sometimes increase the exporter's prices to
a level which makes goods and services uncompetitive in
overseas markets.

* Market unsuitability. Different cultures, customs and
languages can all present problems to the exporter and can
mean that a product and service suitable in the UK has
virtually no market abroad.

* Import rules and regulations vary between countries.
Sometimes rules change rapidly and dramatically.

* Shipping rules and regulations can prove complicated and
represent a vast body of knowledge which the exporter
will at least have to familiarise him or herself with.

* Currency. That earlier advantage of a strong currency in
exchange for a weak sterling might in alternative
circumstances prove detrimental to the exporter.

* Collecting long-standing payments and debts can prove a
very serious problem, particularly for the small business.

Who Exports?

Though the benefits of exporting can apply to companies large and small, it is generally accepted that no small company should consider exporting until the company is well established in the domestic sector, or at least until one of the proprietors h

as sufficient knowledge and experience of exporting to make a concerted effort in overseas markets.

What to Export

Selling abroad bears very little difference to selling in the UK; a need must be identified and a service or product introduced to fill that need.

Few restrictions are placed on what can and can not be exported from Britain, other of course than defence supplies to certain countries, and restrictions on livestock and agricultural products. Where uncertain as to whether or not restrictions migh

t be placed on particular products or services, the entrepreneur will obtain excellent advice from:
The Export Licensing Branch, Department of Trade, Millbank Tower, Millbank, London, SW1P 4QU
071 215 8070

What restrictions and limitations the exporter is likely to encountering are more likely to be placed by that country into which one seeks entry for whatever products and services are concerned. Developing countries might place restrictions designed

to protect their own growing industries. Import controls might reveal themselves in quotas, customs tariffs or complicated technical and documentation requirements. Information and advice on technical requirements might be available from:
The British Standards Institution, Technical Help to Exporters, Linford Wood, Milton Keynes, MK14 6LE
0908 220022

Where to Export

Most newcomers to exporting opt for the relative ease of supplying to English-speaking countries of the old Commonwealth and North America. In many cases British traditions and customs are still very much in evidence and the fact that many British b

anks and financial institutions have branches in these locations can greatly ease the assimilation process.

The European Community might however present the greatest opportunity for new and smaller export firms, and will doubtless prove a more realistic and attractive option with the removal in 1992 of all customs barriers.

Third World and developing countries present particular problems. Payment facilities and procedures are rarely uncomplicated and locating suitable distribution channels can prove difficult, time-consuming and costly.

The most likely first venues for marketing abroad might well be those arising from unsolicited enquiries from potential foreign customers, and information obtained from trade publications, newspapers and specialist export publications.

Starting Out

Exports can obviously increase markets for one's goods many times over, but for the newcomer exporting can also present numerous complications and learning difficulties. Though the temptation might exist, the newcomer is usually advised to gradually

enter the export field, perhaps starting with one overseas market and gradually increasing the range of destinations in which one's products and services are offered.

The newcomer's first port of call for information on exporting in both general and specific terms should be regional offices of the Department of Trade and Industry, details of which are provided at the end of this text.

The all-important initial market research to assess the suitability of your product or service to overseas markets, is one that might well be aided by a visit to a trade show in the country of intended export. There the exporter can speak to foreign

and international business men and women and obtain copies of relevant trade publications.

The exporter might well find the product requires some modification to suit overseas markets, and that an import licence is required before certain products will be allowed into some countries. All can be discussed with export information and adviso

ry bodies on the entrepreneur's return to Britain.

Amongst the more useful sources of information and advice for newcomers and established exporters are Chambers of Commerce, most of the largest of which are able to provide group selling facilities, fact finding services, organised trips abroad, shar

ed telex arrangements, documentation advice, and so on. It is advisable to join one of the larger Chambers of Commerce, such as those in London and Birmingham, as opposed to Chambers of Trade which though generally available in all main towns, are u

sually composed of retailers with no experience or interest in exporting. Many Chambers of Commerce hold regular meetings at which members can benefit from the experience and advice of fellow members and longer-established exporters. Additionally,
many Chambers hold regular seminars on matters related to exporting, some aimed at relative beginners and therefore offering a more than useful insight into the ins and outs of this particular marketing method.

All of the major banks offer free literature and guidance to intending and established exporters, and many have specialist advisers available to answer whatever questions you might have in your beginning days as an exporter, as well as problems you m

ight encounter as you begin venturing into new and untested markets.

