Kraken Business

Entering overseas markets

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by

Team Kraken

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It’s essential to research overseas markets before you start to market, promote and sell your product or service within them. By thoroughly researching your potential customers, competitors and the trading environment in each overseas market you will greatly increase your chance of success. You should also investigate practical issues such as route to market, logistics, regulation and local suppliers in your chosen market.

Deciding how to enter an overseas market will be a crucial part of your export strategy. Different research methods will be appropriate in different markets or for different types of product. Once you have identified your market, there are various ways of entering overseas markets. You can manage the process yourself – selling directly from the UK or setting up an operation in the target country. Alternatively, you can use an intermediary such as an agent or a distributor.

This guide contains basic information on the different ways of researching and entering an overseas market. For more information see our guide on preparing to export.

Table of Contents

Researching customers and markets abroad

You will need to identify your potential customers and their needs, by considering the following factors:

  • Who will buy from you? Each marketplace is different. You may find that your overseas customers are in the public sector while those in your home market are small businesses.
  • What influences customers’ purchasing decisions? This could include culture, age, gender and many other factors. Why do customers buy from you? See our guide on how to know your customers’ needs.
  • What price can the product profitably sell for? This will influence your pricing and marketing decisions. See our guide on preparing to export. 

Researching other countries

When researching potential countries to sell to, you can find information from the following:

You need to establish:

  • Size of your potential market – this could be limited by population, cultural or economic factors.
  • Politics and economics – an unstable political climate or unfavourable trading conditions can make exporting risky.
  • Culture – this may affect your selling proposition. Investigate any barriers to your product’s success. Will your product be valued the same as at home? Will your customers have the same reasons to buy it?
  • Language and etiquette – can you market your product effectively in the local language? Will you have access to professional translators and marketing agencies? It is important to communicate effectively and understand cultural differences.
  • Safety and security – the risks presented by local terrorist activities as well as the global risk of indiscriminate terrorist attacks. Also, the level of crime in the target market. Find the latest security information on the GOV website [opens in a new window].
  • You can also find travel and security information in your target market on the GOV website [opens in a new window].

Trading in Europe

Legislation varies widely in overseas markets and will affect how you sell into them. You must make sure you adhere to local laws. You will also need to consider how you will find and select partners in overseas countries, as well as how you will investigate the freight and communications options available. See the page in this guide on how to research product and packaging changes for export.

However, trading in The European Economic Area (EEA) is much easier as all EEA countries have similar trade laws and free market access which can benefit your business. The EEA includes Norway, Iceland and Liechtenstein and all the European Union (EU) countries.

You can get advice on laws in any EU country using the Enterprise Europe Network (EEN). This is a group of business advice organisations across the EU. You can find your nearest EEN partner organisation on the EEN website [opens in a new window].

UK Trade & Investment can provide support and help in planning your entry into new overseas markets, including market research. Find out about Exporting and doing business abroad on the GOV website [opens in a new window].

Research product and packaging changes for export

You may need to adjust your product or its packaging to comply with local laws and regulations. For example, there may be specific health and safety standards in your target country that differ from those in the UK. It is your responsibility to make sure you comply – and errors can be costly.

You may need to adjust your product or operational set-up to comply with local laws.

You should investigate:

  • local export legislation and technical regulations
  • certification and testing requirements
  • local standards affecting your existing and future products
  • product liability
  • quantities and units
  • patents and trade marks
  • staff qualifications

You can get more guidance from the international trade team at your local UK Trade & Investment office. Learn to Export on the Great.GOV website [opens in a new window].

You may need detailed information on international aspects of standards, accreditation and measurement infrastructure, including more specific facts and figures for a number of countries. You should also be aware that your product may need an export licence, or be subject to import duty and sales tax outside the European Economic Area. To research this, see our guide preparing to export.

Sources of help

Carrying out and commissioning research on overseas markets

There are many sources of market research available from government agencies and commercial organisations.

Conducting your own market research

You can conduct research using media sources, such as newspapers, trade journals and the internet, and get information by networking with experienced exporters. Your trade associations may be able to help you with contacts. For many small businesses the best approach is to visit the market and spend some time interviewing a range of people. See the page in this guide on how to build a marketing plan for overseas markets.

UK Trade & Investment produces ‘sector in country’ reports for many markets. View profiles for most countries on the GOV website [opens in a new window].

Commissioning market research

You can commission a market research agency to investigate your overseas market on your behalf.

Decide whether you want to use a UK-based agency or a local one. A local agency may understand your potential customers better, and will be able to access the necessary information more easily. You should select your agency carefully, and check their proposal shows that they have understood your needs.

State what you expect to find out from your research in a clear brief. This should specify your aims in commissioning the research, and the timescales and presentation you want. Describe your business and product, state the information required and the geographical scope.

