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Is your product ready to be exported?
Whether or not your product is
export ready is a function of the
buyer's needs, your product's ability
to meet those needs, and how your
product will shape up against international
competition. Your product's exportability
would also be dependent on your
business's ability to export as
discussed in the previous section.
In order to determine export readiness,
you need information on the target
market, potential competitors and
the buyers themselves. Your product
may also demand specific questions
relating to that industry. Common
factors that would affect the exportability
of a product are:
1. Market potential
Unless there is a need, you will not
sell your product. Your domestic market
is a good indicator of the chances
of success in international markets
based on the fact that you are meeting
a need locally and should be able
to meet the same need internationally.
This, however, is not the only consideration.
International markets are usually
further away, meaning that you will
have to add international transport
costs, and will most probably have
to include the cost of import duties
and taxes in the final delivery price.
- Have you had success in selling
in your domestic market without
the benefit of protection against
foreign competition?
- Are you aware of buyers in international
markets with similar needs to
those of your customers in South
Africa?
- How do your delivered prices
compare with those of international
competitors?
2. Product
adaptability
A key quality of an export
product is its ability to adapt its
function, design, or packaging to
suit an international market. Cultural
differences between countries could
affect the use or acceptability of
a product in each country. A product
name could have a totally different
and possibly derogatory meaning in
another language and would have to
be changed for that market. The following
questions test the flexibility of
your product to meet the different
needs and demands of selling in international
markets:
- Could your product serve a different
function in international markets
to what it serves in your domestic
market, and if so, can you adapt
your product accordingly?
- Is the packaging suitable for
international freight?
- Can labels, manuals, and marketing
material be adapted to the needs
and requirements of an international
market, eg language?
3. Cost structure
The cost structure of the product
will obviously impact on its competitiveness.
For example, depending on the cost
of materials, and whether or not those
materials can be locally sourced,
international transport costs and
customs duties in the importing country
will collectively determine the final
delivery price. The following questions
highlight the areas that will affect
your cost structure:
- What is the percentage of local
content of materials used in the
production of your product? (The
South African rand has weakened
against major currencies and although
beneficial to exports, if your
raw materials are imported, that
benefit could be lost due to the
higher cost of imports).
- Will your manufacturing process
cope with bigger production runs
and would this improve your efficiency?
- Do you have access to lower
cost raw materials for export
production, eg due to Government
subsidy schemes or duty rebates
on imported raw materials?
- Are you able to cost your export
products without including your
business overheads in the selling
price?
- Is your product a high or low
value product? ( The lower the
value the more sensitive it will
be to pricing and transport costs.)
- Would international freight
costs constitute a high or low
proportion of the final delivery
price?
- Is your product one that would
generally attract high import
duties in most countries, e.g.
agricultural products?
4. Competitor's
product
The more you know about your competitor's
product, the better your position
when determining your own chances
of succeeding. Price is an important
factor in determining success, but
not necessarily the only way to compete.
By differentiating your product against
your competitor's, such as highlighting
some of the unique selling points
of your product, can result in success.
Questions that should be addressed
with regard to your competitors are:
- Are you aware of any clear advantages
that your product has over your
competitor's?
- Are you aware of any disadvantages
that your product has against
your competitors?
- Can your product easily be substituted
by another type of product?
5. Product
complexity
The greater the complexity of your
product, the more important role the
strength of your business will play.
Products that need a high level of
support or installation, need a strong
agent network with trained staff to
support the product. The investment
in setting up a sales and support
structure in the importing country
could be prohibitive to you, making
your product unexportable. The following
questions indicate the type of considerations
affected by complex products:
- Is the technology involved in
using the product considered to
be simple or sophisticated?
- Does the buyer need any special
skills or instructions in using
the product? (More demands are
placed on the way you distribute
and support the product).
- What utilisation demands does
the product have eg power? (Some
markets use a different voltage,
eg USA =110 V)
- Does the product need installation?
(You would have to have qualified
installers on location each time
your get an order.)
- Does the product need repair
services and spares backup? (You
would most likely have to set
up a capable agency network.)
6. Rights to
sell product internationally
If your product is being manufactured
under licence, you must check to see
that there are no limitations on which
markets you may sell into. The country
that you may wish to sell into may
already be producing the same product
under the same licence and the patent
holder may prevent you from competing
with that manufacturer in his market.
- Are there any patents applicable
to your product and what is your
position regarding the rights
to market the product internationally?
- If you are manufacturing under
licence, are there any restrictions
on which markets you may enter?
- By now you should have a clearer
idea of what is meant by export
readiness and what type of commitment
is required in becoming a successful
exporter.
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