RedGuard August 2016 back cover
You have decided to export to expand your available market and soften some of the downside of your current market. Fantastic, but where do you start? There are 194 countries in the world, and as the export sales manager for your company, you need to decide which ones are right for you. There are thousands of publications and government programs as well as hundreds of consultants ready to help you for a fee. But nobody knows your product better than you.
- Develop a plan — The best place to begin is to put an export plan in writing. There are several guides on how to write an export plan, but we recommend beginning at www.export.gov, a website provided by U.S. Commercial Services. Its “Export Basics” page (www.export.gov/exportbasics) guides would-be exporters through a readiness questionnaire and all the way to a guide for creating an export business plan.
- Don’t be too ambitious — RedGuard products are found primarily in oil, gas, petrochemical, and defense and security applications, which shortens the country list down to probably several dozen or so. The best advice we received was to concentrate on only two or three of the best prospects for successful export and build from there.
This article outlines RedGuard’s method for choosing those two or three export targets and the methods we considered and ultimately used to develop business there (i.e., get orders). This is not a one-size-fits-all approach, but hopefully this article will offer ideas and support for other manufacturers interested in starting or expanding their export businesses.
How do you measure potential markets?
At RedGuard, we developed a scoring system that weighs each potential export target based on several criteria, most of which are industry-specific. We scored each criteria from 1-10, which allowed us to narrow a list of six possible export targets down to the two best. Here is the list of our criteria and why they were important:
- Refining capacity — RedGuard products are most often used near process areas in refineries or petrochemical plants. Although we are constantly considering new products and businesses to ease our reliance on refining, this is where the majority of our current revenue comes from. In each target market, we looked at overall refining capacity and the number of refineries and turned that into a score. We also considered future refining additions using various projection models.
- Safety culture — RedGuard products are built to protect lives. They don’t add to production revenue. The return on investment for a blast-resistant building (BRB) comes from preventing injury and loss of life. In the U.S., if you visit a refinery, you will go through multiple levels of security and safety training to enter the facility. You will be escorted at all times, and you will be wearing eye protection, hearing protection, a hard hat, flame-retardant clothing, steel-toed boots and, quite often, gas detection. You will see signs, lines on the ground, alarm horns, and other indications of potential dangers and how you should react in the event of an emergency. This is a safety culture. Compare that with an open-house tour of a gas plant we took last year in an export target, where several of the visitors toured the active, operating gas plant wearing open-toed shoes! We look for countries whose facilities are willing to invest in protecting the lives of their people.
- Oil production — Countries producing oil tend to be the ones spending money on infrastructure and facilities to support that production. In most cases, these countries will follow production with refining and other process facilities where blast dangers exist every day.
- Gas production — Gas production and transport involves several hazardous processes that drive the use of BRBs. At the gas plants where fractionation is taking place, or at fertilizer plants where large volumes of gas are being used in the production of ammonia, there are blast danger zones. Petrochemical (plastics) is one of the fastest-growing industries in the world, and much of this growth is on the heels of low-cost, plentiful gas.
- Safe for travel — In our business, which is tied to the oil, gas, petrochemical, and defense and security markets, we find varying degrees of safety and security within the targeted countries. While we all want to export and be successful, the safety and security of our own employees are paramount. For this reason, we have to include travel safety as a key criterion for deciding whether to do business in a target country.
- Ease of doing business — Many countries require local partners or for you to register with the government, a process that could take a year or more. Taxes, tariffs, ports, imports — these items could be the topic of 10 more articles. Looking into these factors prior to investing time and money in an export target will give you an understanding of the challenges of doing business in your target market. U.S. Commercial Services offers excellent papers on “Doing Business in XYZ” for many countries.
- Economic/market growth or decline — Understanding whether the GDP (gross domestic product) of a country is rising or falling is a good indicator of the economic and industrial health of that country. Are the stock markets and industrial indexes going up or down? All of these indicators will lead to an understanding of whether the clients you identify will be looking to invest in your products or keep their capital closer to home.
- Defense and security opportunities (CoverSix Shelters) — Above we discussed safe travel. In RedGuard’s case, an unsafe or unstable country also offers us opportunities. On the one hand, travel can be hazardous. But on the other hand, these countries need secure facilities to ensure the safety of their staff. Our CoverSix products are designed to provide security for military, government and industrial facilities.
As mentioned previously, most of these criteria are quite specific to RedGuard. The types of criteria and number of criteria will be different for everyone, but keeping it simple is always the best rule.
Now that the scoring is done, how do you go to market?
How to go into the chosen markets is going to vary greatly depending on the types of products (commodity or capital goods), targets chosen above, speed of entry, budgets to apply to export and numerous other factors. This is the hard part of developing the export business plan. How do I get there? Who are my clients? Which products are we going to sell? Do they need to be modified for the market? How am I going to sell? Do I need to set up an office or manufacturing site in the country? We can’t possibly investigate all of this in one article, so we will share our experience with how to sell products in a given market and ultimately how to manufacture buildings for sale and lease in a market 7,500 miles from our headquarters:
- Go direct — At the very beginning of developing an export market, it may be advisable to start slow and get to know the market yourself. The best way to do this is to research possible clients and set up appointments from the U.S. for a dedicated trip to the export target. I stress the word research, as you need to know how to get around, how to conduct meetings, and how to present your product in a foreign land and often in a foreign language.
- Dealers — In the case of the dealer, much of the promotion falls back on the manufacturer. The dealer is there to stock and deliver the product and in some cases offer service. Whereas an agency may work for a commission, the dealer will often own the product and pass it along with a markup.
- Sales agent — Sales agents are a low-cost method to go to market, as they are only paid when they sell something. The downside of the agency arrangement is they also represent many other products and you don’t know how much time they are dedicating to your product. In some regions, the agency agreements can be very binding and protected by the government (against the principal). Proper vetting is critical in agency selection.
- Direct sales office — Setting up your own office puts your name and products front and center in the new market. Being staffed with a direct salesperson allows a qualified professional who knows the product to be in front of potential clients at a moment’s notice. The obvious challenge with direct sales is the expense of a direct office in a territory where business may be slow to develop.
- Joint venture — A joint venture (JV) with a company in the target market offers many advantages. The local company can be your sales, marketing and manufacturing partner. Bringing two companies together brings the best skills of both to bear in the new market. Both companies share the costs and the profits. Although this may sound like you are cutting your business in half, the truth is such a strong local presence brings more than enough business to make up the difference — with less risk and headache. In the Middle East, a proven market for BRBs, RedGuard chose to form a joint venture with Specialist Services, a leader in offshore modular structures. The JV process took over six months but in the end formed a company called RedGuard Specialist Services that is poised to be a leader in designing, selling, manufacturing and leasing modular blast-resistant structures in the Gulf Cooperation Council. We are excited to work with Specialist Services and build a great new company. (See our JV press release in Supplier News.)
Exporting can be challenging but also extremely rewarding. It allows growth that is not possible with domestic markets alone.
For more information, visit www.redguard.com or call 855-REDGUARD [733-4827].