For a fee, you can commission research on your market Get help from a trade specialist on the GOV website [opens in a new window]. 

The Export Marketing Research Scheme (EMRS), administered by the British Chambers of Commerce (BCC), provides free advice on conducting market research overseas and finding market research agencies. It can also help cover part of the cost. 

Published market reports

You can also buy reports on some overseas markets. Search for commercially available research on the Market Research World website [insecure] [opens in a new window].

Build a marketing plan for overseas markets

It’s essential to build a detailed marketing plan, based on market research, for each of your overseas markets. Huge differences between markets and countries prevent the use of a ‘one size fits all’ approach. Your marketing plan should take into account your chosen approach to the market and your plans for logistics, order fulfilment, customer service and supplier management.

See our guide on how to write a marketing plan.

Investigate your new market and how your product will fit into it. Consider the following questions:

  • What’s your priority – minimising potential costs or controlling the process?
  • Do you have the market knowledge (and language skills) to make contacts and generate sales?
  • Do you have the time and money to invest in setting up a local branch or subsidiary?
  • Are there restrictions on the way you can enter the market? For example some countries may insist you form a joint venture with a local business.
  • What is appropriate for your product? If it requires specialist after-sales support, selling through an intermediary may not be suitable.
  • What are the usual distribution channels for products like yours in the target market?

Communicate with customers abroad

As part of your promotion, you may want to communicate directly with customers in your market abroad. The choice you make will be defined by your budget and how effectively each method will reach the customers in your chosen market. See our guide on advertising: the basics.

Alternatively, you may choose to buy in a database of potential customers from a direct mail agency. You should select the agency carefully to ensure you receive high-quality data. See our guide on direct marketing: the basics.

Trade visits

Trade visits are organised visits to target markets. While they provide an excellent opportunity to research overseas markets, you can also use them to generate business.

UK Trade & Investment offers a range of services to help businesses going on trade visits to generate advance publicity in their target market. It also offers a range of other advice and financial support. You can get details of future trade visits on the Great.GOV website [opens in a new window].

Researching partners, logistics, and infrastructure

The distribution channels available for selling will vary between countries. See the page in this guide on the different ways to enter overseas markets.

Ask yourself how will you be paid by your overseas customers? Will the exchange rate be prone to excessive fluctuation? See our guide on getting paid when selling overseas.

Investigate the communications infrastructure. Does your target market have widespread access to telephones, faxes or the internet? You may also need UK freight forwarders experienced in your chosen market and product especially if you have particular requirements, eg for speed, packaging or temperature. See our guide on international transport and distribution or our section on transport options for moving your goods. See our guide on using brokers and forwarders.

If you are importing, you will need to identify countries to trade with, as well as individual suppliers within those countries. See our guide on how to manage overseas suppliers.

The different ways to enter overseas markets

When you decide to enter an overseas market, it’s important that you identify the best approach for your business. There are four main ways to sell to customers in overseas markets. You may find you need to use more than one entry strategy, depending on the markets you target and the products you offer.

Selling directly from the UK

This typically involves making periodic sales visits to the country, supplemented by telephone sales or accepting overseas orders on an e-commerce website. It can be a simple and cost-effective way to enter an overseas market. However, it may isolate you from your customers, and make you unable to share the exporting workload with partners or intermediaries.

Opening an overseas operation

This involves opening your own branch or subsidiary in the new market, or entering into a joint venture with a local business. Having a presence on the ground can be valuable, but setting it up and maintaining it may involve major resource commitments.

Using an overseas sales agent

A sales agent acts on your behalf in the overseas market, either by introducing you to a customer or by receiving commission on any sales to that customer. Agents are used extensively in the European Union and are protected from abusive business tactics by law.  Ensure that you understand what you have agreed and seek legal advice on your agreement, as it’s not advisable to operate without an agency agreement in place. The key benefit of using an overseas sales agent is that you get the advantage of their extensive knowledge of your target market.

Using an overseas distributor

A distributor buys from you and then sells on at a higher price to their market and customers. They take full responsibility for the import of your goods. A distributor takes ownership of the goods and therefore can do with them as they wish, which means you must trust them with your brand. It is always worth spending time ensuring that the relationship is documented and well thought through.

Important considerations

There is much more to exporting than simply generating overseas sales. An intermediary can help you with issues including customs and other paperwork, shipping, warehousing and after-sales service. Selling direct means you will have to handle these issues yourself.

See our guide on how to manage the risks of exporting.

When selling overseas, you can sell your product or service directly to customers or use an intermediary. You may decide a mix of these approaches is best for your business. There is no ‘one size fits all’ solution.

