Where Export Begins

Export activity is very attractive for business.

At the same time, this area is rightly perceived as high-risk. A systematic understanding of the work on an export project will help you confidently take a step towards a new geographical market.

Where does the Motherland begin? Generation X (thanks to Mark Bernes' voice) and many representatives of Generation Y (more likely thanks to memes now), who form the core of management in modern Russian companies, know many variations of the answer to this short question.

And where does export begin? In management practice, the answers are extremely diverse. If we leave aside personal motivations (investments in citizenship for the owner or the desire to go to an exhibition in, say, Japan, Switzerland, California (USA) for the marketing director), then it is always a certain understanding of export as a business growth point. And here we start thinking that the company has matured for an export strategy.

Export Strategy and the Benefits of Its Implementation

Any company operating in the market implements a certain strategy one way or another. Its most important component is the marketing strategy, which is generally intended to align the internal environment of the organization with the external environment and, on this basis, create opportunities for making a profit. In this sense, the export strategy is an integral part of the marketing strategy concerning work in foreign markets.

The Russian Federation is a member of the Customs Union of 5 states, which leads to some uncertainty in understanding what export is.

From the point of view of customs legislation and formal logic, export is associated with the crossing of the customs border by goods, and therefore the movement of goods within the Customs Union is not export. In this sense, export is a sale abroad except to Kazakhstan, Armenia, Kyrgyzstan, and Belarus.

From the point of view of currency legislation and marketing logic, export is the sale of goods outside the country's territory, including the states of the Customs Union. These sales also bring currency earnings, and their organization requires a certain set of actions, universal for any new geographical market.

Regardless of which point of view we take as a basis, the implementation of an export strategy gives the enterprise the following advantages.

1. Risk Diversification.

New markets are almost always new customers, that is, alternative sources of income for the company compared to the existing base. It is important that the dynamics of economic development in different countries, and especially in their individual sectors and industries, may not coincide with the Russian one, thereby hedging the risks of market conditions.

2. Acquisition of New Competencies.

Entering new export markets requires certain competencies from personnel, which can often become a barrier to implementing an export strategy. On the other hand, working through even one export project allows improving the skills of marketers, salespeople, lawyers, production staff, accountants, logisticians, and even the top management of the exporting company. After such an upgrade, work in the Russian market becomes much more productive.

3. VAT Refund.

It's simple – there is no outgoing VAT on export supplies, even within the Customs Union. If your company is on the general taxation system, this greatly reduces the tax burden, and if the share of exports is high (and as a result, the incoming VAT exceeds the outgoing one) – you can get a VAT refund from the budget.

4. Access to State Support Measures.

Export currently has the status of a state project in Russia, so exporters receive many preferences, including financial ones in the form of subsidies and compensations. You can learn more about them, for example, on the website of the Russian Export Center.

5. Growth of the Business's Image Component.

Russians' respect for everything foreign, let's face it, is in their blood. Therefore, companies whose products are in demand there receive extra karma points from business partners in Russia. It is clear that it is desirable to supply outside the countries of the former socialist bloc – preferably to Western Europe or Southeast Asia, but you can start with, say, Belarus or Serbia. It is problematic to quantitatively calculate the effect of export activity on brand value, but logically it is there and is far from near zero.

An export strategy as a unified systemic activity is implemented in companies quite rarely due to the significant specificity of importing countries. As a rule, a separate project is prepared for each state, relatively independent and within a separate team (the same specialists can be members of several teams depending on the complexity and stage of implementation of the export project).

Stages of an Export Project

Considering the stages of an export project, we will approach the answer to the question posed at the beginning of the article. What is the content of the first stages – this is the beginning of export, and so – here are these sequential steps.

1. Market Selection and Buyer Search.

At this stage, it will be necessary to select those geographical markets that are a priority for us in terms of commercial results, conduct their segmentation, analyze purchasing power and determine the target audience of the product, propose an optimal system of sales and promotion, pricing policy, analyze the competitive environment and assess partnership opportunities, consider market entry barriers, including administrative ones, conduct negotiations with potential partners and discuss the terms of the deal, etc.

2. Preparation of the Goods to Meet Market and/or Buyer Requirements.

For most export countries, the product must be adapted in terms of appearance, packaging, labeling, and the specifics of supporting marketing activities must be clarified. Each shipment, especially the first batches, is agreed upon in detail with each partner.

3. Negotiations with the Buyer and Conclusion of a Foreign Trade Contract.

At this stage, the sampling volume during contract execution, shipment frequency, requirements for batches, and approval of the final contract parameters (primarily prices and payment forms) are established, and then the foreign trade contract is actually developed as a document and signed by the parties.

4. Production of Goods for Export Shipment.
5. Customs Clearance of Goods.
6. Delivery of Goods.
7. Payment for the Shipment.

In this case, points 4 to 7 may change chronologically depending on the specifics of settlements between the parties and the implementation of physical delivery.

The first and second stages, as well as largely the third stage, describe various aspects of the company's marketing activities. In this case – in the export market. Hence the logical answer to the question "where does export begin?" – with marketing. And marketing itself begins with market research. In export marketing activities, an additional "zero" stage arises – the selection of markets for their research.

Selection of Priority Markets for Export

The experience of conducting export market research has made it possible to identify three key criteria (potentials) for organizing work on prioritizing foreign markets.

1. The Generic Potential of the Product, Determining the Economic Boundaries of Its Distribution Area.

Each type of product has geographical limits where the economics of supply are positive. For some goods (for example, books) – this is the entire globe, for others (fresh bakery products) – no more than 300 km by road.

Therefore, when starting market selection, it is necessary to draw up a coverage map of the territory that falls within the zone of commercial feasibility of supply.

If an interesting market is outside this area, then there is essentially one way to overcome this limitation – to open production in that country.

2. The Potential and Competencies of the Exporter.

It is necessary to impartially assess the internal environment of the organization to understand whether an export project to the countries on the list is within its power. Not every firm that supplies to Kazakhstan has the competencies to work with China. But such existing limitations can be overcome by entering into market collaborations of various kinds to attract missing resources and competencies (marketing, personnel, financial, etc.).

3. The Potential of the Market of a Specific Export Country.

By generally assessing the costs of entry (production and product adaptation, logistics, overcoming barriers, paying mandatory payments, etc.) and the commercial effect from sales (through market capacity, its potential share for our products, and the possible selling price), we conclude on the feasibility of exporting to this country.

As a rule, if a country satisfies the first criterion but does not pass the third, then it will be necessary to implement a set of marketing activities that will allow forming a positive "economy" for the export project.