Mitigating risk inside and outside the Eurozone – the debate continues…

Fri 5 Oct 2012
Posted by: International Trade News

The Institute of Export continues to urge British exporters and those dealing in international trade to seek out new markets which are least affected by the Eurozone crisis.

This call to action has been reinforced by our Director General Lesley Batchelor when invited to take part in a vibrant Guardian blog live Q & A hosted by the Guardian Small Business Network on how to grow small businesses in international markets.

Fellow panelists included Clive Drinkwater, North West regional director for UK Trade & Investment, Mike Cherry, national policy chairman for the Federation of Small Businesses (FSB), Tara Panjwani at the UK India Business Council, Alla Ouvarova and Anna Richey of Two Chicks which exports worldwide, Ruma Deb of the London Chamber of Commerce and David Williams, CEO of manufacturing company Egbert H Taylor.

Questions to the panel included how to sell into Europe, coupled with routes to market and seeking potential investors, identifying the right market and testing potential markets at minimal cost as well as seeking out trusted distributors and setting up joint ventures.

During the debate Lesley outlined how the USA remains our top market for exports. She also stressed how careful preparation and research is required when seeking out more complex markets – highlighting the Institute’s expertise in providing education and training programmes and qualifications in the practice and competences needed for those serious about how to trade internationally.

Lesley has also been invited to answer topical questions, centred on the Eurozone, currency fluctuation, copyright and the next emerging markets set to explode, on the London loves Business website. Below is a transcript of the questions and Lesley’s responses.

Q. Why would any British company consider exporting within the eurozone given the current crisis?

We have an unhealthy attitude towards the Eurozone. Most businesses trading with Europe should have found a way of mitigating risks there by now, while looking towards new markets too.

And remember, Europe is traditionally a trading block! It is open to more ideas than many other markets. Of course it’s difficult for businesses that have been trading on a weak pound. With the renewed strength of the pound it has put prices up by 30%, so if you’re selling on price as opposed to quality, it’s a hard proposition, but not everything is about price, it’s about branding too.

All sized businesses must understand and optimise their branding. Businesses need to think about how they position their products; if you go high-end, everything must be high-end – including your website, your packaging and your service.

Likewise, if you’re downmarket, everything has to say to the customer: “You can afford this, we’re trading on price, and we’re one of you.”

Q. What about currency fluctuation, how can you protect yourself?

This is a problem everyone has, but you can’t keep pricing in sterling and be surprised when people don’t buy. Don’t put the onus on the buyer; the customer shouldn’t have to make price comparisons according to currencies. Make it easy for them to buy your product.

This is particularly important when trading internationally because your customer can be very far away. Communication is key to ensuring the customer feels you’re delivering the whole package and providing a valuable service and product.

Q. What potential risks should businesses look out for when exporting?

Intellectual property is a key area. Not all the countries you trade with will respect the same laws surrounding intellectual property that the UK and Europe do. Even those signed to the World Trade Organisation agreements may not be so vigilant of legislation, so businesses need to be aware of this.

Likewise, a business must check it doesn’t inadvertently infringe the trademark, copyright or IP of another business, as it might be that a product very similar to yours already exists in that market.

Any business considering exporting to a new market must check the excise duty of the country they are exporting to (trade across the European Union incurs no excise duty), and any local tax they are likely to incur. Once added together, alongside the cost of freight and packaging, it might be that the cost makes it unviable as an export market.

All countries have their own bureaucracy and red tape. Regulations surrounding exporting are changing all the time and it’s vital that an export business remains compliant or risk incurring fines. The Institute of Export publishes a monthly journal that carries, among other articles, a compliance watch outlining changes in regulation so its members remain informed and up to date.

Q. What else does the Institute of Export offer its members?

The organisation was established in 1935 – during the last big recession. It was started by people who realised businesses needed advice on trading internationally; essentially we are a member organisation that helps promote professionalism in international trade. We offer short courses/quick starts – some trade specific, some more generalist. Most importantly, we offer qualifications ranging from those for 16 year olds to a full Foundation Degree in the Professional Practice of International trade. These ensure businesses are informed and equipped with the tools and competences they need to trade internationally.

We also send out a daily briefing email that keeps the recipient up to date on foreign exchanges and the markets, an e-newsletter and a monthly journal with the compliance watch mentioned above. And each quarter we offer a new journal that briefs members on the different sectors and the markets at large. Everything you need to stay current and up to date with the fast changing world of global trade.

Q We’ve had the BRICs, what’s the next emerging economy that exporters should be keeping an on?

I think South America as a whole is really interesting, and businesses should be keeping an eye on what’s happening there. Then there’s Africa, so much is happening in Africa, the GDP growth is between 5-8% – more than anywhere in Europe except Luxembourg.

Q What advice would you give to an SME taking its first steps into the international market

1. Look at what your competition is doing internationally and ask yourself: “Is there room for me out there?”

2. Look at what type of product you are offering and match it to the country. So if you have an innovative technology product, look at the country you’re considering and check if it suits the culture.

3. And, of course, research. Research, research and research the market you’re considering exporting to – be sure you understand the risks as well as the profits!

Contact us below with your questions – or call the team at Export House on 01733 404400.