Distribution

Once having made as reliable an assessment as possible of the suitability of your product or service to overseas markets, then comes the decision as to exactly how marketing will take place. The range of possible options include: agents, distributor

s, selling direct, collaborative projects and trade shows, all of which we might now briefly consider.

* Agents

Agents acting on the exporter's behalf will usually visit potential customers for the purpose of taking orders, and will normally command commission to the tune of 10 per cent the cost of goods exported. The exporter subsequently despatches goods an

d forwards invoices direct to customers. The main problem confronting the exporter is that of locating a good and reliable agent to act on his or her behalf, something with which most export information and advisory services are usually more than qu

alified to assist.

* Distributors

Distributors undertake services very much akin to those carried out by agents, and might additionally maintain stocks of the exporter's goods. Distributors might sell products through their own already established chains of agents and distributors.

All goods and services are sent direct to the main distributor.

* Selling Direct

Where the exporter opts for direct marketing, it must then be established whether the postal services will prove adequate to facilitate all transactions, or whether the more costly options of air freight or sea freight are more appropriate to marketi

ng of the product or service concerned. Post, where suitable for the product concerned, can prove cost-effective and eliminate the financial burden known to accompany delivery via agents and distributors. But only certain products and services are
suited to marketing by mail, which by its very nature is unsuitable for fragile and perishable items and wholly inappropriate for services which must of necessity be carried out in person! Goods suited to posting abroad will usually be both light an

d reasonably compact. The procedure for posting is relatively simple: the exporter completes customs declaration forms available at the post office and hands them back in the same manner as when posting parcels to a UK address. Payment terms might
be CBD (Cash Before Delivery) or COD (Cash on Delivery). Rules and regulations relating to specific countries are available at Post Office counters.

Sea freight and air freight transportation normally require shipping agents to handle the sometimes complicated documentation involved. The astute exporter will realise only too well the profitability of shopping around for a reliable shipping agent

and a competitive rate.

Direct marketing can in fact prove very complicated and time-consuming, particularly for smaller firms which will have to master problems of documentation, customs, shipping, payment, and sometimes language differences. Dealing by remote control can

in itself prove difficult, and the alternative of trips abroad to effect transactions can prove costly in the extreme.

One other method of selling direct involves attendance at a Trade Show in the country to which the businessman intends to export. Orders originate by direct approach from customers. Follow up sales and repeat custom usually comes from regular attend

ance at trade shows.

* Collaborative Projects

Collaboration finds companies in different countries carrying out certain services and providing facilities for exporters abroad, in return for reciprocal representation of their goods and services in other countries.

* Trade Shows

Even small businesses operating on an international basis should consider taking a stall at any of the many international trade shows held in Britain and abroad. For many exporters it is from attendance at trade shows that the vast majority of busin

ess originates.

Pricing

Costs of exporting can of course make products far more expensive than when sold in domestic markets. Pricing must therefore be carefully monitored and controlled and take into account costs of freight, shipping insurance, overseas agent's commissio

ns, and other incidental expenditure. Product insurance is essential and can be arranged through insurance brokers.

As a rough illustration of what factors make for accurate pricing controls, the following must be taken into account:

* If you are not the producer of the goods to be
exported, the amount of any discounts for cash or
quantity that the supplier will allow you, might make
a significant difference to prices.

* Costs of packing.

* Costs of freight and transportation.

* Bank processing charges. The bank through which you
receive payment will charge between 1/8 per cent and
1/4 per cent of total invoice value.

* Currency exchange charges, where appropriate.

* Insurance costs.

* Agent's commission, where appropriate.

* Your profit.

Getting Paid

One of the major attractions of dealing through domestic export houses or buying agents in one's own country is the relative certainty of being paid promptly, and in sterling. Extended credit is not usually encountered. Exporting direct on the othe

r hand brings certain problems, mainly of ensuring payment and avoiding risks incurred from fluctuating currency exchange rates. It is no secret that some countries have a reputation for speedy payment, whilst others prove quite the opposite. Advic

e in this respect is available from the following section of the Department of Trade and Industry:
Export Credit Guarantee Department, Export House, 50 Ludgate Hill, London, EC4M 7AY

The normal procedure with a new customer to whom one exports, is to use either Letters of Credit or other documentary collection handled and co-ordinated by banks. If you plan to offer credit, you should take up references in the same manner as woul

d be the case for a new UK customer.

