Export Readiness Self-Test Survey – Product Focus

The ’8Q Export Readiness Self-Test – Product Focus’ is a web-based survey assessment designed for:

• Companies that see exporting as a possible new or expanded activity but are uncertain about their export potential or prospects.
• Export counselors who need a fast, user-friendly way to “qualify” new clients for export assistance.
• Individuals who are interested to consider import-export as an international business venture, second career or second life…:)

This self-test consists of 8 questions that prompt you (as an exporter) to consider your product’s success potential in the export market. Ready to try it out? We assure that your responses will be kept private and confidential.

Want to look at those questions and possible answers before trying it out? I shall spoil your fun by showing you those 10 questions now.

Question 1: What is your product’s tolerance level towards harsh or widely varying environmental conditions?

Many products can tolerate different environmental conditions up to a point, but lose effectiveness as extremes are approached (e.g., abnormal temperatures, humidity, altitudes, pollutants, etc.). The more sensitive the product to these changes, the more required to “protect” it against the elements. Although even the domestic market varies environmentally among regions, the problem is compounded in exporting, where differences from country to country are far more pronounced. Protection could be as inexpensive as strengthening or insulating the packaging, or it could involve more costly measures, such as altering the product itself or storing it under controlled conditions. It’s best to avoid markets where costs of protection would be prohibitive or make you uncompetitive and focus instead on more environmentally conducive markets.

Question 2: Would you be willing to adapt your product and/or packaging to better suit foreign markets?

Adaptability is a must in exporting. Foreign markets differ from the domestic market in many ways that can critically affect product acceptance — in income levels, standards, climates, sizes of people and space, language, religion, cultural preferences and taboos, business practices, etc. These differences often dictate whether your products would be allowed into a market; could be afforded; could tolerate the local physical environment; would “fit” or operate efficiently; or would appeal to or offend potential buyers. For example, your products must comply with different health, electrical and technical standards abroad. Low income countries may demand more affordable versions of your products than high income countries (stripped down, second generation, etc.). Harsh environmental conditions in some countries can affect product performance (e.g., abnormal temperatures, humidity, altitudes, pest infestations, pollutants, etc.). Your products may not fit the smaller sizes of people, homes, streets, etc. in some countries. The colors and shapes of your products, or the words or symbols you use in your product literature, could be culturally offensive in countries with different religions, languages and customs.
Willingness to adapt your product design, packaging or promotion can greatly increase your market options and may well be crucial in certain markets. Unwillingness will limit you to the fewer markets that accept domestic products exactly as they are. If costs to adapt are deterring you, think again. Not all needed adaptations are costly or difficult. Some may be fairly easy and inexpensive, such as adjusting the sweetness in a soft drink; switching packaging materials to protect against rot, rust, mildew, pests, etc; changing the color or shape of the product package; translating or adding local context to brochures to make them more understandable. These are usually well worth the cost or effort. In other cases, you may need to make more substantial changes, such as re-engineering or retooling the product. Rather than rule out change altogether, weigh the potential benefits of greater sales against the increased costs to adapt.

Question 3: Does your product compare favorably with domestic competitors in features and benefits? Does your product has its unique selling features/benefits?

It helps to be “superior” in some key way, particularly when you’re higher priced than your competition. Foreign buyers look at product performance, not just cost, when they make procurement decisions (e.g., dependability, versatility, durability, repair frequency, productivity, labor-saving etc.). They will often pay more to get more. If your product fits a niche in the domestic market, or has some advantage over competing products, you have strong export potential. In your overseas marketing, you’ll want to emphasize any areas of product superiority or tout other advantages, such as reliability as a supplier, strong customer service, etc. If you have no particular qualitative advantages, you may still have export potential. Many of the most heavily exported products are virtually indistinguishable (e.g., agricultural products, raw materials and semi-manufactures). You and your competitors alike must use price and credit as your main selling points. If you do have a distinguishable product, but it’s comparatively “inferior,” consider markets that aren’t as picky. Buyers in many less-developed, cost-conscious, labor-intensive countries may not need or want the “best” or “latest”. They’ll often take a lesser product to pay less (e.g., manually-operated vs. automated equipment, yesterday’s technology, no frills models).

Question 4: Is your product price-competitive in the domestic market?

Domestic price-competitiveness is a big plus in exporting. Competition abroad is usually stiffer than at home, and price is often a decisive competitive factor. A competitive price is a must for products that are otherwise indistinguishable, such as basic commodities. Even for performance-based products, price often becomes decisive at some point. Unless your product is indisputably superior to the others, or is indispensable, the buyer may ultimately let price be the final determinant. If your prices are competitive domestically, you’re in a strong position to offer very attractive export pricing as well. While you’ll need to add some export delivery costs to your prices (e.g., freight, insurance, etc.), so too will most of your exporting competitors. You can thus retain your relative price advantage in many export markets. On the other hand, if you have little or no price advantage domestically, and have no offsetting product strengths (superior quality, uniqueness), exporting may not be a viable option. Given the importance of competitive pricing, you should try to obtain comparative price information before you enter a target market. If necessary, strongly consider adjusting your prices to meet the competition.

