Exporting… at what cost? Part 1

The supreme attraction of international trade

Nowadays, in this era of globalization, it seems impossible to imagine that the growth of a business can happen without expansion into new territories. The generosity of the financial assistance granted by the government to this type of deployment testifies to this keen interest in the conquest of the world markets. It is widespread enough to suggest that a self-respecting company should always be considering an expansion of its activities outside its territory, no matter the cost.

Yet, we rarely wonder if the time is right for expansion, if the funding is adequate and if the business strategy is strong enough. Often, and I am speaking here in a small business context, the process is improvised, guided by growth ambitions rather than a well-designed and well-planned strategy. The reality is that a small business that is taking its first steps into foreign markets has neither the experience nor the contacts to facilitate the process. Many resources are invested to generate sales in a new territory and many other investments will logically follow in support of these new sales.

So, with limited resources, what can we really expect? How can we be competitive without changing the price in order to generate demand, thus affecting our profitability?

I have always felt the pressure to start exporting, from the first days of my business, and I have long resisted, considering that my meager resources should be allocated for the survival of my company, which was still not very profitable. I was constantly asked to invest more to generate sales while I was struggling to generate profits… I was producing more, yes, but I was not making more money, quite the contrary. Despite the financial support provided to help fund these investments, with a little hindsight, even though I waited several years and resisted the pressure to enter new markets, I can tell you that it did not go as planned, and the result is far from being worthy of all the resources invested into this process.

Have you really exploited the potential of your most accessible, which is also the most profitable market?

Do you know all the costs associated with the development of new sales in a new territory? You have a number in mind… you can multiply it by at least 3! Indeed, sales outside of one’s own market are often the least profitable. The costs of sales development, marketing, transportation, etc. all add up and ultimately, little profit is created by the growth generated in the export markets. Yet, at the same time, we neglect to maximize the most profitable sales in our own territory. We weaken our competitiveness in our local market and waste our precious resources (human and financial) by targeting foreign markets. Whereas we should rather have the wisdom to wait a little to have the financial strength to allow for this type of expansion.

Nobody will tell you that, though; on the contrary, you will be encouraged to go sell in Asia. Are your sales really saturated in Canada, or even here in Quebec? Unfortunately, if a company wants to invest significantly in marketing to develop its sales, it can receive funding in this respect only if this development targets external markets. This does not encourage development in local markets.

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