Unleashing Business Growth Through International Trade 

20231115 wk46 - Unleashing Business Growth Through International Trade - gigCMO

If you're one of the UK businesses that trade internationally, then you're probably aware of the benefits of expanding your business overseas to drive growth. According to the Office of National Statistics, the exports of products increased by £1.6 billion (1.7%) in Quarter 2 2023. The number of businesses exporting goods and services in the SME sector is growing year-on-year. 

Whether you're an established business or a small UK exporter, doing business internationally brings unique benefits and challenges. Let's look at some key considerations and business strategy when trading internationally. 

What is International Trade and its Importance?

International trade refers to the exchange of products and services across borders. It is a licensed activity that involves the establishment of trade agreements and policies. These agreements and policies encourage harmonious relationships between nations that rely on one another for better living across their population.  

The European Union demonstrates how countries can use free trade agreements to strengthen their international market standing and grow GDP while contributing to the global economy. When member states of a union become borderless in terms of trade, no taxes are imposed on imports and exports. Since leaving the European Union, the United Kingdom has been striving to strike trade deals with countries worldwide.  

International trade is important because countries rely on other countries to import goods that are not readily available in their own country. If a country focuses on exports, it may have more supply of certain raw commodities than demand in its own markets. Or it may have a specific competence, such as in technology or manufacturing, which drives demand in the international market. International trade generates the worldwide marketplace on which the global economy is built. 

The International Trade Centre (ITC) publishes trade statistics on imports and exports across 200 nations, organised by product group. It's a great free resource for understanding certain countries' specialisations and helping to establish trade development strategies. 

What are the Challenges Affecting International Trade and Expansion?

Several factors can affect international trade and business expansion, and these can be broadly categorised into both external and internal factors. Here are some of the key factors:

Economic Conditions

The economic stability and growth prospects of both the home and target countries play a crucial role. The overall economic health can impact the cost of doing business and the demand for products or services. 

Market Demand

It is critical to assess the demand for your products or services in your target market. Conducting market research helps identify whether there is a need for what you offer and whether consumers can afford it. Changes in consumer preferences and market demand can affect trade patterns. 

Regulation and Trade Policies

Trade agreements, both bilateral and multilateral, can open up new markets and reduce trade barriers. Government regulations and trade policies, including tariffs, quotas, and trade agreements, can either facilitate or hinder international trade.  

Supply Chain Shifts

These shifts can be caused by various factors, such as changes in consumer behaviour, technological advancements, or geopolitical events. Companies need to be aware of these shifts and adapt their supply chains accordingly to remain competitive in the global market. That means a lot of costs need to be invested upfront. 

Business Competitiveness

In the international market, you will face competition from both local and international businesses. Maintaining and improving your business's competitiveness, including factors like product quality, pricing, and marketing strategies, is crucial for success. 

Cultural or Language Barriers

While language may not always be a barrier, comprehending the nuances of local administration and corporate governance can be challenging. This is true for smaller companies with limited resources, as they may not have the resources to dedicate time to understand market dynamics, administrative requirements, and risk management processes. 

Environmental and Social Responsibility

Increasingly, environmental and social responsibility factors, such as sustainable practices and ethical sourcing, can impact trade as consumers and governments seek more responsible products. You must evaluate the suitability of your existing business policies and procedures for international expansion. The business framework will require adjustments to ensure your operations comply with the local context. 

International growth demands careful planning, a deep understanding of foreign markets, knowledge of trade agreements and regulations, and a tailored go-to-market strategy. It's not just about seizing occasional ad hoc deals; it's about establishing a sustainable presence in international markets. 

Before taking the leap into international expansion, businesses should conduct thorough market research, assess their readiness, and develop an approach that aligns with their long-term goals. It's a journey that requires commitment, resources, and a well-thought-out strategy to ensure success and mitigate potential risks.

