Prioritizing Your Products with the Highest Export Potential – Why It’s Important

— 9 min read
Whether your company is an experienced exporter or new to exporting, one way to help ensure profitability in export markets is to step back and assess or re-assess the products, services, or technologies (hereafter referred to as products) that your company will promote in export markets. 
 
If your company produces only one product, this process will enable you to identify or anticipate potential challenges and hurdles early in your export expansion process and allocate resources accordingly. If your company produces multiple product lines, this process will enable you to focus your resources on those products that will have the greatest success in the near term and gain a better understanding of what will be required to succeed with products that might face export hurdles, import hurdles, or sales and use hurdles. 
 
Often, companies continue to add products to their export catalog without putting each one through this type of process and the result can be limited sales and profitability in relation to resources allocated to sell the product in a particular market. While this process can be completed by one individual in your organization, it is more productive to have input from various functional areas within the company.
 
 
 
Steps
 
⦁ Assess Export Potential of Products
 
Your company may be making a worldwide, regional, or country assessment of your products depending on how you are defining your market.
 
To start the selection process, list the products you are currently exporting or you believe might have export potential. Beside each product listed, indicate why you want to export the product and/or believe that the product might be successful in export markets. This list may be based on your current knowledge – no research required – and updated over time. It is also a good opportunity to include others from your organization in this discussion.
 
After listing your products with export potential, select one or more products that you believe have the highest export potential. List these potential products and your rationale for selecting them.
 
⦁ Select Best-Prospect Products
 
Your initial assessment is designed to determine likely issues to be encountered such as governmental approvals, if any, and product features or characteristics that may require a certain degree of alteration. Ideally, your products can be exported “as is” since one of your objectives will be to successfully sell your product in export markets with a minimum of expense and complication. Use your experience in the U.S. market, knowledge of foreign markets in general (e.g., use of metric measurements), and your intuition to start the assessment process.
 
There are four types of questions you will want to address to initially determine the exportability of your products: 
 
⦁ What hurdles might I have to overcome in order to ship my products out of the country?
⦁ What hurdles might my foreign customers have to overcome in order to import my products?
⦁ What hurdles might my foreign customers have to overcome in order to sell or use my products?
⦁ What other hurdles might I have to overcome to maintain export success?
 
In order to select your most exportable products (Best-Prospect Products), start with the potential products you selected as Products with Export Potential. 
 
Use the information you currently know about your products, your potential customer base, and your existing knowledge and perceptions about foreign markets. For each product you are considering, write down the hurdles you believe will have to be overcome or about which you have questions. This list does not have to be long. The number of questions may, of course, depend on the type of product you choose.
 
⦁ Export Hurdles
 
There may be export hurdles to be addressed that are related to shipping your product out of the country to a foreign buyer or, for example, not to getting your product into the foreign market. You will need to determine if your product will require a special export license or is prohibited from being shipped to a specific country or customer. Note any initial hurdles of which you may be aware. You will address export licensing in more detail later in the process.
 
⦁ Import Hurdles
 
In many countries, your customers may have high import hurdles such as tariffs, restrictive quotas, or other formal and informal barriers to importing. If you are exporting electrical, medical, food, or certain other types of products, your customer may not be able to import the product until the product has passed inspection and meets the standards of the importing country. If your product requires government approval in your domestic market, for example, there is a chance there is a comparable agency in other countries that may require your foreign customer to obtain approval. Obtaining import approvals is not necessarily an obstacle because there are a number of ways to work through the approval processes. The important thing at this time is to raise the questions that will have to be answered at some later step in the process by you or your customer.
 
⦁ Sales and Use Hurdles
 
Your initial product screening should also include an assessment of sales and use hurdles such as the product’s features and characteristics. Are there things which would obviously need some modification in order to make the product marketable, and, if so, how difficult would the changes be to implement? Because all but three countries of the world use the metric system and many parts of the world use different types of electrical power, your foreign customers may have problems selling and/or using your product unless the products are modified. Your product should also be reviewed for foreign sales and usage problems such as the need for training in the use of the product, after-sale support or maintenance, and so forth.
 
⦁ Other Hurdles and Issues
 
During the initial assessment, you may identify other hurdles and issues about which you are unsure and which will have to be considered as you progress down the export track. For example, if your product is competitive with imports in your domestic market, will it also be competitive in foreign markets? Are there patents or trademarks that will have to be protected?  By starting a list of these unresolved issues now, you are more likely to address all the potential areas of concern that will have to be resolved before you take your product into a foreign market.
 