Amongst the many methods of payment for which the exporter might opt are the following:

* Cash With Order - Before Delivery. This is of course
a normal business requirement for firms operating in
domestic markets. You might not actually get
payment in advance and some other method might be
requested by the importer. But, you can always ask!

* Open Account - A large percentage of transactions take
place on open account, where invoices are provided,
goods delivered, and payments made by bank transfer.
This is ideally a form of payment used when a
certain level of trust has been established between
parties to the transaction.

* Bills of Exchange - This is a document that enables
the exporter to provide a period of credit to the
importer, usually sufficient to have goods shipped,
collected, and possibly sold before payment is made
through the importer's bank. A 'sight' draft is one
that must be paid before title passes in the goods
concerned. A 'term' draft on the other hand allows
for payment some time after received, usually in
multiples of 30 days. Term drafts are normally
extended only to known clients of good financial
standing. The main benefit of term drafts is one of
the customer being able to sell goods well in advance
of payment. In EEC countries, some banks will avalise
(guarantee) payment by their customers of bills of
exchange. Normally, because the exporter is agreeing
to some delay in receiving payment, a reasonable
amount of interest will be included.

* Documentary Letters of Credit - This comprises an
irrevocable letter of credit, raised by the importer
upon instructions to his or her bank. The bank opens
a credit in favour of the exporter in which very
precise conditions are laid out in respect of
supporting documents, methods of despatch, details of
the goods, and so on. Both parties' banks confirm the
agreement and payment is guaranteed. One problem with
regard to documentary letters of credit is the amount
of paperwork known to accompany the transaction -
commercial invoices, certificates of origin, shipping
documents, customs declarations, bills of lading and
so on are all required often with multiple copies of
all documents.

Others form of documentary letter of credit exist.
The most desirable is the irrevocable letter of
credit, given that payment is guaranteed in all
circumstances, including those of revolution, currency
crash, insolvency, and Act of God.

* Factoring - Becoming increasingly more popular this
method is one of dealing with an international
factoring company which will handle all collections on
behalf of the exporter and provide credits in
sterling. Usually factoring companies are backed by
major banks. Information on appropriate factoring
companies can be obtained through your bank or upon
request from:
The Association of British Factors, 24-28 Bloomsbury
Way, London, WC1A 2PX
071 831 4268

Export Terminology

Exporting employs a unique body of words and phrases, all of which the beginner will soon become familiar with. For the time being we might briefly consider a few of the more common terms used in exporting circles:

* Bills of Lading - This is the document provided by the
shipping line as receipt and proof of ownership of the
goods transported on your behalf. Usually the
document tends to come with multiple copies, some of
which are forwarded to the importer and others to the
paying bank as evidence of trading.

* Certificate of Origin - This is a statement by the
exporter with the backing of a Chamber of Commerce and
sometimes an embassy. The document states from which
country the goods emanate.

* Commercial Invoice - More detailed and complex than
everyday invoices with which the reader will doubtless
already be familiar, this document contains a full
description of goods, along with packing marks,
weights, insurance details and information regarding
transportation routes. Some countries require Chamber
of Commerce confirmation of the invoice's contents;
others require all information provided to be given in
their own official language.

* FOB (Free On Board) - The usual means of quoting
export prices. The price includes carriage to
specified ports or docks, and charges up to placing on
board the ship or aircraft taking the items to their
intended destination. If shipped from Southampton,
the contract might then say 'fob Southampton'.

* CIF (Cost, Insurance, Freight) - A little further on
from FOB this cost is that of FOB plus insurance on
board.

* Price Ex Factory - The price of your goods where the
buyer has to arrange and pay for all other costs of
carriage, insurance, etc.

* Letter of Credit - A common form of payment for
exports, provided and controlled by the paying bank.

* Consolidated - Where your exported goods are
consolidated or grouped with others, usually in a
container, in order to obtain the benefits of cheaper
shipping rates.