1. Understanding Trade Agreements

One of the initial steps in international expansion is to gain a deep understanding of trade deals and challenges. This involves exploring the economic agreements in place and policies that may affect your business. In the context of the United Kingdom post-Brexit, it's crucial to comprehend the trade agreements that govern trade with different countries. This knowledge forms the foundation for your international strategy. 

What are Examples of International Trade Agreements?

Let's look at some of the important organisations and treaties in international trade that involve the exchange of products across national borders. 

General Agreement on Tariffs and Trade (GATT):GATT is significant because it promotes freer and fairer international trade. It establishes the concept of the "Most Favoured Nation" (MFN) designation, which means that when one country offers favourable trade terms to another, it must offer the same terms to all GATT members. This helps UK businesses access international markets with lower tariffs and better trade terms. It is considered a success because it has a large number of member countries, covering around 90% of world trade. 

United States-Mexico-Canada Agreement (USMCA): USMCA, a renegotiated version of the former North American Free Trade Agreement (NAFTA), is essential for UK businesses that trade with Canada, Mexico, or the United States. This agreement aims to remove trade barriers between these countries, making it easier for UK businesses to export their goods and services to North America. It has also improved conditions for UK banks and offers better protection for intellectual property. UK businesses should pay attention to the USMCA because it affects their trade relationships and access to the North American market. 

Trade and Cooperation Agreement with the EU: After leaving the European Union (Brexit), the UK and the EU reached a trade agreement signed on 30 December 2020 that governs their economic relationship. This agreement is of utmost importance to UK businesses, as it governs the economic relationship between the UK and the EU. It includes provisions to eliminate tariffs and quotas on most goods, making it easier and more cost-effective for UK businesses to trade with their biggest trading partner. It also covers various other aspects of trade and cooperation, impacting how UK businesses operate in the European market. 

World Trade Organization (WTO): The WTO is an international organisation that regulates and promotes international trade. The WTO is significant because it establishes rules and agreements that govern trade among nations. These rules cover areas such as tariffs (import taxes), subsidies, and intellectual property rights, which directly affect how UK businesses engage in international trade and protect their interests. Being a member of the WTO helps the UK maintain a rules-based and predictable global trading environment. 

2. Evaluating International Markets

We highly recommend initiating a comprehensive global market selection process, employing the following criteria to guide your decision-making. Create a concise list of countries that demonstrate a significant or promising concentration of your target market. 

Environment and Market Analysis

Evaluate the following variables for each country:  

  • GDP Growth: This should encompass the country's growth prospects in terms of infrastructure development and the demand for products relevant to your business, especially in the tourism sector. 
  • Country Risk: This includes an assessment of potential political or social unrest, security concerns, and currency devaluations that could impact your operations. 
  • Political Factors: Examine the degree of political state in business decisions, political and social stability, and any possible alliances or trade agreements with your home country that might be advantageous. 
  • Other Factors: Consider geographic proximity and the similarity of the country to your source market in terms of social and business culture. 

In the pre-selection phase, focus on countries that pique your interest or exhibit substantial market potential. Subsequently, rank these countries based on: 

  • Market Appeal: Consider the demand for your product and the associated risks. 
  • Operational Difficulties: This involves an evaluation of market legislation, state-level protectionism, ease of doing business, procedures for establishing a business, tax regulations, administrative costs, and the level of local competition. 

Analyse the Competition

To analyse the competitive landscape in your chosen market: 

  • Identify your primary competitors and provide a detailed description of their operations. 
  • Analyse their economic performance and sales trends over the past three years. 
  • Identify the distinguishing factors that set them apart, such as pricing strategies, distribution channels, market maturity, financial stability, development potential, and future expansion plans. 

Demand Analysis

A thorough analysis of current and potential demand for your product in both your home market and the selected international markets is essential. This analysis should define the product's profile and its expected evolution over time. It should validate the success of your pre-selection process and confirm that the chosen markets are indeed suitable for your product. 

This data will inform your subsequent marketing strategy, encompassing aspects such as pricing, presentation, promotion, and distribution. It is advisable to supplement this initial analysis with further on-ground research in the target market, potentially through intermediaries, to verify the accuracy of your initial assessments. 

