Indian businesses have always aspired to sell in overseas markets. For a successful entrepreneur, there’s nothing more exciting and satisfying than conquering foreign market. Higher margin, easier bank credit, tax free revenue and various export incentives are some of the attractions of overseas markets. Besides, thriving overseas presence is an insurance against any instability in domestic market. However, not much information is available on the topic, specially for small and medium Indian enterprises.
In a series of articles, we shall discuss preparations and planning required before venturing out to overseas markets, various routes for overseas entry with comparative advantages/disadvantages and sources of information. In preparation and planning stage – a business must objectively assess whether its ready for overseas market. To help a business evaluate its position – here’s few pointers.
1. Domestic Distribution First – Overseas Comes Later
A business must establish itself in domestic distribution market before planning any overseas venture.
Robust presence in at least some part of domestic market for few years gives enough understanding and maturity for running a successful distribution network. Without such expertise in domestic market – any foray in overseas market may result in costly mistake.
2. Is The Product Ready For International Market ?
There’s simple test to ascertain if a product is ready for international market or not – extent of
overseas sales. Foreign customers must constitute at least 25 percent of a products customer base to make it eligible for overseas launch. Past sales figures would easily identify which countries make up the majority of international demand. Accordingly, overseas distribution plans for target countries may be drawn
3. Is Your Company Ready For Overseas Distribution ?
To ready your company for overseas distribution – please make sure
- Your company has a website in English, and preferably the language of the target country
- Presentation materials, product descriptions etc. are available in English, and preferably the language of the target country
- Distribution agreement (see below) is ready – IN English and language of target country
- Logistics and delivery conditions are clearly defined.
- Outline for a marketing plan, specifying the proposed way of promoting the products or services in the target country.
4. Legal and Trade Certifications
Your product must comply with legal requirements of target country. Some of the legal requirements could be trademark, certifications etc. For products belonging to food, medicine, ayurveda, herbal etc. – there are detail guidelines on product quality, safety and efficacy in EU, US and other developed markets. For apparel there are safety compliance requirements such as use of chemicals, dyes etc. Its important to find out about these legal and compliance requirements in advance and prepare accordingly.
5. International Distribution Agreement
You need to hire a lawyer to prepare an international distribution agreement, covering regional exclusivity, purchase orders, product pricing, payment terms, warranty/liability, MAP (Minimum Advertised Price) policy, governing law etc. In case distributor pushes for exclusivity, balance such demand with clause specifying performance measurement to continue holding exclusivity in that region.
6. Arrange Inventory / Fulfillment Centers in Target Countries
Your overseas distributor should have fulfillment centers in their region for prompt delivery to its downstream retail channels. This will save you in logistics cost as also from hassles of return/ replacement etc. If any post sale customer service is required – include cost and maintenance of that in distribution agreement.
Once overseas distributor is up and running – make sure they have all the assistance for smooth sales and marketing operations. Remember, the distributor is essentially an extension of your own sales and marketing arm in that nation conducting marketing, sales, PR, customer service and much more. Success of your distributor is your own success.