Between 2018 and 2021, and despite COVID-19’s challenges and constraints, there was a boom in the number of Spanish SMEs that went international, according to data provided by the country’s tax and customs authorities. Still, a mere 26.4% of all companies selling abroad can be regarded as regular exporters, and it is they who generate 92% of total export revenue.
Although the reasons behind this uninspiring export performance can be diverse, here I single out the ones I personally feel play the biggest role.
1. Exports are not a long-term strategic goal, and therefore, senior management is not committed to sustain them long-term.
This approach treats exporting activities as marketing actions, and not as an essential part of the corporate strategic vision. As a consequence, the projects lack an appropriate budget, and is not given the necessary continuity. In the end, the companies’ erratic efforts do not yield the expected results, and frustration sets in. At times, the export efforts can be given the initial go-ahead if promoted by a reputable sales director only for senior management to put the plan “in quarantine until results are proved”. Senior management can also limit the export success if they lack a clear understanding of the necessary tools and conditions for a successful implementation of their export plan.
The solution starts by making exports a part of the corporate long-term strategy. Then we need to provide an appropriate budget in line with the objectives set. Finally, an experienced export team with a mixed background (strategy and sales) needs to be appointed to successfully drive the export efforts.
2. Lack of an international mindset to fully understand the buying motivations and the decision-making process of export customers.
This may lead to management thinking that local practices and marketing actions will work in exports as they do in their domestic market, which simply isn’t the case.
The solution requires the person leading the export process to understand the language (and culture) of potential customers in key target countries. This person needs to have extensive international sales experience, a clear understanding of their customers’ decision-making process, and needs to proactively work inside his/her organization to solve customers’ objections. Also, the requirements of the export customers need to be explained across the organization, so these are fully understood and accepted.
3. The company is not willing, or is unable, to implement the necessary changes in order to adapt to export markets.
The company can fail to adapt its products or internal procedures to export customers. Although we may not be able to modify the intrinsic properties of all of our products for each individual customer, we still need to offer products in line with our export customers’ expectations. We might, of course, meet internal resistance to change, and therefore we will need people in key management positions to understand and promote change in their areas.
The solution starts with an accurate situation analysis of the company with the view to find target countries whose requirements are within its operational and technical reach. Therefore, we need to research which countries, industries, type of customers, and purchasing styles are within our reach with minor product modifications, or adaptations in service levels, distribution, terms of delivery, etc. It is critical that the person in charge of export sales talks to other operating directors on equal terms. For this to happen, he/she needs to carefully gauge the consequences of any operational changes, as well as understand their financial implications.
4. An ethnocentric Sales Manager who lacks international experience, and doesn’t know how to develop the operative part of the export plan.
This director will be reluctant to promote and facilitate the use of the necessary tools, alienating the export team by not being able to piece together a commercial proposition in line with market expectations.
The solution doesn’t allow for any shortcuts. A sales professional with global skills and expertise is needed to manage the project. A useful organizational tip is for this manager of international sales to report directly to the company’s Managing Director rather than the Sales Director.
5. The domestic market starts to grow, or recovers from a major slowdown.
Senior management might then be tempted to swith resources to domestic customers who they know and understand, and lose interest in export business, which is often more transactional and more demanding when it comes to interpreting commercial agreements. In this scenario, the export project initially slows down, and finally languishes.
Have you come across other reasons behind export failure? Feel free to share them.