Assessing Market Attractiveness

A market’s attractiveness is a measure of its potential for long-term success and its alignment with your overall business objectives. When evaluating a market's attractiveness, include the following questions: 

  • Is this market profitable for my business? Can it sustain growth and profitability? 
  • Are customers in this market willing to pay for my goods or services? 
  • What is the size of the addressable market? Make a top-down analysis of the market's size and composition or a bottom-up analysis using data from initial sales efforts to gauge sales potential. 
  • How much of the addressable market can we capture? Analyse competitor data and market share to ascertain if there's ample opportunity for your business. 
  • Can we forge valuable relationships with this customer base? Depending on your business model, consider whether it's feasible to secure the right deals with the right number of customers. 
  • Is repeat business viable in this market? Given the high cost of acquiring new customers, assess if this new market offers opportunities for repeat purchases or engagement with your other products and services. 
Gauging Market Accessibility

Market accessibility measures the logistical complexity and potential costs associated with serving a particular market. To gauge market accessibility, reflect on the following questions: 

  • Is expanding into this market feasible? Consider regulatory constraints and logistical challenges. 
  • Do legal obstacles hinder business establishment in this market? Scrutinise local laws, regulatory bodies, and the operations of successful brands for insights into the local landscape. 
  • Can we manage the language barrier? Assess your capacity to conduct business in new languages and within unfamiliar cultural contexts. 
  • Is it financially viable to operate in this market? In certain markets, government approvals may entail upfront investments before seeing returns. 
  • What are the infrastructure requirements? Collaborate with local partners to navigate distribution needs, leverage third-party providers, and connect with vendors. 

3. Mapping International Go-to-Market Strategies

Once you've established the preliminary viability of your business in a global market, start developing your go-to-market strategy. 

A go-to-market strategy is a plan that incorporates various strategies and marketing methods to ensure the successful entry of a product into the market. To provide you with a clearer understanding of robust go-to-market strategy, this guide outlines key components to develop during the process. 

Identify Your Target Market

At the heart of any marketing strategy lies the customer. Whether you're launching a new product or improving an existing one, it is important to begin by researching and identifying your target market. This is a group of individuals who share common features, such as demographics or psychographics. This process, known as segmentation, involves understanding the characteristics of individuals or organisations most likely to purchase your product. 

Key questions to address when identifying your target market: 

  • Is your product intended for everyday customers (B2C) or other businesses (B2B)? 
  • Will you employ demographic, psychographic, or other segmentation methods to define your target market? 
  • What are the pain points of your target market, and how does your product address them? 

Clarify Your Value Proposition

A product's value proposition defines the benefits it offers consumers and the problems it solves. As you prepare your go-to-market strategy, a clear understanding of your product's value proposition is essential to direct your marketing efforts. 

Key considerations for defining your value proposition: 

  • What pain points does your product address? 
  • How does your product stand out from competitors? 
  • What unique features or experiences does your product or service offer to potential customers? 

Define Your Pricing Strategy

Pricing is a critical factor for any product. Striking the right balance is essential to avoid selling your product for too much or too little. Understanding your target market and the value your product offers will help determine an appropriate price point. 

Questions to ponder when developing your pricing strategy: 

  • What are the manufacturing costs for your product or service? 
  • What price is required to generate a profit? 
  • What do your competitors charge for similar products or services? 
  • How much are your target customers willing to pay for your product? 
  • Will you use a subscription or transactional pricing model? 

Craft Your Promotion Strategy

Your promotion strategy outlines how you will market your product to your target customers. The techniques you choose will depend on the type of product or service you are offering. 

Considerations when crafting your promotion strategy: 

  • Which channel is the most effective for reaching your target audience: online or offline? 
  • Does your customer engage better with outbound marketing methods or inbound marketing efforts? 
  • Where does your target audience spend most of their time, and which marketing channels reach that space? 
  • What marketing methods can you implement considering your current budget? 

