step to step guide to exporting

8/6/2019 Step to Step Guide to Exporting

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Step-by-Step

Gulde to Exportlng2008


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Prepared for:

Foreign Affairs and International Trade Canada

Prepared by:Write Away

Acknowledgments

Some Tips were adapted from the Canadian

Trade Commissioner Service publication, Expand

Your Horizons. Some Pitfalls were adapted from

material from Export Development Canada.

Export Myths were adapted from Exporting

Basics by Maurice Kogon, Director, Centre for

International Trade Development, El Camino

College, Torrance, CA, U.S.A.

Disclaimer

This information is to be considered solely as a

guide and should not be quoted as, or considered

to be, a legal authority. It may become obsolete

in whole or in part at any time without notice.

ISBN: FR5-27/2008E-PDF

Catalogue no.: 978-0-662-48363-2


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G U I D E T O E X P O R T I N G 2 0 0 8 i

About the Guide?

The Step-by-Step Guide to Exportingis intended to help you learn about the worldmarketplace and how your company can do business there. It concentrates on theoverall principles of exporting and describes the processes that businesses commonlyuse to develop export strategies tailored to their needs. Among other things, theguide will help you:

I assess your companys export readiness;

I build an export plan;

I research and select your target market;

I create an export marketing plan;

I determine the best methods of delivering your product or serviceto your target market;

I develop a sound financial plan; and

I understand the key legal aspects of international trade.

Getting ready to do business outside Canada is a complex undertaking for anycompany. But the basic principles of exporting are quite straightforward andthousands of Canadian firms of all sizes and in all sectors have learned to use

them successfully. With careful planning and a solid commitment to becomingan exporter, your company can join them in the global marketplace.

Please Note

The information provided in the Step-by-Step Guide to Exportingis general innature. To ensure that your particular needs are met, always consult specialistssuch as the trade commissioners of the Regional Offices of Foreign Affairs andInternational Trade Canada, or call a Canada Business Network Information

Officer at 1-888-576-4444.


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ii S T E P B Y S T E P

Contents

1. Getting Started: AssemblingYour Export Potential 1

1.1 Exporting: Whats in it for you 1

1.2 Are you ready? 2

1.3 Evaluating your export potential 3

1.4 Science and technology innovation

and exports 3

1.5 Export quiz: Are you ready? 4

2. Globalization: Joining aGlobal Value Chain 7

2.1 About globalization 7

2.2 Understanding global value chains 7

2.3 The growth of global value chains 7

2.3.1 Declining costs of transportation 7

2.3.2 Improved information and communication

technologies 8

2.3.3 Reduced barriers to trade and investment 8

2.4 Global value chains and Canadian exporters 8

2.5 Global value chains and your business 8

2.5.1 Provide an intermediate input for

an existing value chain 8

2.5.2 Develop your own global value chain

through outsourcing 8

2.5.3 Use FDI to connect to or establisha global value chain 9

2.5.4 Focus on service sectors 9

3. Charting Your Route: DevelopingYour Export Plan 11

3.1 Why plan? 11

3.2 The foundation: Your business plan 11

3.3 Building on the foundation: Your export plan 11

3.4 The elements of your export plan 11

4. Setting Out: Identifying YourTarget Market 13

4.1 Understanding international market research 13

4.2 The kinds of market research 14

4.2.1 Secondary research 14

4.2.2 Primary research 14

4.2.3 Online resources 14

4.2.4 Profiling potential markets 14

5. Reaching the Customer: DevelopingYour Export Marketing Strategy 17

5.1 Understanding export marketing plans 17

5.2 The many Ps of international marketing 17

5.3 Building your export marketing plan 18

5.4 Setting prices 18

5.4.1 Market demand 19

5.4.2 Competition 19

5.4.3 Pricing strategies 19

5.5 Promotion 19

5.6 Marketing tools 20

5.7 Pricing checklist 21

6. Opening the Door:Entering Your Target market 23

6.1 Understanding entry strategies 23

6.2 Working out your entry strategy 23

6.3 Methods of market entry 23

6.3.1 Direct exports 23

6.2.2 Indirect exports 24

6.3.3 Partnerships 24

6.3.4 Acquisitions and investments 25

6.3.5 Selling to foreign governments 25

6.4 Intermediaries 25

6.4.1 Agents and representatives 26

6.4.2 Trading houses 26

6.4.3 Foreign distributors 26

6.5 Choosing an intermediary 26


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G U I D E T O E X P O R T I N G 2 0 0 8 iii

7. Shippers and Shipping:Delivering the Goods 29

7.1 International trade regulations 29

7.2 Export declarations 297.3 Export permits 29

7.4 Delivering products 30

7.5 Freight forwarders and brokers 30

7.6 Packing your goods 30

7.7 Labels and marks 31

7.8 Transportation insurance 31

7.9 Export documentation 31

7.9.1 Shipping documents 31

7.9.2 Collection documents 31

7.10 Duty Deferral and Duty Relief 32

7.11 Delivering services: How its different 32

8. Paying Your Way: Planning YourExport Financing 33

8.1 Understanding the risks of export financing 33

8.2 Planning your export finances 33

8.3 Where to get financial help 34

8.3.1 EDCs working capital solutions 34

8.3.2 Business Development Bank of Canada 36

8.3.3 Trade Routes Contributions Program 35

8.3.4 Canadian Agriculture and

Food International Program 35

8.4 Finally, its payday 35

8.4.1 Cash in advance 35

8.4.2 Letters of credit 35

8.4.3 Documentary credit 36

8.4.4 Documentary collection 36

8.4.5 Open account 36

8.5 I nsuring against non-payment 36

9. The Fine Print: Understanding theLegal Side of International Trade 37

9.1 Understanding international contracts 37

9.2 Understanding the proper law 379.3 Resolving disputes 37

9.4 Meeting international standards 38

9.5 Corporate Social Responsibility 38

9.5.1 Operating according to CSR principles 39

9.5.2 CSR and corruption 39

9.6 Contracts for the sale of goods 39

9.6.1 Transfer of title and the effects of transfer 39

9.6.2 Delivering the goods 40

9.6.3 Acceptance or refusal of goods 40

9.6.4 Unpaid sellers rights 40

9.7 Contracts for the sale of services 40

9.8 Negotiating in other business cultures 40

9.9 Protecting intellectual property rights 41

10. Selling Online: E-Businessfor Exporters 43

10.1 Understanding e-business 43

10.2 E-business applications and benefits 43

10.3 Assessing your e-business potential 43

10.4 Website suitability 44

10.5 T he technical side of e-business 44

10.6 Finding e-leads 45

10.7 Checking e-leads 45

10.8 Getting paid 45

10.9 Supporting your online customers 45

Appendix A: Your Exporting Checklist 47

Appendix B: Resources for Exporters 49

Appendix C: Glossary of InternationalTrade Terms 51


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1

G U I D E T O E X P O R T I N G 2 0 0 8 1

Getting Started: Assessing

Your Export Potential

First of all, do your homework and know

yourself. Realize that it is a commitment for

a long, long term. Know your strengths

Do your research on your product or your

service and then go for it. Exporter

1.1 Exporting: Whats in it for you

The globalization of the worlds economies has been pro-ceeding rapidly since the early 1990s. Many companiesthat once used little but domestic materials and labour tomanufacture their products or services now go to marketsabroad to acquire the resources they need. These devel-opments, coupled with the steady dismantling of tradebarriers around the world, have opened up the globalmarketplace to an unprecedented degree.

This is good news for Canada, since weve always been atrading nation. The combined value of our exports andimports consistently accounts for about two-thirds of thecountrys GDP, which demonstrates the vital importanceof global trade to our national well-being. Many Canadiancompanies already have long experience in the interna-tional market, and more are joining them every year asthe liberalization of global commerce continues.

Why, though, would a company thats already doing wellwithin Canada consider becoming an exporter? Thereare several good reasons, including:

I

Increased sales if domestic sales are good, exportingis a way to expand your market and take advantage ofdemand around the world. You may also find foreignniche markets where your product is rare or unique.

