Exporting Your Services

Making the Commitment

The following ten questions and answers provide tips on how to decide whether or not to export:

What does it mean to “export” my services?
What are the advantages of exporting my services?
What are the challenges in exporting my services profitably?
How can I reduce any risks associated with exporting my services?
How do I find out if my service will be competitive abroad?
What do I need in order to export successfully?
How do I decide when the timing is right to start exporting?
How long before we can expect to see a profit?
Who in my firm needs to support the decision to export?
What are the most common mistakes made by service exporters?

What does it mean to “export” my services?

You “export” your services whenever they are purchased by a foreign customer. Member countries of the World Trade Organization have agreed this can happen through any one of four “modes of supply”:

Mode 1: Your service crosses the border from Canada to another country (e.g., e-mailing or faxing or couriering a report to a customer).

Mode 2: Your customer crosses the border temporarily (e.g., foreign executives attending a training seminar you give in Canada; tourists to Canada; a foreign-owned firm in Canada).

Mode 3: Your service firm establishes a commercial presence abroad (e.g., a local or regional office)

Mode 4: You or your staff cross the border into your customer’s market to provide a service (e.g., you deliver a training session at your customer’s office).

The defining question is: "Are you getting paid by a non-Canadian, regardless of where the service delivery actually takes place?" If your answer is “yes,” then you are exporting.

What are the advantages of exporting my services?

There are many advantages and benefits you can gain from exporting. Some of the most common are:

• Increasing sales volume and profitability beyond what is possible in Canada.
• Diversifying risk by broadening your market and customer base.
• Acquiring customers whose needs are a better match for your services.
• Using your production capacity more continuously.
• Extending the life cycle of a service innovation.
• Keeping current customers who are expanding internationally.
• Acquiring new knowledge and experience you can use in Canada.
• Raising the profile of your firm in Canada and abroad.

What are the challenges in exporting my services profitably?

There are three types of challenges your service firm is likely to face in exporting:

1. Lack of credibility in the foreign market
   Successful marketing of services is different from the process of marketing goods, mainly because customers have to pay (or promise to pay) in advance before they can inspect the completed service. So, to manage their sense of risk, customers usually seek out recommendations from those they know before trying a new service provider. If your firm is not known in foreign markets, it is unlikely to get recommended no matter how good your service is.

   What you can do to overcome this:

   • Focus on building your firm’s credibility in the foreign market before promoting your specific service.
   • Make sure your website and other promotional materials are world-class.
   • Make sure your firm’s principals (senior management) are willing to travel to build relationships with potential customers abroad.
   • Build a strong base of contacts and “advocates” who are willing to recommend your services.
   • Be visible at international conferences or through presentations. Customers prefer to see service providers “in action” as a way to sample the service.
   • Be visible and active in key online discussion groups and e-marketplaces.
   • Learn about the local culture. There is no room for first bad impressions.
   • Form a partnership with a leading local firm to build credibility by association.
   
   
2. Difficulties in gaining temporary business entry to a market
   To develop business opportunities, deliver services, and maintain good relationships with customers, you will usually need to travel to the export market periodically. Entry may be problematic if you require a business visa along with a letter of invitation.

   What you can do to overcome this:

   • Evaluate travel restrictions carefully before you select a market because you must be able to cross the border when required.
   • Acquire multiple-entry visas where possible.

    

3. Apparent lack of convenient access
   You are usually competing with domestic service suppliers that are more accessible than you are in Canada.

   What you can do to overcome this:

   • Work with a local partner, or create your own local presence, as most buyers are more comfortable dealing with local service providers.
   • Establish strong electronic links with your customers through e-mail and online interaction.

Note: Working with a local partner can also help with language or cultural challenges and with minimizing extra service delivery costs.

How can I reduce any risks associated with exporting my services?

In most instances, the degree of risk you will face is directly related to the way you prepare for exporting and how well you develop relationships with your customer base abroad. The following are the most common strategies used to reduce risk:

Type of Risk	Strategies Used
Not getting paid	Develop good customer relations. Do prior due diligence on customers.
Legal action for “non-completion”	Manage customers’ expectations well. Get professional liability insurance.
Loss on foreign exchange rates	Contract for exports in a stable currency (e.g., C$, US$, €, £, ¥).
Reduced domestic quality	Ensure adequate capacity to export and still provide quality service to domestic customers.
Creating local competitors	Select local partners with complementary, rather than similar, expertise.