⦁ Select & Prioritize Best-Prospect Products
 
The assessment of your best-prospect export products has identified some of the potential hurdles you and/or your customers will have to overcome in order to introduce your product to a new market. In addition, you have raised other issues that you will have to consider along the way.
 
At this point, you should be able to initially determine the potential “exportability” of your products. Determine the product or products which you believe to be most exportable. Then, select and prioritize the products and record the product names and rationale for selection. 
 
⦁ Determine Harmonized System Codes
 
Determine or double-check the HS product code for each of your prioritized products. The HS number is a six-digit commodity classification number and is used internationally to classify products for customs purposes. The HS codes are maintained by the World Customs Organization and can be reviewed at the UN Trade Statistics website.
 
U.S. companies should also determine their domestic export Schedule B codes. These codes are composed of the HS six-digit code plus an additional four digits. To identify the Schedule B numbers for each of your company’s products, use the U.S. Census Bureau’s Foreign Trade Division website. If you require assistance with the search for your numbers, use the Contact Us information option listed on the website.
 
Canadian companies should consult the Canada Statistics’ Canadian Export Classification codes.
 
⦁ Determine Export Licensing Restrictions
 
Now is the time to take a closer look at export licensing restrictions if you are unsure about this requirement as it relates to your prioritized products.
 
U.S. companies need to comply with the US Export Administration Regulations (EAR), administered by the US Department of Commerce (USDOC), Bureau of Industry and Security (BIS). Depending on your product and other factors, you may have to check with other U.S. agencies.
 
⦁ Check to see if your product has a specific Export Control Classification Number (ECCN) on the Commerce Control List (CCL). If it is not listed on the CCL, your product will be classified as EAR99 and will not require an export license unless (a) it is being shipped to an embargoed/sanctioned country, restricted party, or in support of a prohibited end use and (b) it appears on the U.S. Munitions List (USML). 
⦁ Check with other federal departments based on other legislation that limits certain exports and their uses (e.g., Department of State for certain defense uses, Department of Treasury for specific end users).
⦁ At this point, you may not know to which country markets and buyers you will be shipping product. Therefore, you may need to return to this task later in the market expansion process. 
⦁ The vast majority of products are classified as EAR99 and do not require an export license.
 
Canadian companies may consult Global Affairs Canada for licensing issues. The Ministry of Foreign Affairs, Export Controls Division issues export permits in accordance with the Area Control List (ACL) and the Export Contact List (ECL).
 
After completing this process, you will have a prioritized list of best prospect products for export expansion based on export hurdles related to shipping your product out of the country to foreign buyers, import hurdles that will need to be addressed by your customer in the export market, and sales and use hurdles that will be faced by your customer trying to sell the product in a competitive environment or the end user that might require support.
 
As your company makes resource allocation decisions for export expansion, you will find the information gleaned from this process to be invaluable in determining which products will be capable of generating the desired return and you will be in a better position to make decisions related to issues such as product modifications, in-country training or product servicing, and other attributes that will enable true export expansion for your company.

Benchmarking to Export and Globalization Best Practices

— 7 min read

Business leaders are constantly searching for ways to improve their businesses, often using the continuous improvement process to help achieve this objective. Benchmarking can be an important component of continuous improvement, particularly if personnel at all levels and across all functions of the company are involved in the process.

Have you considered benchmarking with a focus on export and globalization?

The point of benchmarking is to identify internal opportunities for improvement across a range of processes and functions. But, how often does company leadership benchmark the company’s operations and strategies against best practice standards for accelerating the company’s success in global markets, globalizing its organization, and globalizing its vision and strategies.

Why do it?

Many industries are global and most companies need to compete with domestic and international competitors. If company leadership does not develop and instill a global perspective, they will likely be surpassed by those competitors that do. Benchmarking is defined as “a process of measuring the performance of a company’s products, services, or processes against those of another business considered to be the best in the industry, aka “best in class.” What better way to trigger innovation, learn from other industry sectors, and gain information that will enable the company to become more successful globally.

What should be benchmarked?

The key to successful benchmarking is to clearly understand the processes, procedures, and methods that allow a company to become the best across a wide range of categories. Initially, it will be important to benchmark your organization and establish baseline information about your company. This information will provide a snapshot of your organization in relation to factors that are associated with success in international markets. It also initiates the product assessment process and examines the business reasons for entering and expanding into export markets.

