HSBC’s Carol Bagnald on what to consider if you want to grow overseas.
Globalisation and the internet might have made the world smaller but it has made your potential customer base a whole lot larger. Carol Bagnald, regional commercial director at HSBC, gives tips for how to take make your business a global one and outlines the pitfalls that retailers newly embarking on international expansion should avoid.
The past few years have undoubtedly presented challenges for retail businesses as consumers have felt forced to tighten their belts and reduce spending. Market conditions have remained challenging this year, and it is clear that the effects of the recent recession continue to be felt in the retail sector.
But the picture is not a completely bleak one. Many companies are tackling the recession head on, taking advantage of a shift in consumer demand and creating innovative products to put themselves on the front foot for the continued economic recovery.
Many UK retailers, particularly those in the jewellery business, have been able to offer quality as the point of differentiation instead of competitive pricing like other retail sectors.
For British retailers the opportunity is perhaps an even greater one thanks to our heritage in the luxury market. Brands such as Burberry and Mulberry are strongly rooted in the UK fashion industry but their quality signature pieces are recognised across the world, allowing for the recreation and reinvention of products to target new international markets. Luxury retailers have undoubtedly been ahead of the game in terms of pinpointing international markets as an opportunity and new demand from emerging markets has proved valuable to quality UK retailers offering investment pieces.
At HSBC we’re seeing our luxury business owners take a forward-thinking approach when it comes to business strategy, effectively balancing the growing international market with a domestic consumer demand for long-lasting investment pieces. This innovative approach extends beyond strategy though, and the best businesses recognise the need to constantly create, by continuing to produce new, exciting, good-quality product.
Looking ahead, we are expecting to see a continued demand, both at home and overseas, for investment designer pieces. We are also already seeing a broadening of access to designer items, with many major department stores offering exclusive lines. This offers the consumer an attractive middle ground option, allowing them to purchase affordable items that feel luxurious, instead of high-end items with matching high-end price tags. Again, this strategy shows how the luxury fashion and jewellery industries are moulding to their environments and maximising sales through different avenues and price points, without compromising on their core brand.
The opportunities to expand beyond the domestic business market in the UK is supported by findings from HSBC’s recent Trade Connections report, a new global trade forecast which found that by 2025 the UK is set to increase its international trade by 60%. This means that British businesses are expected to increase their import and export activity from current levels of US$933.7 billion to US$1,360.7 billion (£597bn to £870bn) in the next 15 years.
This might be tough at the moment as the business world is one characterised by change and uncertainty, but organisations are taking this challenge head on by looking overseas.
For businesses that are looking to grow, international trade is a great opportunity but businesses are advised to shape their future strategy based on meaningful insights to ensure the right strategic partners are in place. Learning from peers and contacts who can provide valuable insights and considering alliances and partnerships as well as supply chain risk will all help to prepare for the new venture.
International markets will always be subject to fluctuations, so businesses should conduct research and strengthen their knowledge about the markets they plan to trade with – from projected economic outlook, to relevant legislation and specific industry restrictions or regulations.
With the right advice and preparation, what may initially seem to be a daunting prospect can result in a diverse business, leading to exciting new growth opportunities. As well as the obvious business potential, broadening a company’s horizons and improving its skills and staff knowledge are extra benefits of overseas trading.
Businesses keen to explore the idea of international expansion should speak to a bank with a strong international focus and expertise, as well as other business advisors to confirm they are following the correct path regarding such a crucial stage of their business plan.
TOP TIPS ON TAKING YOUR BUSINESS INTERNATIONAL
Establish clear objectives – Establishing your main reasons for exporting or targeting a new market will help you to make better decisions further down the line. For example, you may want to boost turnover, look for new markets, or maintain growth. An internationally competitive product, customers who expect you to be available overseas, or an increasing number of international requests via your website can also be a reason to venture overseas.
Location, location, location – Research the opportunities the new country could bring to your business and travel there to tour the cities and shopping districts to better understand the market and business culture. Talk to UKTI for guidance and market intelligence.
Prepare – You need to be sure that you have the resource and commitment to put towards trading overseas for the first time. You should utilise any existing strengths such as languages, knowledge of regulations, foreign trade terms and familiarity with foreign currencies within your business.
Understand the cultural differences – A shared language does not necessarily mean shared financial or legal systems. Differences in regulation, currency, business practice and language may impact the amount of time it takes to do business. Consider using the services of Export Communications Review which provides companies with impartial advice on language and cultural issues, helping you improve your competitiveness in existing and future export markets.
Identify and protect against the risks – Just as with our own economy, international markets will always be subject to fluctuations. The key to successful overseas trading is making sure that you know about each of the markets you are, or plan to, trade with – from projected economic outlook, to relevant legislation and specific industry restrictions or regulations. There are financial products that can help you manage the risk of international trade, such as invoice finance and foreign currency accounts, your bank can advise you on the best strategy for your circumstances, helping ensure you get paid and grow your profits.