I Higher profits if you can cover fixed costs throughdomestic operations or other types of financing, yourexport profits can grow very quickly.

I Economies of scale when you have a larger marketbase, you can produce on a scale that lets you makethe most of your resources.

I Reduced vulnerability if you diversify into interna-tional markets, you avoid depending on a single mar-ketplace. A domestic downturn, for example, will beless damaging if you have other markets where demandremains high.

I New knowledge and experience the global market-place abounds with new ideas, approaches and market-ing techniques. You may find them very successful in

Canada, too.I Global competitiveness foreign companies are enter-

ing Canadian markets and Canadian companies aregoing foreign. The experience your company gainsinternationally will help keep you and Canada com-petitive in the global marketplace.

I Domestic competitiveness if your company succeedsin the global marketplace, it means your product cancompete with the best the world can offer. This helpsyou succeed at home and ensures your resiliencewhen faced with foreign competition in Canada.

Exporting does require you to deal with a variety of chal-lenges, but you can surmount them through carefulpreparation and planning. Among these challenges are:

I Increased costs an exporting venture means youllhave to meet many short-term costs for things such asextra travel, production of new marketing materials andperhaps additional staff. You may have to modify pack-aging, or your products or services, to adapt them tomarkets abroad.

I Level of commitment it takes time, willingness,effort and resources to establish and maintain yourselfin foreign markets.

I Staying in for the long haul while exporting holdsgreat economic promise for most companies, you canexpect months or even several years to pass before yousee a significant return on your export investment.

I Cultural differences youll need to familiarize your-self with the differences in language, culture and busi-ness practices in your target market. If you dont, yourisk inadvertently offending your potential customerand losing a sale.


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I Paperwork youll have to get used to it. Both Cana-dian and foreign governments require a lot of docu-mentation from exporters of products and services.

I Accessibility you have to be easily available to yourforeign clients.

I Competition you must be sure youre thoroughlyfamiliar with the competition in your target market.

Source: Adapted with permission from the Forum for Interna-tional Trade Training, Going Global.

Finding help

The booklet RoadMap to Exporting, available atcanadabusiness.ca/roadmap, will help potential andexperienced Canadian exporters with all aspects of in-ternational trade. It provides resources and contact in-formation to help businesses with export counselling;

marketing strategy information; market entry sup-port; export financing; and in-market

Exporting goods versus exporting services

Exporting goods and exporting services present quitedifferent challenges. The former must deal with packag-ing, customs and physical delivery, for example, whilethe latter confronts issues such as work permits, creden-tial validation, and travel to and from the market.

1.2 Are you ready?

An export-ready business is one that has a marketableproduct or service, and the capacity, resources andmanagement commitment to deliver it on a global scaleat a competitive price. The trick is to determinewhether this is true of your company and if it isnt,how to make it happen.

Your first step is to think about the resources and knowl-edge your business already has. To begin, consider:

Your expectations do you have:

I clear and achievable export objectives;

I a realistic idea of what exporting entails;

I an openness to new ways of doing business; and

I an understanding of what is required to succeed inthe international marketplace?

Human resources do you have:

I the capacity to handle the extra demand associatedwith exporting;

I a senior management committed to exporting;

I efficient ways of responding quickly to customer

inquiries;I personnel with culturally-sensitive marketing skills;

and

I ways of dealing with language barriers?

Financial and legal resources can you:

I obtain enough capital or lines of credit to produce theproduct or service;

I find ways to reduce the financial risks of internationaltrade;

I find people to advise you on the legal and tax implica-tions of exporting;

I deal effectively with different monetary systems; andensure protection of your intellectual property?

Competitiveness do you have:

I the resources to do market research on the exportabil-ity of your product or service;

I proven, sophisticated market-entry methods; and

I a product or service that is potentially viable in your

target market?

EXPORT MYTH

Im too small to be an exporter

No, youre not! To succeed in international markets,you dont have to be a big firm with lavish resourcesand an entire department devoted to exporting. Tensof thousands of Canadian small and medium-sizedcompanies those with foreign sales of between$30,000 and $5 million are currently exporting andare doing very well at it.

2 S T E P B Y S T E P


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1.3 Evaluating your export potential

Can your product or service find a worthwhile marketoutside Canada? Its crucial to answer this question satis-factorily if theres no demand for what youre offering,youd obviously be unwise to proceed. Here are some

things to take into account when youre analyzing yourexport potential:

Customer profile

I Who already uses your product or service?

I Is it in broad general use or limited to a particulargroup?

I Is it popular with a certain age group?

I Are there other significant demographic patterns toits use?

I What climatic or geographic factors affect the use

of your product or service?

Product modification

I Are modifications required to make it appeal toforeign customers?

I What is its shelf life? Will this be reduced by time intransit?

I Is the packaging expensive? Can it be easily modifiedto satisfy the demands of foreign customers?

I Is special documentation required? Does it need tomeet any technical or regulatory requirements?

Transportation

I How easily can it be transported?

I Would transportation costs make competitive pricinga problem?

Local Representation

I Does it require professional assembly or other technicalskills?

I Is after-sales service needed? If so, is it availablelocally or do you have to provide it? Do you have theresources to do this?

Exporting Services

I If youre exporting services, what is unique or specialabout them?

I Are your services considered to be world-class?

I Do you need to modify your services to allow for differ-ences in language, culture and business environment?

I How do you plan to deliver your services: in person,with a local partner or by electronic means such asthe Internet?

Capacity

I Will you be able to serve both your existing domesticcustomers and your new foreign clients?

I If your domestic demand increases, will you still beable to look after your export customers or vice versa?

TIP: Involving yourself in events held by the exportcommunity in your area can help you learn about in-ternational trade. Seminars and business breakfasts,

for example, can be excellent opportunities to profitfrom other peoples experience with exporting.

PITFALL: Lack of commitment when start-upproblems arise, the exporter does not have the deter-mination or financial resources to deal with them.

1.4 Science and technology

innovation and exports

Historically, Canadas major exports have been natural

resources and commodities. But in a global marketplacethat recognizes science and technology (S&T) as cruciallyimportant generators of wealth and competitiveness, wecannot depend too much on our natural resources for oureconomic well-being. Diversifying our exports, especiallyin sectors related to S&T, is an essential strategy if we areto maintain a robust and adaptable economy.

The Government of Canada has established S&T devel-opment as a major economic priority for the foreseeablefuture. This includes not only advanced R&D, but alsothe commercialization of our S&T innovations and theirtransfer to the global market. This outward-lookingapproach is important because strong international S&Tlinkages help connect Canadian firms to the global mar-ketplace of ideas, talents and technologies. In turn, it en-sures that our exporters have access to leading-edgeresearch, which boosts Canadas competitiveness andproductivity and ultimately leads to a higher standardof living for all Canadians.



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Looking abroad is even more important when one con-siders the relatively small size of the Canadian market formany advanced technologies; in the aerospace sector, forexample, the volume of domestic demand simply cantsupport the full-fledged commercialization of a serviceor product. Finding an international market by becom-

ing part of a global value chain, or by supplying compa-nies that are already established in such a chain, can beessential to an S&T companys survival.

If your company falls into this category, you will almostinevitably have to become an exporter and enter theglobal market. Exporting in this context can, of course,mean more than shipping goods abroad or providingservices in a foreign country. It can also mean joining aglobal value chain through R&D collaboration with anoverseas company, forming an international partnershipto commercialize a product, or investing in a foreignbusiness whose research and innovations complement

your own.

1.5 Export quiz: Are you ready?

Is your business ready to start exporting? Take the quiz,check your score and be sure.

1. Is your product or service already available?

A. currently in production or being developed

B. at the prototype stage

C. at the idea stage only

2. Is your product or service selling in the Canadian

market?

A. selling, and market share is growing

B. selling, but market share is low

C. selling in only one city in Canada

3. Do you have the surplus production capacity or

available specialists to meet increased demand foryour product or service?

Yes / No

4. Do you have the financing required to adapt yourproduct or service to suit your target market and to

promote it?