You should consider the implications of each method in terms of:

  • the direct and indirect costs, such as investment in an overseas operation, or the heavy discounts often demanded by distributors
  • how much control you’ll retain over how your product is sold, and how much you’ll need to delegate to partners or intermediaries
  • which export-related risks you’ll have to bear, such as exchange-rate movements, non-payment risks, longer trading cycles and delays due to documentation problems

An intermediary may be able to handle issues such as paperwork, shipping and warehousing. However, you will have less direct control. Selling directly may give you more control, but you will have to bear higher costs. See our guide on outsourcing.

Opening operations in overseas markets

Opening an operation in your overseas market is generally the most costly and time-consuming way to enter it, but the rewards can be great.

Local rules may restrict your options, but the three main ways to open an overseas operation are to set up:

  • a local office – staffed by one or more of your employees
  • a locally registered subsidiary company – a new business in the target market, subject to local company, employment and tax rules, and generally hiring some local staff
  • a joint venture – partnering with a local business to set up a new business with ownership shared between you

Advantages

A local office in this way gives you the chance to identify and exploit opportunities in your target market. It also gives you the flexibility to control your operation, and expand if necessary. There are other benefits:

  • While intermediaries may opt for short-term sales, this way you can plan for the long term.
  • Your customers will take you more seriously if you have a local base. This is particularly true if your products require specialist after-sales service.
  • If you use a joint venture, you will be able to share the risk. You will also benefit from your partner’s local knowledge and reputation.
  • If you operate alone, all profits from the enterprise remain yours alone.
  • A local subsidiary company offers limited liability if things go wrong. It is also easier to expand than a local office.
  • It provides an opportunity to extend your intellectual property rights and registrations into other markets.

Disadvantages

This option may require significant resources, and involves greater administrative and managerial burdens than other approaches to entering overseas markets:

  • You will need to understand corporate, employment and tax law in the new territory, and use local specialists to help you.
  • You may need to rebrand the business to attract local attention or if your existing business or product name has a different meaning in the new territory.
  • Costs will be high if things go wrong.
  • You have to take all the risks yourself (if you don’t work with a local partner). These could include non-payment or regulatory compliance problems.

There are important legal and financial implications involved in setting up an overseas business. You should take advice from your solicitor, accountant or business adviser, as well as from similar professionals in the target market.

Using an overseas agent

A sales agent acts on your behalf in the overseas market by introducing you to customers who you supply and invoice direct. They are paid a commission for any sales they make ranging between 2.5 per cent and 15 per cent. The key benefit of using an overseas sales agent is that you get the advantage of their extensive knowledge of the target market.

While there are clear benefits, agency relationships can also have downsides.

Advantages

  • You avoid the recruitment, training and payroll costs of using your own employees to enter an overseas market.
  • An agent should be well placed to identify and exploit opportunities.
  • Your agent should already have solid relationships with potential buyers – it might take you some time to build up your own contacts.
  • Using an agent allows you to maintain more control over matters such as final price and brand image – compared with the other intermediary option of using a distributor.

Disadvantages

  • You remain responsible for shipping and other trade-related logistics – although your agent should be able to help.
  • You need to specify in an agent’s contract if you need them to credit check your customers for you.
  • Arrangements must be made to allow access to your sales ledger as part of the commission payments process.
  • After-sales service can be difficult when selling through an intermediary.
  • You may lose some control over marketing and brand image, compared with entering the market yourself.

See the page in this guide on finding and contracting with overseas agents and distributors.

Using an overseas distributor

A distributor buys your goods from you and then takes full responsibility for selling them on in the overseas market. While the role of a sales agent is to find you customers, a distributor is your customer.

Advantages

  • The main advantage of using a distributor is simplicity. Distributors enable you to access international markets while avoiding logistics issues and many trade-related risks.
  • The distributor is usually responsible for the shipment of goods, and the accompanying customs formalities and paperwork.
  • If you sell to a UK-based distributor, you avoid currency-related risks.
  • It would be easier for a distributor with an established reputation and contacts list to introduce a new brand to the market than it would be for you.
  • Distributors generally spend on marketing to support their sales effort, although they will sometimes expect you to make a financial contribution.
  • A distributor will often offer credit facilities to potential customers.
  • Many distributors carry a stock of the products they sell – so they buy in bulk, and take care of warehousing and inventory control in the overseas market.

Disadvantages

  • In return for taking on your trade-related risks and burdens, distributors will expect heavy discounts and generous credit terms from you.
  • You may lose control of the way your products are marketed and priced.
  • If you use a sales agent, you can use the commission structure to motivate them – there’s no similar mechanism with a distributor.
  • Distributors often demand a long period of exclusivity, so you need to be sure that you choose one that has experience selling your type of products and has customers for the kind of goods you sell. See the page in this guide on finding and contracting with overseas agents and distributors.