How do I find out if my service will be competitive abroad?

First ask yourself how you would know if your service would be competitive in another part of Canada. Your competitiveness is probably related to one or more of the following four factors:

1. Your ability to provide quality control that is as good or better than your competitors – competitiveness based on quality.


2. Your ability to provide better value for money than your competitors – competitiveness based on price.


3. Your ability to address an unmet customer need – competitiveness based on uniqueness or innovation.


4. Your ability to provide a culturally appropriate service.

Once you are clear on what makes your service competitive, compare what you are currently offering with the needs of your target customers abroad – are your current competitiveness factors relevant to them? Alternately, you can team up with a local partner and get their assistance in determining how competitive your service is.

You can also assess your competitiveness by finding out what your competitors in the market are offering, how well they are meeting the needs of your target customers, and the cultural differences you will need to adapt to in order to compete with them. This comparison involves benchmarking your performance against your competition. Benchmarking involves identifying practices responsible for the high performance of other firms (in any industry) that you can adapt and adopt in your own firm. Websites such as the American Productivity and Quality Center can help you do this.

Competitively, you will want to compare your firm with “best in class” or “best of breed.” Comparisons can be made not only with firms in your same industry but also with firms in other industries who use similar processes, and can involve a range of functions such as:

• Financial performance
• Response time
• Delivery process (convenience, access, use of technology)
• Allocation of staff time
• Ability to target customers’ needs
• Quality controls and recovery techniques
• Empowering front-line employees
• Service standards and targets

Benchmarking can help your firm ensure that, when you enter an export market, your firm is at least meeting international quality standards.

What do I need in order to export successfully?

To be ready to export successfully, you need six things:

1. Support from senior management for your export objectives and strategy.


2. Adequate resources including finances, delivery capacity, and staff who are sensitive to cultural differences.


3. A competitive service well-matched to the needs and preferences of local customers.


4. An appropriate online presence.


5. Realistic expectations of what it will take to succeed.


6. A flexible and timely export strategy that takes advantage of your network of contacts and is based on appropriate market research.

 

Flexibility in your export strategy is critical because the international competitive environment changes rapidly and, with the increase in e-trade, market opportunities often come and go in less than two months.

How do I decide when the timing is right to start exporting?

The traditional advice to goods producers has been to grow in a domestic market before exporting. This advice is not relevant for many service firms, especially given the growth in e-trade of services. Some service firms are only in the business of exporting if they supply a specialized service for which there is more demand abroad than in Canada.

The Export Readiness Diagnostic can help you assess your firm’s export readiness; and, based on the results, you can start exporting as soon as you feel ready. You may wish to choose a period of slack time when you can focus properly on export market development. Remember, you need to allow lead time of at least several months for a market development activity before you can expect export sales to begin.

How long before we can expect to see a profit?

Developing a profitable export initiative takes time and investment. You can accelerate the process by:

• Working through your network of contacts and satisfied customers instead of entering a new market “cold.”
• Doing your homework on your target market from Canada before you incur travel expenses.
• Finding ways to supply services to foreigners in Canada.
• Exploiting online opportunities.

 

Unless your service can be provided entirely online or provided to visiting foreigners, it takes from three to six trips to the export market to develop an export opportunity. You will reduce your overall costs if you try to get your travel expenses reimbursed through speaking opportunities and linking market development trips to travel to/from existing export markets.

If you enter the market through a strategic alliance with a local partner, you may find you can become profitable almost immediately. Similarly, if you enter through referrals from foreign customers in Canada, you can significantly reduce the time it takes your export initiative to become profitable. If, however, you choose to enter the market independently, your estimates should be double the usual time it takes to become profitable in a new local market.

What are the most common mistakes made by service exporters?

Most service exporting mistakes fall into one of five categories:

1. Approaching a market “cold” rather than getting referrals from satisfied customers and other network contacts.


2. Trying to promote one’s service without first spending time establishing one’s credibility as a provider of quality services.


3. Poor or rushed preparation, including travelling to foreign markets without spending time on market research and developing local contacts.


4. No attempt to customize the service to cultural values and mores.


5. Not treating online presence as another “market” that needs to be staffed appropriately for global customers.

• Next
• Previous