A. financing is in place

B. financing is being arranged

C. no financing available

5. Is your management committed to sustaining your

export effort?

Yes / No

6. Does your firm have a good track record of meetingdeadlines?

Yes / No

7. Does your management have experience in exportmarkets?

Yes / No

8. Does your product or service have a distinct com-petitive advantage (quality, price, uniqueness, inno-

vation) over your competition?

Yes / No

9. Have you adapted your packaging (labelling and/orpromotional materials) for your target market?

Yes / No

10. Do you have the capacity and resources to provide

after-sales support and service in your targetmarket?

Yes / No

11. Do you have a Free on Board (FOB) or Cost, Insur-

ance and Freight (CIF) price list for your product,or a rate list for your service?

Yes / No

12. Have you undertaken any foreign market research?

A. completed primary and secondary market research, including a visit to the target market

B. completed some primary and secondary marketresearch

C. no research



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13. Is your promotional material available in thelanguage of your target markets? (Business cards,

brochures, websites)

Yes / No

14. Have you started marketing your product or

service in your target market?Yes / No

15. Have you engaged the services of a sales represen-tative/distributor/agent, or partnered with a local

firm?

Yes / No

16. Have you hired a freight forwarder or customs

broker?

Yes / No

Source: Adapted with permission from Foreign Affairs and

International Trade Canada, Businesswomen in Trade OnlineAssessment.

How did you score?

If you selected A, or answered Yes to 1216 ques-tions, congratulations! You understand the commit-ment, strategies and resources needed to be asuccessful exporter. At the very least, you have thefoundation in place to take on the world and succeed.

711: Not bad, but there are weaknesses in your export

strategy. It may be wise to seek advice and guidancefrom government experts, export consultants or theinternational trade branch of your financial institution.

Less than 7: While you may be ready to visit farawaylands, youll need to do more homework before youexport. Consider getting help from the sources men-tioned in this chapter.



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2Globalization: Joining

a Global Value Chain

2.1 About globalization

Economic globalization refers to the rapid expansion ofinternational trade and capital flows that has been occur-ring since the early 1990s and to the increase in foreigndirect investment (FDI) that has accompanied this ex-

pansion. As a result, the economies of the worlds coun-tries have become much more closely integrated thanever before.

Thats the abstract way of looking at globalization. Inconcrete terms, globalization has caused myriads of busi-nesses to divide their products or services into compo-nents. Then, instead of producing the componentsthemselves or obtaining them from domestic suppliers,they outsource certain aspects of the work and acquirethese goods or services from suppliers, partners or affili-ates in other countries. These components, together withthe activities that create them, make up the links of what

economists call a global value chain.

2.2 Understanding global

value chains

According to the Office of the Chief Economist atCanadas Department of Foreign Affairs and Interna-tional Trade (DFAIT), a value chain (whether global ornot) consists of the full range of activities that are re-quired to bring a good or service from its conception toits end use and beyond. This includes activities such asdesign, production, marketing, distribution and supportto the final consumer. The activities that comprise avalue chain can be contained within a single firm or di-vided among different firms, and can be a single geo-graphic location or spread over wider areas.

When those activities are no longer contained within a sin-gle geographic location such as a country, but instead arescattered across the planet, we have a global value chain.

Global value chains arent new. Trade and investment werebecoming broadly internationalized in the late 19th andearly 20th centuries as transportation costs fell and tradebarriers remained low in 1879, for example, 95 percentof Germanys imports entered the country without payingany duty at all. But this earlier move toward globalizationceased abruptly with the outbreak of World War I, andtentative attempts to revive it were stopped in their tracksby the Great Depression and the upheaval of the SecondWorld War. In many respects, globalization didnt reallyresume until the last quarter of the 20th century.

Since then, global trade has been shifting away from thetraditional export model, in which companies manufac-ture products in one country and sell them in another.It is also departing from the branch-plant approach,wherein a business produces its goods in a foreignmarket and sells them almost exclusively in that market.Instead, international trade is now increasingly charac-terized by the movement of intermediate inputs (for bothgoods and services) along a global value chain whoselinks may be anywhere in the world.

2.3 The growth of global valuechains

According to the Office of the Chief Economist, there arethree major forces driving the growth of global value chains.

2.3.1 Declining costs of transportation

As transportation costs fall, companies can move theirgoods and services across greater distances without los-ing competitiveness in their target markets. Unless timeconcerns dictate otherwise, there is thus no particular

need for a company to locate its facilities close to its sup-pliers or consumers, so it can establish them in locationsthat offer the best competitive advantages.



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2.3.2 Improved information andcommunication technologies

More flexible, adaptable and cheaper information andcommunication technologies (ICT) mean that compa-nies are much less limited by distance when operating in

foreign markets. Advances in ICT have also made it pos-sible to trade in services that depend on the very rapidmovement of large volumes of data (such as software de-velopment or financial services) or real-time communi-cations (such as online medical diagnosis orteleconferencing).

2.3.3 Reduced barriers to tradeand investment

The number of bilateral trade and investment treatieshas been increasing quickly during the past 20 years.

Global tariff rates have been falling steadily over thesame period, and developing markets such as India andChina have been liberalizing their economies at a rapidpace. This lowering of barriers to trade and investmenthas accelerated the growth of global value chains as com-panies gain access to markets that were formerly closedto them.

2.4 Global value chains and

Canadian exporters

Global value chains take advantage of open borders andeconomic liberalization so that each link of the chain canspecialize in what it does best. This leads to greater effi-ciency, increased productivity and lower consumerprices for higher-quality goods and services. At the sametime, this trade environment stimulates intense globalcompetition that encourages innovation all along thevalue chain.

As global value chains have evolved, companies world-wide have had to adapt to the new realities they present.In one common strategy, a firm can create its own globalvalue chain by outsourcing some of its non-core activi-ties; it might, for example, shift its product-assembly op-erations to suppliers, partners or affiliates in countrieswith lower labour costs or other competitive advantages.An alternative approach, especially for small andmedium-sized enterprises (SMEs) is to supply goods orservices to a global value chain that has already been es-tablished by another company, including a foreign multi-national; by doing so, the SME can make itself part ofthat particular value chain.

In general, Canada has been reasonably successful atadapting to these changing conditions. Our excellent R&Denvironment and highly skilled workforce, together withour long experience as a trading nation, have underpinnedthis success. However, as companies become more inter-nationally mobile, they will redouble their efforts to find

business-friendly places to operate, and Canada will haveto meet the challenge of attracting and retaining the high-value activities that support a technologically advanced,diversified and prosperous economy. Canadian businessescan play a part in this in several ways: for example, byleading the creation of global value chains for their indus-try sector, by participating in existing chains, by mergingwith larger firms or by acquiring other companies.

2.5 Global value chains and your

business

You have a considerable range of strategies for benefitingfrom global value chains. The following are among themost common; you can use them by themselves or com-bine them, depending on your needs.

2.5.1 Provide an intermediate input for anexisting value chain

If your product is something that another company (eitherCanadian or foreign) uses as an intermediate input for itsown activities within a global value chain, you may be ableto link into that chain by becoming a supplier to the com-pany. This is a very common approach and certainly thesimplest, since it closely approximates the traditionalmodel of production and/or exporting. For SMEs, espe-cially for those with niche technologies or specializations,new opportunities are emerging to sell to multinationalsor their suppliers, especially as these firms outsource ac-tivities that were previously carried out internally.

2.5.2 Develop your own global value chainthrough outsourcing

If your company manufactures either finished productsor intermediate inputs for other companies, you can useoutsourcing to set up your own global value chain. Thismeans that you acquire your own intermediate inputs,such as raw materials, components, subsystems and othergoods and services, from foreign suppliers, and use themto manufacture your finished product or intermediateinput in Canada (or in another country, for that matter).



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2.5.3 Use FDI to connect to or establisha global value chain

By investing abroad you can gain immediate access to aforeign market, allowing you to expand your sales andpromote your companys growth. There is a broad spec-

trum of investment approaches, ranging from the passiveto the active.

