There are various ways of entering overseas markets. You can manage the process yourself – selling directly from your own country or setting up an operation in the target country. Alternatively, you can use an intermediary such as an agent or a distributor.
The different ways to enter overseas markets
When you decide to enter an overseas market, it’s important that you identify the best approach for your business. There are four main ways to sell to customers in overseas markets. You may find you need to use more than one entry strategy, depending on the markets you target and the products you offer.
Selling directly from the UK
This typically involves making periodic sales visits to the country, supplemented by telephone sales or accepting overseas orders on an e-commerce websiteOpening an overseas operation
This involves opening your own branch or subsidiary in the new market, or entering into a joint venture with a local business.
Using an overseas sales agent
A sales agent acts on your behalf in the overseas market, making sales for which they receive a commission.
Using an overseas distributor
A distributor takes more responsibility for exporting than a sales agent. The distributor buys goods from you directly, and is then responsible for selling them at a profit in the overseas market.
Choose how to enter overseas markets
When selling overseas, you can sell your product or service directly to customers or use an intermediary. You may decide a mix of these approaches is best for your business. There is no “one size fits all” solution.
You should consider the implications of each method in terms of:
- the direct and indirect costs
- how much control you’ll retain over how your product is sold
- which export-related risks you’ll have to bear.
Making the right decision
Investigate your new market and how your product will fit into it. Consider the following questions:
- What’s your priority – minimising potential costs or controlling the process?
- Do you have the market knowledge to make contacts and generate sales?
- Do you have the time and money to invest in setting up a local branch or subsidiary? â€¢Are there restrictions on the way you can enter the market?
- What is appropriate for your product?
- What are the usual distribution channels for products like yours in the target market?
Selling direct from your own country
Selling direct from your own country is an easy and cost-effective way to enter an overseas market. However, you will be far from your market and potential customers, which may cause you some problems.
There are many advantages to selling to an overseas market from your own country
- You can use existing resources to start exporting into your new market.
- You maintain full and direct control over the process – including all aspects of the marketing of your goods.
- It is a good way to experiment with exporting – the strategy is easily reversed if it isn’t working out.
- There are other issues to consider:
- You will need to know the market well to find buyers and build relationships.
- You will be responsible for logistics such as shipping and customs formalities.
Opening operations in overseas markets
Opening an operation in your overseas market is generally the most costly and time-consuming way to enter it, but the rewards can be great.
Local rules may restrict your options, but the three main ways to open an overseas operation are to set up:
- a local office, staffed by one or more of your employees
- a locally registered subsidiary company – a new business in the target market, subject to local company, employment and tax rules, and generally hiring some local staff
Exporting in this way gives you the chance to identify and exploit opportunities in your target market. It also gives you the flexibility to control your operation, and expand if necessary. There are other benefits:
- While intermediaries may opt for short-term sales, this way you can plan for the long term.
- Your customers will take you more seriously if you have a local base. This is particularly true if your products require specialist after-sales service.
- If you use a joint venture, you will be able to share the risk. You will also benefit from your partner’s local knowledge and reputation.
Using an overseas agent
A sales agent acts on your behalf in the overseas market and is paid a commission for any sales they make. The key benefit of using an overseas sales agent is that you get the advantage of their extensive knowledge of the target market.
However, while there are clear benefits, agency relationships can have their downsides too.
- You avoid the recruitment, training and payroll costs of using your own employees to enter an overseas market.
- An agent should be well placed to identify and exploit opportunities. â€¢Your agent should already have solid relationships with potential buyers – it might take you some time to build up your own contacts.
Getting the relationship right
Make sure you get an agent with experience of selling your type of products and who has potential buyers interested in the kind of goods you sell. Otherwise, you risk tying yourself into an unproductive relationship.
Using an overseas distributor
A distributor buys your goods from you and then takes full responsibility for selling them on in the overseas market. While the role of a sales agent is to find you customers, a distributor is your customer.
- The main advantage of using a distributor is simplicity. Distributors enable you to access international markets while avoiding logistics issues and many trade-related risks. â€¢The distributor is usually responsible for the shipment of goods, and the accompanying customs formalities and paperwork.
Finding and choosing overseas agents and distributors
Make sure you research before selecting an agent or distributor. Draw up a shortlist of at least three, then carefully compare what each can do for you.
Where to find agents and distributors
There are many organisations that can help you with your search, including:
- trade associations covering your sector
- your local Chamber of Commerce
- the Chambers of Commerce in your target country
Contracting with overseas agents and distributors
Make sure any agreement with an agent or distributor is formalised in a clear written contract. This will reduce the chances of disagreements or problems arising later. It’s worth seeking expert advice – from a lawyer with trade-related experience. Make sure you understand every part of the contract.