A comprehensive Export and Globalization Benchmark Assessment should include both an Operational Benchmark Assessment and a Strategic Benchmark Assessment.

The Operational Assessment would benchmark all aspects of the company’s operations against best practice standards, including the company and management; products; markets and entry /expansion methods; operational plan and budget; organization, policies and systems; information and resources; export team and support services; competitive market price and offer; market entry and expansion preparation; production capacity; distribution network; sales and financing; shipping and collections; and the evaluation process.

Let’s use a real-life example to take a closer look at operational benchmarking. The company is a mid-size producer of hand tools. They benchmarked 39 subsets under the Operational Assessment categories listed above. One subset of company and management was management commitment. The best practice standard was as follows: “Management has allocated a portion of its time to the export market entry and expansion effort sufficient to lead the effort and has designated a strategic international leader to guide the companywide export acceleration and globalization process.”

The leadership team went through a very deliberate process to address areas of strength and areas of weakness. They engaged in discussion and sought input from others. They discovered that the time and guidance allocated to the international effort by the strategic international leader was significant. However, the international expansion effort was a low priority for the leadership as a whole. Management’s focus on domestic priorities was very high and on-going product issues further complicated the allocation of management time and leadership for the international expansion effort. Based on their findings, they gave themselves a score of 5 on a scale of 1 to 10. They detailed their decisions, actions to be taken, assigned responsibilities and established a timeline.

Other operational areas where the company scored 5 or less (scale of 1 to 10) in relation to best practice standards included after-sales product support; target market sales projections; integration of the domestic and international operational plan; organizational structure; intra-company coordination to implement the global expansion plan; access to information resources; selection of distribution channels in each target market; pricing and terms of sale for each target market; distribution partners (recruitment, selection, and start-up in target markets); sales negotiations; integrating export-related policies, procedures and systems into the company’s standard operations; shipping and documentation system; and establishing and evaluating sales and profits by country and product line.
In each case, the company developed and implemented measures to move in the direction of established best practice standards, as well as a timeline for implementation and re-assessment. The importance of making this a companywide effort cannot be over-emphasized.

Next, our hand tools company needed to take on a task that was even more challenging than the Operational Benchmark Assessment, and that was the Strategic Benchmark Assessment. Below is a brief summary of the tasks.

  • Profiling the industry’s strategic global players, strategic global market segments, strategic global country markets, and strategic global competitors in order to understand the company’s role or position in the global environment.
  • Assessing industry globalization forces such as market forces, cost forces, government forces, competitive forces, and other current or future globalization forces in order to understand key conditions that are propelling the globalization of the industry.
  • Assessing the extent to which the company’s strategies are globalized to be in balance with the industry’s globalization force including assessing and benchmarking the company’s strategies related to market participation, product standardization, activity location, marketing, and competitive moves.
  • Globalizing the company’s strategic direction including the future strategic product and market direction it will pursue and the future strategic competencies it will need to achieve in order to achieve maximum profitability and growth and strategic competitive advantage in the global market of the future.
  • Globalizing the strategic plan including strategic goals, initiatives, values, and mission in order to integrate its domestic and global strategies into a single globalized strategy.

This was their first attempt to consolidate and document their knowledge about the company in relation to the global industry and then compare those findings with best practice standards. They benchmarked 17 subsets under the Strategic Benchmark Assessment tasks listed above. On a scale of 1 to 10, the company scored between 2 and 5 on those ratings.

On the downside, there was a lot they didn’t know and they had a lot of work to do. The upside was that they saw the value of initiating an on-going process to collect and compile information and data that would enable them to become more competitive and more profitable.

Who does it and how often?

Many companies bring in someone from the outside, such as a management consultant, to conduct benchmark assessments. However, you may want to consider conducting the Export and Globalization Benchmark Assessment as an internal initiative. Depending on your company’s global experiences, you may find some of the tasks more or less difficult. Frequently you will find that you do not have information adequate to make a firm decision or that your judgements are somewhat tentative. Initially, you will use your knowledge, experience, and immediately available resources to work through the various components of the assessment. Over time, the questions raised during this initial pass will be revisited and increasing amounts of knowledge, experience, and resources will be brought to bear and your decisions and judgements will be updated. As mentioned earlier, getting personnel across all functions and at all levels involved in the process will be critical to success in terms of contributing information, ideas and ultimately buy-in for decisions, changes, and plans that result from the benchmarking.