The Reason You Failed to Start in an International Sales

 

Why Most Small and Medium-sized Enterprises Fail in Overseas Sales

 

Firstly, I apologize for the provocative title. However, while many small and medium-sized enterprises (SMEs) aspire to expand into overseas markets through exports, the reality is that only a tiny fraction succeed. Even if they manage to secure initial orders, the majority struggle to sustain subsequent business.

Today, let's explore the various factors hindering SMEs in international sales and understand what they need to become successful exporters and evolve into trading companies.

 

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Reasons for the Failure of SMEs in Exporting 1: Lack of Fundamental Capabilities

 

The most fundamental reason for the failure of SMEs in exporting is the lack of basic capabilities. Here, I'm not referring to sophisticated corporate structures or a pool of experienced professionals akin to large corporations or industry giants. By basic capabilities, I mean the fundamental skills necessary to overcome constraints of time, space, language, and cultural barriers to conduct business successfully. It starts with a genuine understanding of the prospective customers, which I can say "relationship".

 

When many SMEs embark on exporting, the process often looks like this:

One day, the CEO of Company "A" hears that a competitor has made a big breakthrough in exporting to the United States. Upon reflection, it seems that Company A's products are not inferior to the competitor's. The products are comparable in quality, the pricing can be competitive, and above all, the CEO himself, who has built Company A from scratch, is confident. Thinking it can be overcome with perseverance and effort, the CEO goes to work.

Upon arriving at the office, it becomes apparent that the company lacks personnel experienced in exports, and even fluent English speakers are absent. A hiring advertisement is posted, but due to financial constraints and an inadequate HR system, hiring a team leader seems burdensome. Hence, typically, junior-level staff or recent graduates with some proficiency in English or a background in trade are hired.

Now that the overseas sales team is assembled, the CEO expects them to fulfill his dreams. However, months pass without any progress. Frustrated, the CEO consults a "trade expert" with 20 years of experience or decides to participate in a renowned trade fair. Still, there's no income. One lucky day, an order comes in! But to the CEO's dismay, the quantity is insufficient, and the enthusiasm wanes. With the consideration of incurred expenses, retaining staff becomes challenging, and gradually, the interest in the export team diminishes.

Reading this, you might think, "That won't happen to us. We even hired a team leader." But it just makes you Version B.

 

Trade involves paperwork, but fundamentally, it's about relationships between people

While documents may facilitate trade, ultimately, like any other sales activity, exporting is about building relationships between people. Hence, neglecting relationships in export business makes success exceedingly difficult.

Simply put, what matters in exporting is not whether you have assembled the right team, but whether you are prepared to establish proper relationships with potential buyers. If you're ready to form these relationships, exporting can be achieved even with just one competent staff member. However, without the readiness to form proper relationships, even a complete team won't ensure success. And proper relationships can only be established by competent individuals, regardless of their rank, authority, or experience.

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Reasons for the Failure of SMEs in Exporting 2: Lack of Strategic Approach

 

Even with well-prepared capabilities for relationship-building, successful exporting doesn't come easily without a strategic approach. Despite being well-prepared for relationship-building, if you can't identify the right targets for relationships, what's the point? This highlights the absence of a strategic approach.

In my experience working with several SMEs, I've often encountered a lack of proper strategy among companies venturing into exports. Business owners are curious about where I've succeeded in the market or which clients I've secured deals with, but very few inquire about why I targeted a particular market or how I established connections with specific clients. Of course, I don't divulge all details, but...

The movie "The Wolf of Wall Street" depicts a scene where one character tries to sell a pen to the protagonist. This scene illustrates the basic economic principle of supply and demand, fundamental even in trade deals.

When business owners inquire about "which market," it's one way to quickly assess demand. However, there's a serious flaw here: depending on how I entered that market, the same demand might completely vanish.

For example, suppose I exported Korean soju to the United Kingdom and found demand there. Excited about the opportunity, the CEO rushes to set up a task force for the UK market. But what if the client I secured is the key distributor of imported liquors in the UK? Unless I ruin the relationship with that client, the same demand won't arise elsewhere in the market.

 

In trade, there must be demand for opportunities to exist.

Just as domestic clients need to have demand to place orders, overseas potential customers naturally need demand to even consider purchasing. And this demand can only be verified through proper market research.

Of course, observing trends in the same industry is one way of conducting market research. However, that alone is not enough.

 

Overseas Market Research Methods and Tips

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Reasons for the Failure of SMEs in Exporting 3: Battle Against Time

 

Exporting can yield quick success in rare cases, but typically, it's a prolonged endeavor. Due to time differences and geographical constraints, even a simple conversation can be challenging, let alone exchanging views, which can take days.

Moreover, for a new entrant in overseas markets, with no brand recognition or even basic credibility, it's essential to invest considerable time and effort.

Even if a potential buyer shows interest suddenly, deals often fall through at the sample stage, or enthusiastic trading partners may go silent. There are numerous reasons deals can fall apart: perhaps the product isn't competitive enough, or the buyer's project gets canceled. It could be a simple change of mind or, worst-case scenario, an international trade scam.

Enduring these challenges and seizing opportunities amidst setbacks is what exporting entails. However, many SMEs fail to weather this time and effort.

When considering fixed expenses like personnel costs for trade staff, even the thought of a lucrative contract falling short can be disheartening. Many might question whether it's worth the effort and money. However, remember that perseverance through this time is crucial for export success.

 

Trade is a Battle Against Time.

 

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Becoming a Successful Exporter as an SME:

 

When recruiting team members for overseas business in my previous company, I occasionally encountered resumes where candidates claimed they had conducted transactions worth billions and assured that if hired, they could achieve billions in trade revenue for the company in no time. Interestingly, such claims were more common among candidates with extensive experience.

However, if you've had even a little experience in trade, you'd know this is practically impossible. Sometimes, I wonder if such resumes lead small businesses venturing into exports to develop misconceptions about trade.

But let's remember, there are no easy tasks in this world, and even big companies typically face numerous challenges before establishing themselves. For SMEs, regardless of their scale or domestic standing, in overseas markets, they're merely newcomers with no background. Therefore, regardless of who comes onboard, the situation won't change. Hence, taking measured steps is the fastest way forward.

So, remember, anyone can do it, and if it were easy, nobody would make a fuss about exporting.

Thus, SMEs preparing for export must invest ample time and effort into a well-planned strategy, maintaining a steady and consistent effort over time. This is intrinsic to the essence of trade. And for those willing to take on this challenge, success awaits.