You might, for example, become part of a global valuechain simply by investing in a foreign company while tak-ing little or no part in its operations. Purchasing a foreignfirm, or setting up a joint venture or partnership with a for-eign company, might also work for you; either of thesestrategies lets you take advantage of the other firms assetsand experience, which will both increase your competitive-ness in the local market and give you better control of localproduction and distribution networks. This approach canbe very cost-effective if you obtain existing production and

distribution capabilities though the investment and dontneed to build them from the ground up.

At the active end of the spectrum, you could become afull participant in a foreign market by establishing awholly-owned subsidiary there. This investment strategypresents a range of advantages that can help you driveand benefit from the global value chains of which yourcompany is a part. Perhaps the most important of these

advantages is that you arent dependent on a partner, soyou control the direction your subsidiary will take. Youalso have direct contact with your end users, which isgood for developing new products and for building solidcustomer relationships. Your company and its role in thevalue chain are likely to become better known, since your

identity isnt obscured by the presence of a partner. Fi-nally, your overseas staff answers only to you, and all datarelated to your foreign operation is at your sole disposal.

2.5.4 Focus on service sectors

The service sector is opening up all over the world andprovides many opportunities in the financial, educa-tional, consulting, environmental, engineering and archi-tectural sectors, to name just a few. Even if youreprimarily a manufacturer, you may be able to move upthe value chain by branching into value-added servicesrelated to your sector, such as design, distribution, mar-

keting and logistics.Secondary industries related to your sector may provide ad-ditional opportunities. Companies are demanding an in-creasing variety of services to facilitate tradesuch asfinancial, information processing, telecommunications, lo-gistics, and legal servicesand your company may have spe-cialized expertise that is directly applicable to such activities.



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3Charting Your Route:Developing Your Export Plan

It is critical to understand your market and

the major focus of your business before you

enter the international marketplace. Align

yourself with strategic partners, find your

niche in the marketplace and localize your

products to meet the market demand.

Canada Export Award Winner

3.1 Why plan?

If you plan your export project thoroughly, youll have abetter chance of doing well in your target market. Badplanning (or no planning) will undermine yourprospects of success, and keep in mind that a major fail-ure abroad could severely damage your domestic opera-tions as well.

Financial institutions and other lending agencies will notnormally provide funds to a business that lacks a well-developed export plan. At other stages of the exportprocess, potential partners and investors may commit

themselves only if your plan clearly sets out your objec-tives along with the processes and resources youll use toachieve them.

In short, youll get nowhere without an export plan. Thischapter will help you create one.

EXPORT MYTH

Exporting is too complicated

It can seem that way, but remember that you dont

have to do everything yourself. You can use outsideexperts such as export management companies, over-seas agents, foreign distributors or freight forwarders.While youre getting established as an exporter, theycan represent you, find overseas customers, managesales orders, handle paperwork and deliver the goods.

3.2 The foundation: Your business plan

A good export plan begins at home, and is built on acomprehensive business plan that accurately reflectsyour current domestic operations. If your business planis out of date, now is the time to review and renew it. Ifyou dont have one, this is definitely the time to createone. For more information, go to the Canada BusinessStart-up Assistant at www.bsa.canadabusiness.ca, whichhas a section on preparing business plans.

TIP: Contact your industry association to find names ofsuccessful exporting companies in your sector and tar-

get market. You can then set up a network of businesscontacts who can provide you with practical advice.

3.3 Building on the foundation:

Your export plan

Once youve polished up your business plan, you canstart creating your export plan. It isnt something youllfinish in a week, though, and even after youve begun ex-porting, youll need to update it regularly.

TIP: The trade commissioners of the Canadian TradeCommissioner Service provide assistance to small andmedium-sized Canadian companies, free of charge.There are Trade Commissioner Service offices inevery province; to find your local office, visit www.infoexport.gc.ca and click on Our Offices in Canada.

TIP: The financial needs of your export venture willaffect the complexity and length of your export plan. Afinancing plan for a multiphase, high-value project willbe more complex than one for a $10,000 transaction.

3.4 The elements of your export plan

An export plan is really just a business plan that focuses oninternational markets. It identifies your target market(s),export goals, necessary resources and anticipated results.



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Your export plan should contain the following:

1. Introduction

I business history

I vision and mission statement

I purpose of the export plan

I organizational goals and objectives

I international market goals

I short and medium-term objectives for exporting

I location and facilities

2. Organizational issues

I ownership

I management

I staffing

I level of commitment by senior management

I relationship between exporting and other operations

I corporate experience and expertise in exporting

I strategic alliances

I labour market issues

3. Products and services

I description of products and services

I key features

I adaptation and redesign required for exporting

I production of products and services

I future products and services

I comparative advantage in production

4. Market overview

I market research

I political environment

I economic environment

I size of market

I key market segments

I purchase process and buying criteria

I description of industry participants

I market share held by imports

I tariff and non-tariff barriers

I industry trends and other market factors

I market outlook

5. Market entry strategy

I target markets

I description of key competitors

I analysis of competitive position

I product positioning

I pricing strategy

I terms of sale

I distribution strategy

I promotion strategy/development of sales leads

I description of intermediaries and partners

6. Regulatory and logistical issues

I intellectual property protection

I other regulatory issues

I modes of transportation and cargo insurance

I trade documentation

I use of trade service providers

7. Risk factors

I market risks

I credit and currency risks

I political and other risks

8. Implementation plan

I key activities

I evaluation criteria and process

9. Financial plan

I revenues or sources of funding

I cost of sales

I marketing and promotion costs

I other expenses or expenditures

I operating budget



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4Setting Out: IdentifyingYour Target Market

Take the time to examine the local culture,

find out how things are done there and adapt.

Part of the process includes finding the right

local partner.

Canada Export Lifetime Achievement Award Winner

4.1 Understanding international

market research

After the export plan, market research can be the mostimportant contributor to international success. There areabout 190 countries in the world, and you obviouslywant to pick the right one(s) for your product or service.

To do this, you need information that will provide a clearpicture of the political, economic and cultural factors af-fecting your operations in a given market. For example,you may already be aware of an opportunity in a foreignmarket, but need specific information to take advantageof it. Or perhaps you have a target market in mind andyou want more detailed knowledge of the demand foryour product or service.

Market research is the key to understanding your oppor-tunities. It can confirm that an opportunity actually ex-ists in a particular market and can help you analyze themarkets characteristics. It can give you insight into howa new market can be developed. Most important, it helpsyou discover whats important to your potential cus-tomers and what may influence their buying decisions.

Although theres usually a lot of detail involved, the threebasic steps of international market research arent partic-

ularly complex. They are:

Step 1: Screen potential markets

Collect statistics related to your sector that show productor service exports to various countries.

Identify five to 10 large and fast-growing markets foryour product or service. Look at them over the past threeto five years. Has market growth been consistent year

over year? Did import growth occur even during periods

of economic recession? If not, did growth resume witheconomic recovery?

Select some smaller emerging markets that may holdground-floor opportunities for you. If the market is justbeginning to open up, you may not have as many com-petitors as you would in an established market.

Target three to five of the most promising markets forfurther study.

Step 2: Assess target markets

Examine trends that could influence demand for yourproduct or service. Calculate the overall consumption ofproducts or services like yours and identify the amountimported.

Study the competition, both domestic and non-domestic.Look at each competitors Canadian market share.

Identify what affects the marketing and use of the prod-uct or service in each market, such as channels of distri-bution, cultural differences and business practices.

Identify any foreign barriers (tariff or non-tariff) for the

product or service being imported into the country, aswell as any Canadian barriers (such as export controls)affecting exports to the country.

Search for Canadian or foreign government incentives topromote the export of the product or service.

Step 3: Draw Conclusions

After analyzing the data, you may decide that you shouldrestrict your marketing efforts to a few countries. In gen-eral, new-to-exporting companies should concentrate onfewer than ten markets. One or two countries are usually

enough to start with.

With these conclusions in hand, you can then begin todevelop your marketing strategy (see Chapter 5).

Source: Adapted with permission from Western Economic Diver-sification Canada, READY FOR EXPORT: Building A Founda-tion For A Successful Export Program.



