While the UK has undergone the worst recession in years, many other markets have seen unprecedented levels of urbanisation and related economic growth. Markets like China, Brazil and India are growing rapidly, creating new markets with millions of potential new customers. In China alone around 15-18 million people are moving into the cities every year, while the country’s total trade grew at an annual rate of 7.6% to the equivalent of £2.5 trillion in 2013, according to national figures.
Richard Reid is Head of KPMG’s High Growth Markets and an expert in finding and supporting businesses looking to export. He believes that markets like China and India can offer a wealth of opportunity, so long as businesses can source appropriate advice. “Understanding the opportunities and the pitfalls of a new market is essential,” says Richard. “There are certain issues in some countries – like tax, legislation and levels of bureaucracy – that are very different to the home territories, and for some businesses that is something they just don’t want to cope with.”
Saving time and money
Richard believes that tapping expert knowledge can help narrow your focus as you seek out those prospects most likely to bear fruit, a process that can otherwise cost companies precious time and resources. “One of the key areas where an outside expert can help is in avoiding blind alleys,” he says. “While some markets initially look attractive, when you drill down you find they’re more complex. For example, if you’re very high-end in the retail sector, then it may not be worth you setting up in India. But if you’re selling in volume with low margins, then this market could be right for you.” On the other hand, “The Chinese market will pay premium prices for premium products.”
As a first step, Richard recommends looking at the metrics that give you an indication of a market’s growth potential, such as the rate of urbanisation, gross domestic product per capita growth, and the purchasing power of the rising middle classes. However, Richard recommends that you also consider some less obvious metrics, such as the business and political environments. Is the government stable? How much bureaucracy exists? What is the legislation like? Are there trading restrictions with the country and taxes on outside businesses?
Master your market
To get the most out of your move, you will need to consult an overseas trade specialist, ideally one who has people on the ground in your target market. Many of the big law firms, banks and accountancy businesses will also have people in the UK who specialise in new markets, and may even have offices in the countries where you plan to work.
However, Richard believes there’s no substitute for packing a suitcase and travelling to your export destination to conduct research first-hand. “To do it right you have to go to the countries you are going to be working in,” he says, pointing out that there are plenty of independent sources of information that can offer guidance here, bodies such as UK Trade and Investment and UK Export Finance. UKTI has local offices and representation in nearly every country in the world and will help you find the best people on the ground with whom to partner, while UK Export Finance can help you with guarantees on finance when dealing with overseas territories. Another good source of local information and support are the markets’ own outreach organisations, among them the China-Britain Business Council and the UK India Business Council.
The next big things
So what are the next big markets after China, Brazil and India? Richard believes we should be looking to South-East Asian markets like Indonesia, as well as Africa, Mexico, Nigeria and Turkey. But just because a country is growing quickly it doesn’t mean there won’t be obstacles. “This is where you have to get on the ground,” he says. “You need to understand the risk and the issues. India, for example, is a country that always has huge potential, but has enormous bureaucracy. However, the potential is there and if you can crack it, then it is a huge market.”
Once you’ve tapped every source of advice and answered your every question, absorb that information into your business plan. Rebalance your projected costs and take account of every local law and restriction to ensure you receive payment. Seeking local advice is therefore not so much a useful as a crucial step on the road to exporting. As Richard says, “You need to understand the nuances of the country and you can only understand that by having local people on the ground in the countries in which you operate.”
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