What do service/software companies need to know when they go international?
In our latest interview with a trainer from the Institute of Export & International Trade, we talk to Dick Brentnall – the Institute’s services expert. You can also read our discussion about classifications and the option of franchising.
What are the key considerations a business needs to make when selling a service overseas that they wouldn’t make selling it domestically?
There are 4 basic questions that the service company has to consider.
- How are they going to be able to control the offering of that service at the transaction point in the overseas market with the client or customer?
- As an example, here in the UK they will carry out certain processes to ensure that there is a quality interaction between themselves and the client. However, can that same intangible be transferred and controlled in the end-market to the same standards as in in the UK?
- How can they reproduce the service in the end market, bearing in mind the different cultures and the political/economic environments that may impact on the type of service that is being given?
- A very basic consideration here is that you may not be able to recruit people with the same education or skills to carry out that service as you can in the UK.
- How do they ensure consistency in the service being provided?
- It’s very good to have one good service transaction, but the key is to maintain a service quality across multiple transactions, in other words will the local customer get the same level of service each time they use it?
- Bearing in mind the variability in overseas market, how can they ensure that their service is there for the long term? Is it a short-term or long-term need?
These would be the main four initial questions I’d recommend a service company should to consider before going into the technical details of selling into that market.
When it comes to export, in what ways might a business need to change the delivery of their service for the market they’re selling into?
In order of priority, the first thing is the client or end-customer and the economy of that end-market. What can they afford and how do they do business locally as compared to here in the UK?
Doing business may differ in various ways including what time of the day they do it, the method of payment and so on. Therefore the UK service may have to be adapted to the cultural needs in that market.
They also need to take into account the local regulations – there may be pressure from the market’s government for local involvement or to include local parties in the process of the service delivery.
You also have to consider if the service being provided from the UK actually appeals to foreign customers.
How about software companies in terms of adapting their product or how they sell it?
For many software companies their method of getting their offering to market will be the Internet and through a download. There may be technical considerations in the market but in broad terms that would not be too big a consideration.
How they market their service and software could differ in terms of how they describe the product and brand it in order to appeal to end-users. This could include adjusting the website or online vendor placements they sell it through.
Are there additional costs in terms of things like VAT?
The service itself is not VAT-able – only goods are. There may be a tax in a given market that could be applied to the industry like a sales tax; but in general terms the price that is being sold is usually non-taxable.
That could change as governments and international trade organizations get to grips more with services. Today it’s a little more of an open market.
What about IP?
It’s a key area. If you have a trademark or an invention to protect invention that and you may have some copyright requirements. All of these are IP issues.
My advice to any exporter is to ensure that you have protected yourselves in the target markets before you export into them, because, to state the obvious, if you don’t there’s a great danger of there being copying or misuse of your trademark.
The registration of the IP is absolutely critical and should be done as soon as a service exporter knows the markets they are looking to sell to.
What else should a service company be looking to do?
Research the end-market you’re looking to sell to. Check out if the service you offer actually appeals to the customers in your chosen markets.
Then can you spend enough time internally to deal with new overseas business, can you handle currency fluctuations, and can you adapt to the needs of foreign clients.
Topics: Getting Started, Legislation & Regulation, Market Research, Operations, Product Development, and Sales & Marketing