For businesses entering the exciting world of export, there will be some new skill sets required. Those skills range from having the sales, negotiating, and business culture savvy to sign up sales and alliances in a new market, through to understanding the supply chain logistics of safely delivering the product or service to your new customer. Included in the middle are the financing, payment, documentation, insurance and risk mitigation strategies that will all ensure successful exporting. Being able to obtain, service and grow an overseas client is very different to looking after a domestic buyer. If you make a mistake with an overseas order, the potential ramifications to the business are much larger and can often be more significant to your business. Therefore, it's best to prepare for your foray overseas by giving your staff the right skills to make it happen. The skills and know-how for export come from a range of sources, and there are some key ones that exporters need to focus on.
The sales/negotiation process
This involves an understanding of areas like contract law in the buyer’s legal jurisdiction, as well as the expected business and cultural ‘rules’ in the country. It also includes the business negotiation process and particularly the approval process when dealing with government contracts. There is also the concern of protecting your intellectual property in a new market, to ensure your original products or services are not stolen or replicated. To cover off these areas, the tertiary sector, via international business and international marketing courses and MBAs, provides support. On a more practical level, organisations like Austrade, IP Australia plus accounting and legal bodies that understand the requirements of specific markets can provide assistance and guidance.
The supply chain process
This involves moving the product or, if you are a service business, perhaps moving staff offshore. Your staff need to understand the extensive process of booking transport by air or sea, the packaging requirements, deciding which party will organise and pay for tariffs and duties, freight, marine insurance, port charges and so forth. For service businesses that are stationing staff offshore, ‘supply chain’ considerations should include visas, accommodation and funding for expenses. For support, you should work with a credible freight forwarder, which can be an immense help. The Custom Brokers and Forwarders Council of Australia (CBFCA) and the Australian Federation of International Forwarders (AFIF) are two freight forwarder membership groups you should consider for finding contacts. Both associations also run training programs on key logistic requirements such as dangerous goods rules and regulations for shipments. Understanding the process within the business is invaluable, and the Australian Institute of Export (AIEx) also runs regular courses on the end-to-end trade procedures. For service providers, working with an accounting firm with international offices or global affiliations can provide the necessary detail on staffing issues and managing an overseas point of representation.
The documentation/administration process
The preparation of the documents that must accompany every export is another essential skill to learn. Apart from the transport documents, you are required to deal with commercial invoices, packing lists, certificates of origin, insurance certificates, health, and industry approvals. And if you are using a documentary letter of credit to ensure payment, all these documents need to be accurate and line up to include common information. There are documentation packages that can supply a lot of this information in a template format, including authorised government forms such as a customs authority number (CAN) to allow export. A listing is available on the Australian Customs website. There are training sessions provided by many of the banks, and the AIEx, on working through the documentary letter of credit process, and your freight forwarder may be able to supply these documents as part of their service.
This is making sure the product gets to the buyer in good shape, or the service is correctly delivered. It also includes insuring the business for losses, and making sure there are options if your buyer becomes insolvent, an economic crisis occurs, or political risk becomes apparent, for example, if the country is suddenly subject to civil unrest that affects business operations. Risk management starts with a proper understanding of your sales trade terms, otherwise known as international commercial terms (Incoterms). The Incoterm used indicates where the various responsibilities of the parties-buyer and seller-start and end. It is also prudent to talk with your bank or financial institution on safe payment methods, how to manage any foreign exchange exposure, and what financing support it can provide until you are paid. If you need to trade on open account terms, you might also want to talk to a credit insurance company about insuring your receivables. To help SME exporters work through the variables of payment methods and export finance, the Export Finance and Insurance Corporation (EFIC) and Austrade have jointly developed a new Export Finance Navigator website. The Export Finance Navigator takes users through the export process and highlights the financial risks at each stage, plus provides a list of the organisations that can help at each stage. Austrade, the Department of Foreign Affairs and Trade (DFAT), and state governments all have offices abroad and can provide good on the ground advice on the local situation and potential areas of risk. Being aware of any current sanction regulations is also important; this is both from the perspective of knowing who your counterparty is as well as correctly dealing with the issue of additional 'payments' that might be requested in certain countries.
Export education around the world
Most of our competitor countries have export education, however it does take different forms in different locations. There is a mix of government and private providers as there are in Australia, and the practical forms of education outlined above tend to form the key component. So if your competitors are being schooled in the right procedure, shouldn’t you also keep your skills up to date? In the United Kingdom, the Institute of Export there also runs an accreditation program for those service providers that advise exporters about their business. Participants who successfully complete the program become a Certified International Trade Advisor. This is one concept that should be adopted in Australia to ensure that those advising businesses have a required level of knowledge; just as those advising businesses on managing their finance risk require accreditation, so should the wider export adviser network. This summary highlights the various skills required to export successfully. In an industry as complex as exporting, there are a variety of skills necessary for smooth operations, and each person in the business will need the skills related to their export duties, from marketing and sales, to logistics and shipments, and to customer service, administration and payment. By helping your staff acquire those skills, as an exporter you really give your business the best chance for sustainability and growth. -Peter Mace is the general manager of the Australian Institute of Export and a Dynamic Export expert panellist.
Case study: Macnaught
For more than six decades, Macnaught has manufactured Australian-designed grease guns, oil pumps, fuel pumps, hose reels and flow meters from its facility in Turella, NSW. Known as a premium quality producer, Macnaught exports to more than 60 countries worldwide. "As an Australian producer our manufacturing cost is high in relation to many of our overseas competitors and we are at the top end of our market in terms of quality. Consequently, it would seem impossible, in these troubled times, to continue to expand our overseas markets," says Steve Royles, customer service manager at Macnaught, indicating the challenges for exporters. "We believe in not only finding active distribution overseas but working with them to provide the products that are correct for that particular market and building a relationship with them for their market, not the 'one size fits all' approach of many companies." In this respect, education is important so that they can understand how trade is conducted in that country. "Economic, geographical, political factors all must be investigated. Austrade, AIEx, banks, freight forwarders and trade organisations provide great information if you know where to look and bother to ask," he suggests. The result is a product that better fits the destination market, says Royles: "By tailoring our offer we immediately enhance it in the estimation of our local stakeholder and encourage them to regard our product as something special." To offer this level of service to all its markets, Macnaught's administration team is attuned to customer needs, which means it can understand the market and respond accordingly. Education has certainly been of value, Royles adds. "All of my team have attended the AIEx Export Documentation and Procedures course as well as various courses offered by a number of freight forwarders and the major banks. By understanding foreign exchange issues, the best trade terms to apply, packaging issues, transportation and customs clearance, we offer a formidable 'add on' to the product itself." And exporters should continue to acquire knowledge so they can keep on top of relevant issues, he says: "Managers must also be across the current economic and social issues in the various countries in question: southern Europe is a current example. Again, the various departments in the government provide general updates, but further research through overseas and trade organisations will give you the specifics for your particular product."
Austrade: www.austrade.gov.au Australian Customs: www.customs.gov.au Australian Federation of International Forwarders: www.afif.asn.au Australian Institute of Export: www.aiex.com.au Custom Brokers and Forwarders Council of Australia: www.cbfca.com.au Department of Foreign Affairs and Trade: www.dfat.gov.au Export Finance & Insurance Corporation: www.efic.gov.au Export Finance Navigator: www.exportfinance.gov.au International Chamber of Commerce (Incoterms): www.iccwbo.org/incoterms IP Australia: www.ipaustralia.gov.au