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TIP: Exploring foreign markets can take longer andcost more than you expect. Be prepared for additionalexpenses for market research, product launches andpersonal visits.

PITFALL: Going it alone opportunities are missed

when the exporter doesnt investigate potential strate-gic partnerships, joint ventures and technology ex-changes.

4.2 The kinds of market research

There are many ways to study a market, so the secondstep of your international market research may take dif-ferent forms. You might sometimes rely on a gut feel-ing, and at other times use sophisticated statisticaltechniques. The more detailed and objective your re-search, however, the better.

There are two main types of market research, secondaryand primary.

4.2.1 Secondary research

You do this in Canada, using data such as periodicals,studies, market reports, books, surveys and statisticalanalyses. Many of these are available online, as well asthrough chambers of commerce, economic developmentorganizations, industry and trade associations, andCanadian companies that are already doing business in

your target market.

4.2.2 Primary research

After completing your secondary research, you move onto the primary research phase. Here you collect marketinformation through direct contact with potential cus-tomers or other sources.

Primary research almost always demands direct, per-sonal involvement through interviews and consultations.Your foreign or domestic contacts will be able to helpyou better if you state your companys objectives at theoutset and present your questions clearly. For example:

Company Description give a brief description of yourcompany, its history, industries/ markets served, profes-sional affiliations (if any), and your product or service.

Objectives briefly list or describe one or more objec-tives for your planned export product or service, basedon your secondary market research.

Product or service clearly describe the product or serv-ice you want to export.

Questions base your questions on your secondary re-search and be as specific as possible. Youll get a betterresponse if its clear that youve carefully researchedyour subject.

4.2.3 Online resources

The export section of the Canada Business website atwww.canadabusiness.ca/export brings together federaland provincial/territorial resources on the Canadian ex-port market, including links to market and sector infor-mation, trade statistics, and sources of trade leads andpotential partners..

The Canadian Trade Commissioner Service at www.infoexport.gc.ca will give you access to hundreds of

market studies and country reports. CanadExport atwww.canadexport.gc.ca is another excellent source ofcurrent business news and market studies. It will alsokeep you informed about upcoming trade conferencesand trade shows. For companies in the agri-food sector, awealth of market studies and country reports is availablethrough the Agri-Food Trade Service website of Agricul-ture and Agri-Food Canada; youll find it at http://ats-sea.agr.gc.ca.

EXPORT MYTH:

I cant compete overseasThats not necessarily true. Even if your product orservice has no obvious foreign market as yet, theworld is a big place with many needs and appetites.After all, your business sells domestically, so whyshouldnt it find customers abroad? And remember,price isnt the only selling point other factors suchas need, utility, quality, service and consumer tastecan make you competitive even if your prices arentthe lowest in the market.

4.2.4 Profiling potential markets

Heres a checklist to help you summarize what you learnabout a possible market. After youve created two orthree profiles, you can compare them to see which one(s)present the best overall opportunities.



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1. Market type

Is it:

I a fully developed market (Canada, Germany,the U.S.)

I a developing market with rapid growth (China,India)

I a developing market with marginal growth(many African nations)

2. Political highlights

Describe:

I the government

I whos who

I major political themes

I relations with Canada, including agreements

3. Economic highlights

Describe:

I the domestic economy

I economic trends

I general imports and exports

I imports and exports to and from Canada

4. Business information

Specify:

I the currency

I the language

I business practices and regulations

I any differences in legal framework

I government procurement practices

I work relationships

I office hours

5. Partnering options

List:

I Canadian firms doing business in the targetmarket

I major firms from the target market doingbusiness in Canada

I options for local partners

6. Support for market-entry strategies

Identify:

I industry associations

I trade events in the target market

I other networking options

I trade media

I research facilities

I market research sources

7. Cultural considerations

Specify:

I greetings

I forms of address

I dos and donts

I

cultural differencesI attitude toward Canadians

I general tips

8. Travel tips

Describe:

I visa or other requirements

I work permits needed

I business support services

I suitable hotels

I telecommunications standards

I tipping customs

I electrical voltage

I religious holidays



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5Reaching the Customer:Developing Your Export

Marketing Strategy

Treat all markets differently. Dont assume

that because youre successful in one, youll

be successful in another. There are cultural

differences out there that you need to respect.

Canada Export Award Winner

5.1 Understanding export

marketing plans

Long before you fill your first order, youll need an ex-port marketing plan. While youre developing it, remem-ber not to confuse marketing with advertising, sales orpromotion. Marketing is strategy. The other three are thetools your strategy will use to reach your target audience.

A good marketing plan should answer the followingquestions:

According to your research, what are the characteristicsof your target market?

How do your competitors approach the market?

What is the best promotional strategy to use?

How should you modify your existing marketing materi-als, or even your product or service?

TIP: Building business relationships in foreign mar-

kets is best done face to face. Faxes, phone calls andemail are good for follow-up, but they cant competewith face-to-face contact.

5.2 The many Ps of international

marketing

The Four Ps of Marketingare commonly referred to asthe marketing formula and include:

Product what is your product or service and howmust it be adapted to the market?

Price what pricing strategy will you use?

Promotion how will you make your customers awareof your product or service?

Place how and where will you deliver or distributeyour product or service?

International trade is more complicated, and adds ninePs to the list to produce the 13 Ps of InternationalMarketing. They are:

Payment how complex are international transactions?

Personnel does your staff have the necessary skills?

Planning have you planned your business, market,

account and sales calls?

Paperwork have you completed all the requireddocumentation?

Practices have you considered differences in culturaland business practices?

Partnerships have you selected a partner to create astronger market presence?

Policies what are your current and planned policies?

Positioning how will you be perceived in the market?

Protection have you assessed the risks and taken stepsto protect your company and its intellectual property?

Source: Forum for International Trade Training, Going Global



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PITFALL: No translations the exporter should beprepared to have documents translated into the lan-guage of the target market. Current and potential cus-tomers will appreciate it.

5.3 Building your exportmarketing plan

Because marketing is an ongoing activity, your market-ing plan is a work in progress that youll modify continu-ously. As you develop it, consider the followingquestions:

I What is the nature of your industry?

I Who are your target customers?

I Where are they?

I

What is your companys marketing strategy?I What products or services do you plan to market?

I How will you price your products and services?

I Which segment of the market will you focus on?

I Does your marketing material accurately convey thequality of your products or services and the profes-sionalism of your company?

As for content, a good marketing plan is closely relatedto your export plan and should contain the following:

Executive summary state the purpose of your market-ing plan. This provides an overview of your objectivesand how the plan will be used in your exporting strategy.

Product or service analysis give a clear description ofyour export product or service, its unique selling pointsand how marketable it might be internationally.

Market analysis describe your target market in termsof size and trends. Include key economic, social, politicaland cultural characteristics, a profile of your target cus-tomer, buying patterns and factors influencing purchas-ing decisions.

Competitive analysis analyze the competitiveness ofyour product or service. This will help you to position iteffectively in your target market, and to decide pricingand marketing strategies.

Goals state your objectives in terms of market share,revenue and profit expectations. Indicate the positionyou would like to occupy in the target market and ex-plain how you will go about achieving it.

Marketing strategy describe your marketing strategy,including information on specific product or servicepricing recommendations, mode of delivery and pro-posed promotional methods.

Implementation list the activities youll undertake tocarry out your marketing plan, indicating target datesand who will perform the activities. Prepare a detailedmarketing budget.

Evaluation design a method of evaluating your mar-keting plan at various stages to determine if your goalsare being achieved and what, if any, modifications maybe needed.

Summary include a half-page summary of your mar-keting plan goals, describing how they fit into your over-all export plan.

PITFALL: Poor market research the exporter takesinsufficient time to collect background informationon the target markets, such as consumer demand, thecompetitive landscape, local import laws, customs re-quirements and other important factors.