Question 5: What payment terms would you be willing to offer reputable foreign buyers?

Exporters become more competitive abroad when they allow their buyers more time to pay, particularly for price-conscious products. With more time to pay, foreign buyers can lower their up front costs and leverage their resources. This might allow them to buy larger quantities or pay higher prices they couldn’t otherwise afford. Typically, buyers seek payment terms ranging from 30-120 days after receipt of the goods. For more costly purchases, buyers may seek multi-year credit terms. Although exporters would rather be paid in advance or on delivery to reduce risk and financing costs, this may not be feasible in a highly competitive export environment.

Foreign buyers often have alternative sources and may well opt for a supplier more willing to finance the sale. They’ll generally pay in advance or on delivery only when they need or want a product badly enough, have no good alternative, and can afford it. Thus, willingness to extend credit is often a determining factor in making export sales. For higher-priced products, offering atttractive payment terms may be the only way to beat the competition. Credit sales do incur risks and financing costs. However, these can be minimized. There are services available to help determine a prospect’s credit-worthiness. Export credit insurance will protect against non-payment and other commercial risks. Suppliers can also finance or discount the export receivable so that, in effect, they get their money right away (less interest or a premium) even though the buyer has more time to pay.

Question 6: Is your product costly to transport over long distances?

Transportation costs are not usually a prohibitive or decisive competitive factor in exporting. With modern containerization and other advances in transportation and logistics and a more competitive shipping environment, transportation costs generally can be kept to a low percentage of landed cost (product cost plus freight and insurance). The exceptions are unusually heavy or bulky items that can’t be knocked down or containerized. Your domestic competitors presumably face comparable transport costs, since their products are similar in size and weight; are destined for the same markets; and will have to get there by the same mode, mostly by sea or air. Other competitors could have some transport cost advantage if they’re closer to your market or could get there by truck or rail (e.g., Europeans selling within Europe; Asians within Asia, etc.). If transportability or transport costs are a serious constraint, you might consider contracting or licensing production in the target countries. Alternatively, you may still have possibilities in nearby, contiguous markets that can be reached more easily and quickly. Whatever your destination, you should look for the most cost-effective mode and rate. A freight forwarder can help you optimize your transportation costs and handle all the arrangements.

Question 7: Are they any special training required to assemble, install or operate your product?

You could have a competitive problem if overseas users need extensive on-site training. Many products require little or no training, or the users can get along with basic instruction sheets that cost little to translate. However, on-site training can be very costly and cumbersome, particularly abroad, where languages and distances vary greatly, and skilled or trainable labor may be in short supply. High training costs will put you at a competitive disadvantage against in-country suppliers who could probably meet a local training requirement more readily than you. You may need a competent local distributor who can install and use the product and train end?users. To cut costs in these cases, you might try a “train the trainer” approach, either at your domestic site or overseas. The trainee(s) would then provide the necessary ongoing or follow-on training in each market.

Question 8: Does your product require any special technical support or after sale service?

Support-intensive products require a more costly, more logistically complex support structure than other products, particularly in exporting. Customers must have access to replacement parts and competent technicians to install and repair the product. When the customers are overseas, the normal difficulties are compounded by distance and language differences. If your main competitors are locally-based, they could presumably provide in-country support more easily and at less cost than you. To ease the logistics and costs of an overseas support requirement, you could team up with a local distributor equipped to install and repair your product and stock your spare parts. That might limit your support role to supplying any special tools or testing equipment needed; possibly translating your installation and repair manuals into the local vernacular; and providing some hands-on training of your local rep’s technical staff. Alternatively, you could establish your own support facilities in-country, or airlift technicians and parts in as needed. However, these are more costly, more complex options, usually best avoided in a start-up phase. You might reconsider them later should higher sales volume justify the higher costs.

Whew…there you go – the top 8 questions to get your product ready to enter the trillion dollar international trade market. Why not give it a go and see how you fair? There’s no pass or failing grade, just a simple ‘reality check’ on how remarkable is your product when you step up your effort to compete globally. Ready?

Still hesitating to try it out yourself? Why not read our FAQ page on how we keep your responses private and confidential.

Got better ways to improve those questions? Add your comment now as we would like to hear from you!

Acknowledgement: Special thanks to Maurice Kogon, Director for International Trade Development from CITD for making available those export readiness questions for exporters

Please note: The information contained in this survey should not be solely relied upon for the purposes of making a final import-export business decision. It is general information only. You should consider your own personal circumstances, financial position and objectives before making any decisions.

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