It’s important to seek advice from your legal adviser before concluding a distributorship agreement.

Finding and contracting with overseas agents and distributors

Make sure you conduct research before selecting an agent or distributor. Draw up a shortlist of at least three, then carefully compare what each can do for you.

Where to find agents and distributors

There are many organisations that can help you with your search, including:

You may also have the opportunity to join trade visits or attend exhibitions in your target country. 

Choosing which intermediary to work with

The most important thing to establish is that an agent or distributor has proven experience in your target market. But there are many other factors to consider:

  • Are they well located, with the geographical coverage you need?
  • Are they well established in the market, and how do they compare with their own competition?
  • Look at the product lines they currently sell – will your product fit in well?
  • Ask about their strategy for the next five years – does it fit well with your objectives in the market?
  • How large and experienced is their sales team? Is it well managed and given effective incentives?
  • Can they provide you with market research to feed into your sales forecasts?
  • Do they have the warehousing, servicing and other facilities you’re looking for?

It’s also important to look into their financial standing to ensure you’re dealing with a reputable business that can be relied upon to pay you. This can be more difficult with overseas businesses, but it may be possible to conduct a status query through your bank.

International contracts

Make sure any agreement with an agent or distributor is formalised in a clear written contract. It’s worth seeking expert advice – eg from a lawyer with trade-related experience or your local UK Trade & Investment team. Make sure you are satisfied with every part of the contract. See our guide on getting paid when selling overseas.

Key contract points to consider include:

  • Parties – the names and addresses of the businesses involved, and the nature of the relationship, eg agency or distributorship.
  • Products – a clear description of your goods.
  • Territory – the geographic area within which the agent or distributor will sell your goods.
  • Exclusivity – will they have sole rights to sell your goods? If not what are the exceptions? Can they pass their job to a third party?
  • Transport – whose responsibility? Your obligations should be clearly set out in a written contract using Incoterms 2010. Read our guide on International trade paperwork: the basics
  • Pricing – what price will you receive from a distributor for your goods? What price will an agent charge their customers?
  • Commission – what commission will an agent receive?
  • Payment terms – when will payments be made, in what currency, and at what exchange rate?
  • Period – set a termination date for the agreement, and include clear provisions for ending the agreement before that date.
  • Confidentiality – make sure that sensitive information about your business or products is protected.
  • Intellectual property – what rights will the agent or distributor have to use your business name, brand names, trade marks etc? See our guide on intellectual property protection overseas.
  • After-sales care – for example, product liability, insurance and warranties. Who is responsible at each stage of the trading process?
  • Marketing – what promotional activities will support your products and who will pay for them?
  • Jurisdiction – which country’s rules will apply to the contract?

CASE STUDY

Here’s how an export agent helped me sell my products abroad

Managing director Martin Statter wanted to develop overseas markets for Graphskill Limited’s specialist pipework components, but did not have the time or resources to risk setting up offices overseas. Engaging an agent has helped develop overseas trade at the right pace for the business. Here Martin explains how he did it.

WHAT WE DID

Use a trade visit

“We had been thinking about export markets for some time. While we had sold overseas as subcontractors on large orders, we thought there would be some benefit in establishing a local presence in key markets. We went on a trade mission to Germany organised by UK Trade & Investment and met with a number of potential agents.”

Find an agent we could trust

“We found an agent who was looking to add a company like ours to his portfolio. During the meeting, we didn’t overplay our mutual expectations and we felt we could trust each other. As soon as we got home, he had confirmed in writing the framework that we had tentatively agreed on and we converted that into a co-operation agreement. There were clearly defined timescales and responsibilities in the co-operation agreement and it suited both parties.”

Manage the relationship

“We keep in touch regularly with our agent. If there hasn’t been any activity for a while, we check in just to see what’s happening in the market. Email is very useful from that point of view, but we usually speak on the phone if we need to be absolutely clear about the detail of an order.

“Differences in language can play a big part, especially when you’re involved in a business that uses lots of terminology like ours. We realised this when we translated some promotional material into German for our agent. He picked out a couple of phrases that could have been easily misunderstood in translation. It’s regular contact that helps minimise the risk of any confusion like that.”

WHAT I’D DO DIFFERENTLY

Develop our website before looking at overseas markets

“We’ve revamped our website using specialist designers and it has made a huge difference. Potential overseas customers will often want to check your company out before even talking to an agent about your products, so it’s an essential shop window.”

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Every effort has been made by the author(s) to ensure this article’s accuracy but it does not constitute legal advice tailored to your circumstances. If you act on it, you acknowledge that you do so at your own risk. We cannot assume responsibility and do not accept liability for any damage or loss which may arise as a result of your reliance upon it.

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