5.4 Setting prices

Strategic pricing is one of the most important factors inachieving financial success in your export business. Partof setting a realistic export price, and therefore an appro-

priate profit margin, is to examine production, deliverycosts, competition and market demand. You should alsounderstand the variables of your target market and otherexport-related expenses such as:

I currency exchange rates;

I market research and credit checks;

I receivables/risk insurance;

I business travel;

I international postage, cable and telephone rates;

I translation;

I commissions, training charges and other costsinvolving foreign representatives;

I consultants and freight forwarders; and

I product or service modification and specialpackaging.



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5.4.1 Market demand

As in domestic markets, demand in foreign markets can af-fect your price. In other words, what will the market bear?

For most consumer goods, per-capita income is a fairlygood way to gauge a markets ability to pay. Per-capita in-

come for most industrialized nations is similar to that ofCanada or the United States, while it is much lower forthe rest of the world.

Its true that some products or services may create such astrong demand that even low per-capita income will notaffect their selling price. Generally, though, simplifyingproducts or services to reduce the selling price may bethe best option in less affluent markets.

Remember that currency valuations affect affordability.Your pricing should try to accommodate currency fluctu-ations and the comparative value of the Canadian dollar.

5.4.2 Competition

In domestic markets, few companies can set prices with-out considering their competitors pricing. This is alsotrue in exporting.

If you have many competitors in a foreign market, youmay have to match or undercut the going price to win ashare of the market. If your product or service is uniqueor new to a market, though, you may be able to set ahigher price.

5.4.3 Pricing strategies

How will each market affect your pricing? To begin with,you have to include things like product modifications,shipping and insurance in your calculations. And as men-tioned above, you cant ignore your competitors pricing.

Refer to your market objectives when setting your price.For example, are you trying to penetrate a new market?Looking for long-term market growth? Or pursuing anoutlet for surplus production?

You may have to tailor your marketing and pricing ob-jectives to certain markets. For example, pricing strate-gies for developing nations, where per-capita incomemay be low, will differ from your objectives for high per-capita markets.

This all means that you have several pricing strategiesavailable:

Static pricing charging the same price to all customers.

Flexible pricing adjusting prices for different types ofcustomers.

Full cost-based pricing covering both fixed and vari-able costs of the export sale.

Marginal cost covering only the variable costs of pro-duction and exporting, while you pay overhead andother fixed costs out of domestic sales.

Penetration pricing keeping your price low to attractmore customers, discourage competitors and gain quickmarket share.

Market skimming pricing the product high to makeoptimum profit among high-end consumers while thereis little competition.

After youve determined your costs and chosen your pric-ing strategy, establish a competitive price for your prod-uct or service that gives you an acceptable profit margin.

TIP: Business people and customers in most foreignmarkets will appreciate your efforts to learn abouttheir culture. Such efforts will probably increase theirinterest in doing business with you.

5.5 Promotion

The outcome of your promotional strategies can make orbreak your export venture. In this context, promotionrefers to all the communications tools you use to con-vince people to buy your product or service. They are:

Advertising carefully select the media that have awide circulation within your target audience. If few peo-ple have televisions, is radio a better bet? Or print?

Promotional materials you may need to redesign

your marketing materials and packaging to remove ele-ments that are inappropriate, offensive or meaningless inthe target market. Youll also need to translate these ma-terials into the native language, so be prepared to hire aprofessional translator with experience in commercialand business writing. And before you use the translation,have it double-checked by a native of the country.



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Direct mail a targeted direct mail campaign can bevery effective. Research and experience in your targetmarket will help you build a base of potential buyers andclients to whom you can direct your companys message.

Media publicity via the media is a good way to estab-lish awareness, profile and credibility. Prepare a mediakit that introduces a profile of your company, new prod-ucts/services or newsworthy activities. Include copies ofany articles published about your company.

Personal visits personal contact with potential clientsis perhaps the best means of promotion. Many culturesvalue such contact in their business relationships. Yourattention to it can impress your foreign contacts.

Trade shows attending or participating in interna-tional trade shows is an excellent promotional method. Italso allows you to check out the competition and domarket research. If its difficult for your company to take

part in a trade event, consider teaming up with otherCanadian companies, or joining a federal or provincialdelegation.

Internet its generally assumed that a business willhave a website. A well-designed site can help your exportventure in many ways, from promotion to customerservice. Be prepared to commit time and money to keep-ing the site up-to-date, though an outdated site can doyour enterprise more harm than good.

Branding Canada for agri-food companies

Is your company in the food and agricultural sector?If it is, you should know about Branding Canada, aprogram developed by Agriculture and Agri-FoodCanada in close partnership with industry andprovincial governments. This initiative is designed toleverage Canadas strong international image to in-crease the sales and profile of Canadian agri-foodproducts. For more information, refer towww.ats.agr.gc.ca/brandingcanada.

TIP: Be careful to look into the meanings that yourname or corporate image may have in the target mar-ket. You dont want to discover, too late, that they areinappropriate in the local language or culture.

5.6 Marketing tools

Getting your marketing tools right is crucially impor-tant. Heres a list of things to remember about them:

Business cards should be:

I professionally designed and of high quality;

I easy to read;

I in the appropriate language;

I consistent throughout your firm;

I distinctive and informative; and

I up-to-date and complete, including area codes,country, telephone and fax numbers, postal code,e-mail and website addresses.

Brochures should be:

I creative and appealing;I informative and easy to read, highlighting your

uniqueness;

I professionally designed and printed; and

I visually pleasing.

Customer testimonials should:

I show that your company is highly recommended;

I represent your best customers;

I be from top executives; and

I

be included in your brochure.

News articles should be:

I clear in stating that your company is a recognizedleader;

I quoted in your brochure;

I reproduced on your letterhead;

I displayed in your office; and

I sent to potential clients.

Videos should be:

I sophisticated and interesting;

I professionally produced;

I oriented to the quality and benefits of your productor service;

I clear and concise; and

I easily available.



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Websites must be:

I comprehensive and informative;

I professionally designed;

I visually pleasing;

I up-to-date;

I e-mail enabled; andI capable of allowing online purchasing (if appropriate).

5.7 Pricing checklist

Use this handy checklist to track your costs and developyour pricing strategy.

Marketing and promotion

I agent/distributor fees

I advertising, media relations

I travel

I communications

I materials (brochures, business cards)

I trade fairs and exhibitions

Production

I unit cost of manufacture

I product or service modification

I Preparation

I labelling

I packaging

I packing

I marking

Documentation

I inspection

I certification

I document preparation

I cargo insurance

I freight forwarders fees

Transportation

I lading and related charges

I carriage

I warehousing and storage

I insurance

Customs

I customs and others duties at port of entry

I customs brokerage fees

Financing

I costs of financing

I interest charges

I exchange rate fluctuations

I export credit insurance

Source: Forum for International Trade Training, Going Global


Marketing goods versus marketing services

This table outlines some of the differences between marketing services and marketing goods in an export environment.

FACTOR FOR GOODS FOR SERVICES

Demonstrations Sample product Presentation of capabilities

Initial marketing by Sales representatives Firms principals

Stages of marketing Marketing your product Marketing your firm andyour service

Local market presence Sales/distribution facility Office or virtual office in target market

INFORMATION NEEDS

Cultural factors Product design and packaging Interpersonal dynamics

Local associations Distributors, marketers Service industry

Local events Trade shows Conferences (as speaker)

Media Product advertising Press coverage

Local partners Production/distribution firms Other service firms

Government procurement Goods acquisition Services contracts


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6Opening the Door: EnteringYour Target Market

Its very important for new exporters to go to

a target market personally and get a feel for

local conditions. Its also important to partner

with someone whos familiar with the local

business culture. Exporter

6.1 Understanding entry strategiesDeveloping a market entry strategy simply means find-ing the best methods of delivering your goods to yourmarket and of distributing them there. Or, if youre ex-porting services, it means setting up ways to obtain andmanage contracts in the foreign country.

Foreign Affairs and International Trade Canada hastrade commissioners in every province who can help youdesign your market entry strategy. Outside Canada,trade commissioners in more than 140 cities can helpyou deal with the challenges of market entry. For moreinformation, visit www.infoexport.gc.ca.

