In today's global economy any business seeking international market opportunities faces challenges. Staying competitive in an international environment means sales revenues must be constantly improved, and the export factor is of crucial importance. But what if a company lacks the expertise and experience to enter new foreign markets, the resources to establish its own export department or lacks sufficient flexibility to react quickly to current market fluctuations? Outsourcing has proved to be a powerful and effective solution for companies trying to enter and develop new markets, as well as saving costs and manpower, but before transferring parts of your company to an outsourcing provider there are a number of aspects to consider and decisions to be made. An outsourcing company should provide: * established processes * a scalable compensation model * a business mentality * multicultural competence * (long-term) references * matching service range and options * market knowledge, existing networks and contacts.
Many small and medium sized companies lack the capacity and expertise to increase international sales activities but need to do so in order to stay competitive in a globalised market. Market access barriers such as import and customs tariffs, investment logistics, complicated government requirements and many more issues often create insurmountable obstacles for companies trying to enter new markets. Sales managers often simply can’t handle additional demand on their already existing workload or don’t have the know-how. An experienced outsourcing partner can be of great value here. Besides know-how and experience, cost cutting and cost effectiveness are additional incentives to work with an outsourcing specialist. Economies of scale don’t only work in manufacturing but in services too. The outsourcing specialist with its established infrastructure as well as office facilities and employees on-the spot can operate much more cost efficiently. Often they can also use existing networks acquired over the years and also by working not only for one but many customers, external service providers can achieve economies of scale unavailable to individual firms when they combine the volumes of multiple companies. In Europe, the United States, Asia and other emerging markets worldwide there are innumerable cultural and social differences to navigate. Outsourcing specialists employ staff trained to deal with cultural considerations and who have worked in numerous countries. Many are multilingual and have extensive experience with foreign markets and cultures. With an experienced outsourcing company on your side it will be much easier to overcome cultural differences and challenges, allowing you to enter new markets much faster, better prepared and with the ability to be flexible. At any time capacities and the number of employees can be adjusted without difficult terminations of contracts. Because your outsourcing partner has precisely defined tasks to perform, assessment and monitoring is simplified.
The right outsourcing strategy
In order to implement outsourcing strategically a company has to decide which units it might want to outsource. This will always be a very individual decision as well as a dynamic process.
Many companies have successfully outsourced one or all of the following units:
- Market entry phase: Initial market research, benchmarking, competitor analysis, lead creation etc.
- Local marketing: Participation and/or organisation of trade shows, advertisement placement, networking, sales promotions.
- Sales: Personal meetings, sales calls, cold calls, quoting, after sales service.
- Logistics: Freight organisation, shipment tracking, documentation, warehousing.
- Customer service: Order management, billing, payment tracking, claim handling.
Based on the core competences of the contracting companies and their workflow, the scope of transferable units might vary during a certain period of time. To start with, the client might start to outsource only single units but extend his requirements later if the enterprise prove successful. With accelerating globalisation and the need to establish a presence in many markets worldwide, smaller companies especially have begun to outsource their complete sales units, including logistics.
Besides the positive gains outsourcing can achieve there are some challenges to offloading parts of your exporting workload. Critical factors can include lack of commitment, confidentiality and the issue of maintaining your own brand identity when working with an outsourcing partner. While attractive compensation will always be the main motivation for your outsourcing partner, there should also be other incentives for the outsourcing specialist. Since the outsourcing specialist represents the client company in the marketplace trust between the partners is essential. Long term contracts are therefore a good basis for a functioning and successful cooperation. Confidentiality of business data can be another critical factor. To some extent confidential information has to be transferred to the outsourcing specialist. A reliable partner is of utmost importance to the company seeking outsourcing solutions. Inside information and critical data must at all times be handled confidentially. Confidentiality agreements may not completely guarantee this so, again, long term contracts are preferable to short term relationships. To maintain a strong brand identity in the market the outsourcing partner can simply operate under its client’s trade name, address and logo. They might use the company’s contact addresses for emails, phone numbers and sign off on agreements on behalf of the company. Proactive reporting on part of the outsourcing professional can be a useful and important tool in this situation. In summary, finding the right partner is of foremost importance when seeking outsourcing solutions.
Finding the right partner is the first step, laying the groundwork to prepare your company for a successful outsourcing strategy is the second. After having considered your reasons for outsourcing, define your business goals. Decide which units to outsource, set your sales targets and time frames, and clarify these with the outsourcing specialist.
You will also need to put in place an internal coordination process of the personnel requirements within your own company to facilitate a successful functioning relationship with your outsourcing partner. Brief the relevant employees who will be working with the new partner and appoint a liaison person to provide them with all the information and background they need and to act as the go-to contact in case of inquiries or problems. To be outsourcing-ready means being positioned to dispose of well structured organisational units as well as having the willingness and ability to invest in the outsourcing process.
Outsourcing part of your company’s services or even whole departments can be a powerful and efficient tool to stay competitive in a globalised economy. Small and medium sized companies particularly can benefit from transferring important tasks to outsourcing professionals and gaining from their expertise and experience in foreign markets. Outsourcing specialists can work more cost efficiently and react faster in case of market fluctuations but a company seeking an outsourcing partner has to be analyse and structure their own business effectively and be prepared to enter into a long term relationship in order to guarantee a successful partnership.
Freight forwarders are an another important business resource that you can outsource but you must fully understanding what they are doing on your behalf. The role of the forwarder should be to consolidate cargo, manage freight services for international goods movements and documentation services. Managing the relationship involves understanding the forwarders role, know the limitations of what can be done, providing plenty of information and allowing adequate lead time. How to choose a freight forwarder
- Ask others for their recommendations.
- Is the freight forwarder local? Visit the premises.
- Find out about their affiliations. Do they handle air and seafreight?
- Are they available 24/7?
- Compare prices, but realise cheap price = cheap service.
- Do they suit your needs? You may want a freight consolidator if you requirement is small.
- What is their market expertise? If you are freighting perishables you should seek an expert.
Trade Advertising is a Sydney based company specialising in marketing communications for the trade and construction sector with clients including international and multinational organisations. Managing director Deane Waldron outsourced his bookkeeping and management accounting to Intelligent Accounts at the beginning of this year. Intelligent Accounts uses cloud computing to provide the service from Colombo in Sri Lanka. Waldron says the benefits have been:
- significant cost reductions
- improved attitude to performing the outsourced functions
- freedom to focus on the core business
- same day generation of invoices
- proactivity in terms of compliance and statutary obligations
- readiness for end of financial year accounting.
Waldron says he supplies weekly spreadsheets and summaries of financial outgoings which he can compile when it suits him. Intelligent Solutions provides an online portal that enables Trade Advertising to access accounting information at any time.