Choose Your Sales and Digital Distribution

Sales channels are where customers can purchase your product, and distribution channels are how your product reaches your customers. The choice between in-person and online sales, direct or indirect distribution, or variations of these depends on your product's unique requirements. 

Points to consider when selecting sales and distribution channels: 

  • What are the specific sales and distribution requirements of your product? 
  • How do the manufacturing needs of your product impact its sales and distribution? 
  • Where does your target market typically buy products? 
  • How can you sell your product as seamless as possible? 

Set Metrics and Monitor Your Performance

The success of your go-to-market strategy hinges on the goals you set and the metrics you use to measure your success. Continuously track these metrics and make necessary adjustments as your strategy unfolds. 

Common metrics for measuring the performance of a go-to-market strategy include: 

  • Return on Investment (ROI) 
  • Return on Marketing Investment (ROMI) 
  • Market Share 
  • Customer acquisition cost (CAC) 
Download our FREE market assessment template now to streamline your strategy and make informed decisions. Don't miss out on this valuable tool for your business growth!
Download your FREE market assessment template!


Benefits of International Trade for Businesses

An export-ready business may benefit from international trade in a variety of ways that boost productivity and growth, including:

Increased Market Reach

International trade allows businesses to expand their market beyond their domestic boundaries. This broader market reach can lead to increased sales and profits. It enables companies to tap into new consumer bases, which can be particularly beneficial if the domestic market is saturated or shrinking. 

Enhanced Economies of Scale

When companies engage in international trade, they often produce goods in larger quantities. This increased production can lead to economies of scale, which result in lower per-unit production costs. Lower production costs can make products more competitive and boost profitability. 

Better Risk Management

International trade helps companies diversify their revenue streams. If a business relies solely on its domestic market and that market experiences a downturn, the business is at risk. International trade allows businesses to spread risk across multiple markets, reducing their vulnerability to economic fluctuations in any one market. 

International Best Practices Exposure

Engaging in international trade exposes companies to a broader range of business practices, strategies, and technologies. They can learn from successful practices in other countries and apply them to improve their own operations, leading to increased efficiency and competitiveness. 

Diversification of Products

International trade can provide access to various products and raw materials. Businesses can diversify their product offerings, which can attract a broader customer base and reduce dependence on a single product or industry. Diversification can also mitigate the risks associated with fluctuations in demand for specific products. 

Brand Reputation and Increased Equity

Successfully participating in international trade can enhance a company's reputation. When a business enters international markets and meets the expectations and needs of customers from different cultures, it can build a positive brand image. A strong brand can lead to increased customer loyalty and greater brand equity. 

Improvements in Technology

International trade often involves collaboration with foreign partners. This collaboration can facilitate technology transfer, leading to the adoption of advanced technologies and processes that may not be available domestically. This can result in improved product quality and efficiency. 

Product Development

International trade can stimulate innovation and product development. To compete in foreign markets, companies may need to adapt their products to suit the preferences and needs of consumers in those markets. This drive for innovation can lead to the creation of new and improved products that can also be successful in the domestic market. 

International Business Opportunities: Find Your Next Big Win

Pursuing international business opportunities can be a lucrative strategy for businesses as the world continues to recover from the economic recession of the last decade. With new and emerging markets opening up to foreign trade and investment and consumers in long-established markets regaining purchasing power, it is essential to capitalise on new international business opportunities. 

However, international business expansion is not simply about taking your existing model and replicating it in a new location. It requires a deep understanding of the local market dynamics, regulatory environment, and customer preferences. This comprehensive approach, from understanding trading deals to crafting a prioritised go-to-market strategy, empowers your business to navigate international challenges and seize opportunities effectively. 

gigCMO is a growth marketing consulting firm that offers comprehensive support across all facets of your business. We harness intellectual understanding, employing a meticulously structured process and a wealth of capabilities to provide practical, timely, and active support to embed the marketing concept in businesses. Contact us today, and let us be your strategic partner in global success.