A quick look at the methods of market entry
There are a range of approaches you can take, but to be a successful exporter within different markets you may need to use different methods of market entry. It maybe related to your product/service or the country you are trading in, but the best method of market entry for one market may not be suitable for another. So you really need to consider all possible options
It is also important to seek out legal advice prior to entering into any contract or agreement with representatives or potential third party distributors.
Perhaps the most obvious route to target overseas trade is through your website & much of the expertise you use to get customers to buy online can be applied to overseas customers. Effective digital marketing & SEO including PPC can all be used to attract visitors from abroad. However there are a number of key aspects you should consider:
- Make it clear to your visitors you are based in the UK, it will give your business credibility
- Be clear on the rules around VAT - whether it should be charged or not
- If you allow customers to purchase your products online, your payment card provider should handle currency exchanges
- Source and use a recognised international carrier such as UPS, Fedex or DHL
- Complete customs declarations (assuming your product is legal in the destination country!)
- State clearly in your terms & conditions who is responsible for paying any customs or duty payments
- Beware currency exchange rates - your website should update these in real-time otherwise you could be short changed
- Think fraud - don't get caught out by scammers or fraudulent purchasers - talk to your bank or payment service provider about the protection that needs to be in place.
Here your company performs the task of exporting. Sales are made directly to the customer overseas; who can be a wholesaler, retailer or final end user. This approach requires a considerable investment in terms of preparation and
time, you may therefore wish to employ someone to take charge of part of the process, or act as a representative in the chosen market.
Here your products and services are sold abroad by other organisations. This can eliminate the need to travel abroad and the need to deal with complicated export processes and may be a useful route to test the product’s viability in the new market.
Agents - commission agents seek orders on behalf of a client, in return for an agreed commission. Agents generally seek sole agency rights for a country or region. They do not deal with shipping or payment, and will accept no credit risk on stock.
Distributors - hold stocks of products from which they fulfill local orders. They will take legal title to goods, buying from a business and selling for their own benefit at prices which they fix themselves. Distributors therefore earn profits, not commission.
Trade fairs and exhibitions - held internationally attract customers and suppliers from various trades. If you are considering exhibiting it is advisable to contact the relevant trade association who should be able to provide you with support and advice.
Virtual Events – The Covid19 pandemic lockdown has resulted in the cancellation of many trade fairs, conventions and events. As a result many events are being run virtually - to find out more about virtual events, take a look at our free downloadable ebook - The Essential Guide to Virtual Events.
Franchising - involves selling a business as a ready-made package to local operators in return for fees and/or other income enabling rapid expansion whilst limiting management responsibility.
License agreements - here a company grants a business the right to use their product names, technical specifications,
processes or patents by drawing up a license agreement. A fee is charge for the licensed rights.
Joint ventures - a company may collaborate with a UK firm or an overseas business - the opportunity to pool resources and expertise can be of great value.
Export houses - these are firms who facilitate exporting on behalf of a producer; they have detailed knowledge of international sales.
There are three types of export house:
1. Export consultancies - generally small, specialising in specific markets and services.
2. Export merchants - buy products outright from the manufacturer and sell them abroad.
3. Confirming houses - who order from manufacturers on behalf of overseas organisations.
Crown agents - purchase on behalf of the public sector
Buying houses of overseas companies are often located in the UK and can often have vast purchasing budgets. You will still have to deal with the physical process of exporting, but large sales can be achieved.
Before finalising your business strategy it is important to research each market entry option and consider all elements in relation to how your existing customers prefer to do business as well as your product or service; the nature of your product or service will preclude some entry methods. You should also consider the resources you have available; what language skills, staff resource, sales and marketing or financial resources do you have?
Get help with your research with data from Kompass
As business information specialists, we at Kompass, know that your results hinge on effectively targeting the right audience. Whether you set out to focus on Europe, America, Africa, Asia or Australia, a key aspect of exporting will be to research and find the best potential markets.
Our worldwide business information database gives you access to 33 million companies across 70 countries globally and can be refined geographically, by size, company type and many more! With access to business data from Kompass, we can help you to focus on the best target markets that offer your company the greatest opportunities. Contact us to find out more about how we can help you as you plan your export strategy.
Our Kompass Export Zone builds on our business information expertise, by giving access to straightforward guidance on some of the key factors to consider when exporting, research advice and country specific market information. For more advice on getting started on your export journey, see our guide to planning your export strategy.
Disclaimer: Please note that this blog only contains general information and insights about legal matters. The information is not advice, and should not be treated as such. Kompass.com