Trade Routes support for cultural exports

Trade Routes is part of the federal governments De-partment of Canadian Heritage. It supports initiativesfrom arts and cultural organizations that are linked tothe development of long-term export strategies forthis sector. See www.pch.gc.ca/routes.

6.2 Working out your entry strategy

Based on your market research, youve chosen the mostpromising markets for your product or service. Usingwhat you know about these markets, you next decidewhich entry method best suits your needs. Some factorsto consider are:

I How is business conducted in your target market andindustry sector?

I What are your companys export strengths and

weaknesses?I What is your companys financial capacity?

I What product or service are you planning to export?

I How much service and after-sales support will yourcustomers require?

I What trade agreements or barriers apply to yourtarget market?

6.3 Methods of market entry

The traditional means of market entry fall into severalbroad categories: direct exports, indirect exports, partner-ships and acquisitions/investments . Well examine each ofthese and then look at the question of intermediaries agents, distributors and other go-betweens.

6.3.1 Direct exports

This varies depending on whether youre selling prod-ucts or services.

For products, you market and sell directly to the client.

For services, you negotiate, contract and work directlywith the client.

Direct exporting has advantages because it can:

I give a higher return on your investment than sellingthrough an agent or distributor;

I allow you to set lower prices and be more competi-tive; and

I give you close contact with your customers.

It also has disadvantages, because:

I you dont have the services of a foreign intermediary,so you may need longer to become familiar with themarket; and

I your customers or clients may take longer to get toknow you, and such familiarity is often importantwhen doing business internationally.



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6.3.2 Indirect exports

Again, your approach depends on whether youre sellingproducts or services.

For products, you market and sell to an intermediarysuch as a foreign distributor. You can also retain a for-

eign agent or representative who does not directly pur-chase the goods.

For services, you contract with an intermediary whothen negotiates and contracts on your behalf. For manynew exporters, an intermediary may be the best way toenter a market.

6.3.3 Partnerships

A solo entry into a foreign market may not always be thebest approach for an exporter. You might find it advanta-

geous to partner with a local company whose strategicposition complements or enhances your own.

A well-structured partnership can benefit both parties inthe following ways:

I Your partner can complement your capabilities andprovide the local expertise, insights and contacts thatmay make the difference between success and failure.

I Each company focuses on what it does and knowsbest.

I Both partners share the risk.

I You can pool ideas and resources to help keep pacewith change.

I You can approach several markets simultaneously.

I Your partner may provide technology, capital or mar-ket access that you might not be able to afford onyour own.

I Partnerships may help resolve problems related toprofessional accreditation, movement of personnelacross borders, and tax and legal status.

I Combining the technical and financial strengths oftwo businesses can make both more competitive

a big advantage in todays highly competitive globalmarket.

You develop a partnership strategy in three steps:

I First, decide whether or not partnership can work foryou. If your needs can be satisfied in-house, a partnermay not be necessary. If you need financing, you may

be better off looking for investors. But if you requirespecial expertise or a local market presence, then apartnership might work very well.

I Define the form, structure and objectives that a part-nership must have to suit your needs. To do this,evaluate your companys goals, its ability to achieve

them and where you need help in doing so. Thenidentify how the partnership must work in order tofill in those gaps.

I Find a partner who meets these criteria and who willbe a good fit with your company.

There are several different forms of partnerships.The major options are:

Licensing a licence is the grant of rights to anotherbusiness so that it can legally use your proprietary tech-nology and/or intellectual property; for example, to

allow an Indian company to manufacture a product ofyour design and sell it in India. It usually doesnt involvegranting all the rights to the property in the exampleabove, the licence might be for the Indian market but notfor the Chinese.

Franchisingis a more specific form of licensing. Thefranchisee is given the right to use a set of manufacturingor service delivery processes, along with establishedbusiness systems or trademarks, whose use is controlledby the licensing agreement.

Cross-licensing each firm licenses products or serv-

ices to the other for sales purposes. Cross-manufacturingis a type of cross-licensing in which companies agree tomanufacture each others products. It can also be com-bined with co-marketing or co-promotion agreements(see below).

Co-marketing carried out on the basis of a fee or apercentage of sales, co-marketing lets you and your part-ner take advantage of each others existing distributionnetworks and domestic markets.

Co-production this arrangement involves the jointproduction of goods, enabling your business to use its

skills and resources to best advantage. It can also providecheaper manufacturing through economies of scale.

Joint venture the two businesses each contribute capi-tal to a newly created corporation that they operate to-gether, or the Canadian and the local businesses enterinto a general partnership agreement and operate thejoint venture as a partnership.



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Using the expertise of lawyers, accountants, bankers andother professionals is vitally important when setting up anytype of partnership. All parties must be absolutely clear onwho holds which rights and which responsibilities.

PITFALL: Poor alliances the exporter pays too lit-tle attention to the qualifications of a foreign agent ordistributor.

6.3.4 Acquisitions and investments

A partnership isnt the only way to tap into the resourcesof a foreign company. Acquiring a firm in your targetmarket, or making a substantial investment in it, canachieve the same results and help you with your marketentry in several important ways.

You immediately gain access to the local market, whichspeeds up the process of expanding sales and promotingcompany growth. This can also lead to sales in othercountries.

It allows you to take advantage of the local firms assets toincrease your competitiveness in that particular market,in Canada and possibly elsewhere. These assets can in-clude patents and other intellectual property, resourceavailability, access to capital, specialist expertise, propri-etary technology and product differentiation.

You may enjoy lower operating and production costs in

your foreign operation than at home. This can stem fromeasier access to supplies, lower labour costs and lowertransportation costs.

Working abroad

Exporters of services should be aware of the personaland business issues involved in working outsideCanada. Foreign Affairs and International TradeCanada publishes a guide called Working Abroad: Un-ravelling the Maze to tell service exporters about po-tential problems and how to deal with them. Refer to

www.voyage.gc.ca/alt/working.asp.

6.3.5 Selling to foreign governments

Foreign governments can present a rich source of con-tracts for exporters in sectors ranging from environmen-tal technology to aerospace. To help Canadas businessessell to these customers, the federal government has es-tablished the Canadian Commercial Corporation (CCC),

a Crown Corporation that acts as Canadas internationalcontracting and procurement agency. It brings foreigngovernment buyers and Canadian exporters together byassisting with the negotiation and execution of contracts.

To do this, the CCC signs two contracts: one with theforeign government buyer, and the other with the Cana-dian exporter. As the intermediary, the CCC ensures thatthe contract is completed according to the conditions ofthe agreement and transmits the contractual obligationsdown to the Canadian exporter. The result is a securegovernment-to-government contract with the best possi-ble terms and conditions for all concerned. In addition,

CCC manages the cycle of payments from the foreigngovernment buyer to the Canadian exporter to maintaina predictable and timely payment schedule.

The CCC also specializes in managing contracts with theU.S. Department of Defense and NASA, so if your com-pany operates in a defence- or space-related sector, youshould definitely consider talking to a CCC representa-tive; for more information, refer to the CCC website atwww.ccc.ca.

Your opportunities for selling to the U.S governmentarent limited to defence and aerospace, of course. For a

detailed explanation of U.S. government procurement ingeneral and how you may be able to take advantage of it,visit Foreign Affairs and International Trade CanadasSELL2USGOV website atwww.international.gc.ca/sell2usgov.

6.4 Intermediaries

While you may be sure that the direct-exporting route isbest for your company, dont be too quick to jump on aplane and start knocking on doors. Think first about

using a intermediary, because the right one can save youan enormous amount of time and money. They come inseveral types: agents, representatives, trading houses anddistributors.



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6.4.1 Agents and representatives

Agents and representatives arent exactly the same. Anagentsecures orders from foreign customers in exchangefor a commission. A representative is a specialized agentwho operates within a specific geographic area and who

sells related lines of goods or services.Both may be authorized to enter into contractual salesagreements with foreign customers on your behalf. Nor-mally you pay them a commission only when they sellyour product or service.