Useful Reading and Sources of Further Information

'Marketing Without Frontiers' is the title of an excellent - and free - book issued by the Post Office. Providing a useful insight into exporting to most other countries, this document might be obtained from:
Marketing Without Frontiers, Royal Mail International, 12 - 15 Fenton Way, Basildon, S15 4BR

Periodicals and regularly updated publications of interest to exporters include the following:
'Direct Marketing International', 3 Bridgefoot, Market Deepong, Peterborough, PE6 8AA
'Direct Response by George!', Greenhouse Publishing, 4 Market Place, Hertford, Herts., SG14 1EB
'Direct Response Magazine', Greenhouse Publishing, 4 Market Place, Hertford, Herts., SG14 1EB
'Precision Marketing', Centaur Communications Ltd., St. Giles House, 50 Poland Street, London, W1V 4AX
'Eurotrade', 25 Helen Road, Hornchurch, Essex, RM11 2EW
'Export Courier', Stoke and Lindley Jones Ltd., 36 Stonehills House, Stonehills, Welwyn Garden City, Herts., AL8 6NA
'Export Digest', Croner Publications Ltd., Croner House, London Road, Kingston-upon-Thames, Surrey, KT2 6SR
'Export Times', 4 New Bridge Street, London, EC4V 6AA
'Export Today', Setform Ltd., Europa House, 13-17 Ironmonger Row, London, EC1V 3QN
'International Freighting Weekly', Maclean Hunter Ltd., Maclean Hunter House, Chalk Lane, Cockfosters Road, Barnet, Herts., EN4 OBU
'Euromarketing', Crain Communications, 75-77 Cowcross Street, London, EC1M 6BP
'Overseas Trade' is a monthly magazine published by the Department of Trade and Industry, aimed at keeping exporters up to date with tariff changes and opportunities in global markets. Contact:
The Department of Trade and Industry, 1 Victoria Street, London, SW1H OET
'Croner Reference Book for Exporters', is one in a large series of loose-leaf reference documents, regularly up-dated and available on subscription from:
Croner Publications, Croner House, London Road, Kingston upon Thames, Surrey, KT2 6SR
'Enterprise Initiative' is a government sponsored scheme providing the entrepreneur access to experts in various fields of business and marketing. A free booklet is available by telephoning: 0800 500 200
Government literature is also available free to those interested in marketing in Europe. Telephone: 081 200 1992

Useful Addresses for Exporters

Association of British Chambers of Commerce, Sovereign House, 212a Shaftesbury Avenue, London, WC2H 8EW
British Exporters Association, 16 Dartmouth Street, London, SW1H 9BL
(Publishes and distributes a useful 'Directory of British Export Houses')
British International Freight Association (Incorporating the Institute of Freight Forwarders), Redfern House, Browells Lane, Feltham, Middlesex, W13 7EP
Croner Publications, Croner House, London Road, Kingston upon Thames, Surrey, KT2 6SR
(Publishes useful directories and sources of information of use to exporters)
Department of Trade and Industry Export Initiative (British Overseas Trade Board), 1 Victoria Street, London, SW1H OET
Institute of Export, Export House, 64 Clifton Street, London, EC2A 4HB
SITPRO (The Simpler Trade Procedures Board), 2nd Floor, Venture House, 29 Glasshouse Street, London, W1R 5RG
This organisation provides information and advice on documentation and payments procedures, customs regulations and import rules and regulations.
Export Licensing Branch, Department of Trade, Millbank Tower, Millbank, London, SW1P 4QU
FIS Publications Ltd., Adelphi Chambers, Houghton Street, Southport, Merseyside, PR9 ONZ
Issues a guide to all major exporters listed by country.
Overseas Status Report Services, British Overseas Trade Board, Department of Trade and Industry, Ashdown House, 123 Victoria Street, London, SW1E 6RB
Provides extensive services to exporters looking for foreign agents and distributors.
Fairs Promotions Branch, Dean Bradley House, Horseferry Road, London, SW1P 2AG

Regional Offices of the Department of Trade and Industry

DTI South East (Greater London)
Bridge Place, 88 - 89 Eccleston Square, London, SW1V 1PT
071 215 0575

DTI South East (Reading, Berkshire, Buckinghamshire, Hampshire, Isle of Wight and Oxfordshire)
40 Caversham Road, Reading, Berkshire, RG1 7EB
0734 395600

DTI South East (Kent, Surrey, East Sussex and West Sussex)
Douglas House, London Road, Reigate, Surrey, RH2 9QP
0737 226900

