There are numerous reasons why a firm might decide to sell its products on the international market. This is no easy task, and like any business initiative, it requires training and preparation to be a success.
A business export plan is a useful tool that helps business people to understand their position vis-a-vis foreign markets. It is useful for analyzing the risks that the business owner might come up against ahead of time and for designing a contingency plan to address these. It will also help them better understand their destination markets and design an export strategy, thus helping to improve relationships with both suppliers, sales agents, and financial organizations.
What is a business plan?
A business plan does not have a set structure as it varies depending on each firm’s products, services, and features. According to a ProMéxico publication entitled International Business Export Plan, “the aim of the planning process in an export business is to enable a product or service to systematically penetrate international markets, maximizing efficiency and profitability.”
In other words, giving our exports continuity through lower costs, higher profits, and by optimizing the business. An export business plan is simply an organized way of presenting what it is we want to export, where we want to export it to, how we’re going to go about it, and what resources are available to us.
All export plans should contain the following key points:
Overview of bilateral trade
It is important to include detailed information about the firm, particularly a description of its ability, experience, and skills that are relevant to putting the project into practice. According to the blog Con tu negocio, defining the company’s strengths and weaknesses is also recommendable. We need to include long- and short-term objectives, whether there are any previous examples of an export business plan, the trade strategy for the target market, and the description of the product or service.
The latter should include everything from tariff categories, consumer and market segment profiles, the main competitor products, technologies, quality standards, product adaptations, the cost and price for the client, and research and development of new products.
Any export plan should specify where you are planning to export to and should describe this market. This includes political, legal, economic, and sociocultural aspects. According to ProMéxico, it is important to include “a description of your industry in your export target market, an analysis of the competition, market segmentation, and tariff barriers.”
In a PromPerú publication entitled “Drawing up Your Export Business Plan,” David Paredes Bullón explains that it is worth “describing the human capital available to the firm to implement the export project.” Any information relating to experience or competitiveness in the different areas of international trade, the organizational structure of the firm, and the international sphere is an advantage. It is also important to specify whether your firm has external advisers in the area of international trade and strategic partnerships.
According to ProMéxico, this is the most important aspect of the export plan. This section sets out a target market penetration strategy that is compatible with the firm’s long-term objectives. It should prove that implementing the operation is feasible from the administrative, technical, financial, and commercial standpoints. Everything that relates to the international aspects of operations and production needs to be included. These two parts of the plan need to list the following:
- International factors
-Formal requirements for exporting/importing
-Tariff and nontariff barriers
-Commercial terms (Incoterms)
-Contracts, forms of payment, negotiations
-Market development activities
- Production Aspects
-Quality and standards
According to PromPerú, one important aspect of the export plan is to “identify any potential problems that may have a negative effect on the project.” The contingency plans to counteract these problems should also be specified. One of the easiest ways of mitigating the risks that may come with such operations is to take out export credit insurance. This insurance covers sales on credit to the international market (accounts receivable). For example, the Compañía de Seguros de Crédito Continental website indicates that this type of insurance protects exporters from the following risks:
- War, civil war, revolution, or occupation of territory by a foreign power.
- Expropriation or confiscation, requisition of merchandise.
- Delays in foreign currency transfers due to a lack of available funds or government instructions.
- Cancellation of export or import permits.
- Unilateral cancellation of contracts by the importer’s government.
Con tu negocio points out that many small and medium-sized enterprises do not have suitable financial projections for creating a solid export plan. The business owner should specify the financial resources available to them for implementing the export project, historical financial information, current financial status, and the main financial liquidity, activity, and profitability statements.
This segment sums up the export plan. Its main aim is to present a concise overview of the firm’s current status and its plans for the new initiative. According to Con tu negocio, the summary should include a profile of the firm, a precise description of its business, a description of the product or service it supplies, competitive advantages, and financial requirements.
There is no doubt that an export plan is a fundamental tool for enabling small and medium-sized enterprises in Latin America and the Caribbean to integrate more into the international market and to do so on better terms. Many small and medium-sized enterprises already have most of the information described above but a lack of organization and experience can mean that plans to expand into the international market do not prosper.
Drafting an effective export plan not only helps firms from a commercial perspective, it is also a useful form of self-evaluation that generates more involvement in commercial operations and greater awareness of these. Like all management tools, the plan needs to be flexible, adaptable, and open to being revised as the project moves forward.