An agreement with a foreign agent or representative im-mediately gives you a presence in your target market.This is usually less costly than setting up your own directsales operation. Your representative can also make morefrequent sales calls than you probably could. Finally,such an arrangement gives you control over the productor service and its price an important advantage.

Good foreign agents or representatives can help you inmany ways. They can research markets, advise on fi-nancing and transportation options, clear goods thoughcustoms, provide access to potential customers, makecollections, and supply information on local businesspractices, laws and cultural traditions.

TIP: Developing foreign markets is a long-term com-mitment. It takes time, effort and resources. Makesure your management is committed to the export

venture and be prepared for the long haul.

6.4.2 Trading houses

Trading houses are domestic intermediaries that marketyour goods or services abroad. A full-service tradinghouse handles a great many aspects of exporting, such asmarket research, transportation, appointing distributorsor agents, exhibiting at trade fairs and preparing adver-tising and documentation.

Some act as principals or export merchants, buying

products outright from Canadian suppliers, while othersact as agents, selling on commission. Some specialize inspecific industry sectors, while others focus on particularforeign markets.

If you prefer not to sell directly to foreign customers orworry about finding a foreign intermediary, you mightconsider using a trading house.

PITFALL: Poor distributor relations the exportertreats foreign agents or distributors as minor partners,giving preference to domestic distribution channels.

6.4.3 Foreign distributors

Unlike agents, distributors actually purchase your prod-uct or service and resell it to local customers. Often, theyset the selling price, provide buyer financing and lookafter warranty and service needs.

A bonus is that the distributor can usually provide after-sales service in the foreign market. On the other hand,using a foreign distributor may reduce your profit mar-gins and result in a loss of control over your productand/or price.

6.5 Choosing an intermediary

You can obtain information about potential intermedi-aries from the Canadian Trade Commissioner Service inCanada and abroad, and from trade associations, busi-ness councils and banks. Talking with other Canadianexporters or potential foreign customers also can helpyou identify prospective agents or distributors.

Once youve developed a list of candidates, you shouldvisit the market to meet them. Talk to several firms andthen carry out your due diligence to make certaintheyre reputable.

You can also protect yourself by entering into a limited-term trial agreement. If the foreign intermediary doesnot meet your expectations, you can find an alternativeonce the trial period is over.

To evaluate a prospective intermediary in detail, use thechecklist below. Be sure to tailor it to your companys partic-ular needs and the characteristics of your chosen market.

Size of sales force

I How many field sales personnel does the agent or

distributor have?I What are its short- and long-range expansion plans,

if any?

I Will it have to expand to accommodate your needsproperly? If yes, would it do so?



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Sales record

I Has its sales growth been consistent? If not, why not?Try to determine its sales volume over the past fiveyears.

I What are its sales objectives for the next year? Howwere they determined?

Territorial analysis

I What territory does it now cover?

I Is it consistent with the coverage youre looking for?If not, is it willing and able to expand?

I Does it have any branch offices in the territory youwish to cover? If so, are they located where your salesprospects are greatest?

I Does it plan to open additional offices?

Product or service mix

I How many product or service lines does it represent?

I Are they compatible with yours?

I Does it represent any other Canadian firms? If so,which ones?

I Would there be any conflict of interest?

I Would it be willing to alter its present product orservice mix to accommodate yours, if necessary?

I What would be the minimum sales volume needed tojustify handling your lines?

I

Do its sales projections reflect this minimum figure?I From what you know of the territory and the prospec-

tive agent or distributor, is its projection realistic?

Facilities and equipment

I Does it have adequate warehouse facilities?

I What is its method of stock control?

I Does it use computers? Are they compatible withyours?

I What communications facilities does it have?

I If servicing is required, is it equipped and qualified todo so? If not, is it willing to acquire equipment andarrange for training?

I If so, to what extent will you have to share these addi-tional costs?

I If necessary, would it be willing to inventory repairparts and replacement items?

Marketing policies

I How is its sales staff compensated?

I Does it have special incentive or motivation programs?

I Does it use product managers to coordinate salesefforts for specific lines?

I How does it monitor sales performance?I How does it train its sales staff?

I Would it be willing to share expenses for sales per-sonnel to attend seminars?

Customer profile

I What types of customers is it currently in contactwith?

I Are its interests compatible with your lines?

I Who are its key accounts?

I What percentage of its total gross receipts do theseaccounts represent?

Principals represented

I How many principals does it currently represent?

I Would you be its primary supplier?

I If not, what percentage of its total business would yourepresent? How does this percentage compare withother suppliers?

Promotional thrustI Can it help you research market information?

I What types of media does it use, if any, to promotesales?

I How much of its budget is allocated to advertising?How is it distributed?

I Would you be expected to share promotional costs?If so, how will this amount be determined?

I If it uses direct mail, how many prospects are on itsmailing list?

I What printed material does it use to describe its company and the lines it represents?

I If necessary, can it translate your advertising copy?

I Does it have its own website?

Source: Adapted with permission from Western EconomicDiversification Canada, READY FOR EXPORT: Building

A Foundation For A Successful Export Program.


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7Shippers and Shipping:Delivering the Goods

Time spent preparing before shipping your

goods overseas means having your product

arrive on time and at the right cost. Choosing

the right shipping method is vital to your

export success.

Exporter

7.1 International trade regulations

Youll have to familiarize yourself with your target mar-kets import regulations, product standards and licensingrequirements to make sure that your products are im-ported without difficulty. If youre a service exporter, youmay have to acquire professional or other accreditationfrom the country where youll be operating.

Trade and international security

Because the global trading system is vulnerable to ter-rorist exploitation that would severely damage the

worlds economy, the World Customs Organization(WCO) has begun an initiative that will help protectthe international supply chain. Called the SAFEFramework, this initiative aims to establish and inte-grate standards for supply chain security and manage-ment, strengthen cooperation among customsadministrations to improve their detection capabili-ties, strengthen customs-business cooperation andpromote the seamless movement of goods throughwell-secured international supply chains.

7.2 Export declarationsReporting your goods exports is mandatory under Cana-dian regulations (unless youre exporting to the UnitedStates theres no reporting requirement in this case).For details how to do this, go to the Canada Border Serv-ices (CBSA) website and download or read GuideRC4116, Exporting Goods from Canada, which youllfind in the list at www.cbsa-asfc.gc.ca/publications/pub/pubs-eng.html.

Speaking of forms, youll probably have to deal with the

B13A Export Declaration. This form, along with the ap-propriate permits and licences, must be prepared by ex-porters prior to exporting to all non-U.S. destinations.Its available on the CBSA website at www.cbsa-asfc.gc.ca/E/pbg/cf/b13a/README.html.

TIP: You can also submit the B13A Export Declara-tion electronically using the Canadian Automated Ex-port Declaration (CAED) software. The StatisticsCanada webpage at www.statcan.ca/english/exportswill tell you how to do this.

7.3 Export permits

Youll need an export permit if:

the destination country is on the Area Control List(a listof countries for which any export, except humanitarianitems, requires an export permit) or

the goods are on the Export Control List(a list of goodsand technologies that require export permits to be ex-ported from Canada, pursuant to the Export and Import

Permits Act).

For detailed information about export and import con-trols and permits, refer to the Export and Import Con-trols Bureau (EICB) website at www.dfait.gc.ca/eicb/menu-en.asp. A PDF publication called A Guide toCanadas Export Controls is available at www.dfait.gc.ca/eicb/general/general-en.asp. Companies in the agri-food sector can learn about export regulations and certi-fications for food products by visiting the CanadianFood Inspection Agency website at www.inspection.gc.ca.

PITFALL: Eyes too big the exporter tries to entertoo many different markets too quickly.



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7.7 Labels and marks

Be sure your goods are properly labelled and marked.Labelling regulations vary widely from nation to nation,so verify the required labels before you ship. If labelling,packaging or advertising restrictions apply to yourgoods, take them seriously. Your product may not clearcustoms if labels dont conform to local requirements forthings like product weight or electrical standards.

Marking distinguishes your goods from those of othershippers. Mark

step to step guide to exporting

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