Building a successful export business
CEO: Greater emphasis needed to boost export industry
IN order to be successful in an exports business, Standard Chartered Malaysia managing director and CEO Abrar A. Anwar ( pic) says there are six pitfalls to avoid.
Firstly, he says, don’t bet the farm. “Have a clear ‘Plan B’ if your export plans fail to launch and ensure you have limited the risk to your overall business,” he says in a recent interview with StarBizWeek.
It is also important to not be distracted by non-strategic factors.
“Choose your export market based on what works best strategically for the business, rather than geographical convenience or personal contacts.”
Thirdly, Abrar says exporters should never sell to a market without doing the necessary homework.
“Does the market have the right demographics and growth prospects?
“Talk to potential customers as well as inbound investment agencies about whether your business’s product or service will have local appeal,” he says.
Abrar also stresses on the importance of cultural nuances.
Don’t underestimate cultural nuances, he says.
“Take counsel from advisors with expertise in the market’s cultural norms and nuances.”
Fifthly, don’t discount tax and regulatory issues.
He advises exporters to consider the unique country rules in areas such as reporting, accounting and tax requirements.
Also, he says, consider the implications for tax treatment back home.
Lastly, Abrar says: “Don’t be product-my- opic or market-myopic.
“It is dangerous to assume that products and services that are successful in the domestic market will be equally successful elsewhere.”
As Malaysia moves towards becoming a developed nation, Abrar says greater emphasis should be placed on the development of the export sector in order to propel and sustain the economy.
Standard Chartered recently announced its partnership with Star Media Group Bhd for the inaugural Export Excellence Awards 2019 – an initiative to recognise leading Malaysian exporters.
The awards presentation, to be held in November 2019, will honour 46 companies across seven categories as well as three for the “Exporter of the Year” title.
Abrar, during the interview, notes that basis for exporting into a new market could be one of opportunity or one of risk.
Either way, he says, successful exporting is a challenging process.
“Businesses can’t just follow the herd, they must analyse the markets they are interested in and ensure their product or service is appropriately designed and scaled for the unique factors in that market.”
He adds that the technology available to businesses today offers great potential to enhance the export market, but the value of these solutions could be enhanced by collaboration amongst industry players.
This, he says, will require a change of mindset both by organisations and individuals, to embrace new technologies, collaborations and processes.
“The value of doing so could be extraordinary, increasing global prosperity, economic inclusion and stability, and increasing access to international trade to the companies that drive employment and growth.”
Financing is critical
Abrar says a well thought-out financing structure is essential for businesses.
Factors to consider include whether to fund the expansion from the home country, or in the new market, as well as the cost of finance, tax rates, the local legal system and whether any incentives are available from the local government.
“Doing the groundwork will pay dividends – in the long term, the biggest risk is failure to take a considered approach to exporting.
“The key is to do the homework before making the investment and to build the appropriate platform for success,” he says.
However, he says, it is equally important that businesses do not spend too much time on this and end up delaying the process.
“Some businesses agonise over how to do things because of their fear of getting things wrong. Rather than trying things out, they miss the boat because the local competition has caught up, or other companies have made the first move,” he says.
Sometimes, he says, the need to access funding can also help determine the choice of market for exports.
Developed economies whose capital markets provide ready access to funding can be very attractive. However, he says, settling on the right mix of self-funding, debt and equity can be tricky.
“Debt finance does not dilute ownership and can be more straightforward to raise, but equity funding can give businesses more time and flexibility to grow their business.
“The two are not mutually exclusive: the debt it is possible to service comfortably will also determine the amount of equity required,” Abrar notes.
Businesses, he says, must also decide which banks can help them export internationally.
An international bank, like Standard Chartered, with a presence in many markets may be the best choice for many businesses – especially those rolling out an expansion programme – but it needs to offer access to local expertise.
Abrar also stresses the importance of ensuring that SMEs have access to financing.
According to the Asian Development Bank, over a third of trade finance requests made by SMEs are rejected, compared with 7% of multinational corporations.
Given that SMEs comprise 50% of global GDP, addressing these issues would unlock a major constraint on growth, he says.
“There are a variety of reasons why SMEs find it challenging to finance trade.
“Ultimately, a factor that underpins many of these issues is complexity, which is exacerbated by shifting trade patterns and extension of supply chains, and increased regulation such as know-your-customer requirements,” he says.