DTI East (Bedfordshire, Cambridgeshire, Essex, Hertfordshire, Norfolk and Suffolk)
Building A, Westbrook Research Centre, Milton Road, Cambridge, CB4 1YG
0223 461939

DTI North East
Stonegate House, 2 Groat Market, Newcastle upon Tyne, NE1 1YN
091 232 4722

DTI North West
Sunley Tower, Piccadilly Plaza, Manchester, M1 4BA
061 838 5000

DTI North West
Graeme House, Derby Square, Liverpool, L2 7UP
051 224 6300

DTI Yorkshire and Humberside
25 Queen Street, Leeds, LS1 2TW
0532 443171

DTI South West
The Pithay, Bristol, BS1 2PB
0272 272666

DTI West Midlands
77 Paradise Circus, Queensway, Birmingham, B1 2DT
021 212 5000

DTI East Midlands
Severns House, 20 Middle Pavement, Nottingham, NG1 7DW
0602 506181

DTI Northern Ireland
Industrial Development Board for Northern Ireland, Export Development Branch, Marketing Development Division, IDB House, 64 Chichester Street, Belfast, BT1 4JX
0232 233233

DTI Scotland
Industry Department, Exports Division, Alhambra House, 45 Waterloo Street, Glasgow, G2 6AT
041 242 5495

DTI Wales
Industry Department, New Crown Building, Cathays Park, Cardiff, CF1 3NQ
0222 825097

Appendix

A Country Guide

Note: Though embassies and representatives of foreign governments are not usually able to assist with specific information regarding exporting to their country, most will provide addresses and information relating to such as Chambers of Commerce and

various business and export information services of use to the intending exporter.

The following is but a brief selection of Embassies, Consulates and High Commissions with bases in Britain.

Argentina
49 Belgrave Sqauare, London, SW1X 8QZ
Australia
Australia House, Strand, London, WC2B 4LA
Austria
18 Belgrave Mews West, London, SW1X 8HU
Belgium
103 Eaton Square, London, SW1W 9AB
Brazil
32 Queen Street, London, W1Y 4AT
Canada
Macdonald House, 1 Grosvenor Square, London, W1X OAB
Chile
12 Devonshire Street, London, W1N 2DS
China
49-51 Portland Place, London, W1N 3AH
Denmark
55 Sloane Street, London, SW1X 9SR
Finland
38 Chesham Place, London, SW1X 8HW
France
58 Knightsbridge, London, SW1X 7JT
Germany
23 Belgrave Square, London, SW1X 8PZ
Greece
1a Holland Park, London, W11 3TP
Hong Kong
Hong Kong Government Office, 6 Grafton Street, London, W1X 3LB
Hungary
35 Eaton Place, London, SW1X 8BY
Iceland
1 Eaton Terrace, London, SW1W 8EY
India
India House, Aldwych, London, WC2B 4NA
Republic of Ireland
17 Grosvenor Place, London, SW1X 7HR
Israel
2 Palace Green, London, W8 4QB
Italy
14 Three Kings Yard, London, W1Y 2EH
Japan
43-46 Grosvenor Street, London, W1X OBA
Kuwait
45-46 Queens Gate, London, SW7 5HB
Libya
119 Harley Street, London, W1N 1DH
Luxembourg
27 Wilton Crescent, London, SW1X 8SD
Netherlands
38 Hyde Park Gate, London, SW7 5DP
New Zealand
New Zealand House, Haymarket, London, SW1Y 4TQ
Norway
25 Belgrave Square, London, SW1X 8QD
Portugal
11 Belgrave Square, London, SW1X 8PP
South Africa
South Africa House, Trafalagar Square, London, WC2N 5DP
Russia
13 Kensington Place Gardens, London, W8 4QX
Spain
24 Belgrave Square, London, SW1X 8QA
Sudan
3 Cleveland Row St James, London, SW1A 1DD
Sweden
11 Montagu Place, London, W1H 2AL
Switzerland
16-18 Montague Place, London, W1H 2BQ
Syria
8 Belgrave Square, London, SW1X 8PH
United Arab Emirates
20 Princes Gate, London, SW7 1PT
United States
24 Grosvenor Square, London, W1A 1AE
Uruguay
48 Lennox Gardens, London, SW1X ODL
Venezuela
1 Cromwell Road, London, SW7 2HW
Yugoslavia
5-7 Lexham Gardens, London, W8 5JU