For many businesses, following Brexit and the departure from the EU free trade agreement on 31st January 2020, expanding overseas is a necessity. Increased complexity in exporting to the EU bloc and trade agreements with other countries is having an effect. For example, non-EU exports of machinery and transport equipment has surged by around 1/3 in 2 years. But, as most experts would agree, there is much familiarity and similarity in Western European markets. However, the complexities of exporting to anywhere south of the USA, from Mexico to Chile, are somewhat more complex, as just one example. So, let’s take a slightly deeper dive into expanding overseas, including the market, the culture and the geopolitics.
Expanding overseas into new markets
Up until fairly recently, the EU accounted for over half of all UK exports. By last year, this had fallen to 42% and may continue to decline unless some form of trade agreement is struck. However, despite an obvious assumption that non-EU exports would take up the slack, it largely has not. The OBR shows that our imports of services from the EU has collapsed and non-EU exports has not fully offset post-Brexit decline in EU exports. Well, at least some UK services businesses are perhaps having a better time. Whether you blame it on Brexit, the boogie or the UK’s failure to secure a new trade agreement with the USA, there are many reasons. One of these may be the low familiarity with non-EU export markets. For example, if we were to ask you, the reader, to name a few of the largest oil and gas producers in Europe, you would probably name several. If we asked you the same question about Latin American countries, it may be somewhat harder.
Understanding the target customers and their relative attractiveness for export is just one of the challenges. Yes, we can support market sizing and analysis. However, we may not know who our competitors are and how they compare to us. Furthermore, our products may not be quite right for another market, for reasons that as yet we are unaware.
Expanding into new cultures in new markets
Clearly, there are many differences between the UK and some farther-afield export markets. Differences to Europe might include (this list is not exhaustive):
- Food and drink
- Respect for hierarchy or experience
- Security and crime
- Anti-corruption and bribery
These are just a few of the issues that exporters have to contend with. Clearly, it is cheaper, easier and faster to hop on a low-cost flight and visit a potential buyer in Europe. Additionally, over half of Europeans can speak a reasonable level of English, so you can’t go far wrong. Compare this to the cost, time and complexity of getting to Argentina, where only around 6% speak English. For the success of your relationship, your reputation and your pitch, it is best to familiarise yourself with the culture beforehand. It may sound like an exaggeration to say it but one wrong look, gesture or comment could sink any deal.
Now, let’s talk about the elephant in the room.
Overseas markets and geopolitical concerns
To recap, most Britons are fairly knowledgeable about the EU market, especially given the proximity. It is also where many of us take our holidays and city breaks. We know that Western European countries are democratic, possess similar perspectives and overlap on languages. Eastern Europeans are not quite as straightforward, though EU members have become closer together. Aside from perhaps Belarus at the moment, we know where most countries in Europe stand. Most of these countries are accessible on a short flight and most of them are open to greater trade. However, some continents are especially complex, such as Africa. In Africa, only 9 countries are rated as being truly democratic and a number of countries have had the same leader for 20 years or more. FDI may be coming from China or Russia, where there are no such frictions as with NATO countries.
Turning our attention to Latin America, there are 21 countries. There are substantial cultural and economic differences between all of these countries, from Mexico to Brazil and Nicaragua to Ecuador. The good news is that they are mostly democratic, though not all entirely stable. Additionally, they don’t all speak the same language or dialect and have different customs. Some have cosy relationships with China, while others have taken a hardline approach as in the USA. The territory is vast, covering many fallen cultures and possessing varied histories from colonial invaders. Though many of us may know the name of a holiday resort or the capital city, how many of us could name the second and third city in each country? As a continent rich in precious minerals, the market is substantial. But, how do you access it? How do you behave and approach such markets? Is the government accepting of your attempts to enter their market? As a result of this complexity, many consultancies are expanding this area of knowledge to support you overseas.
Thinking beyond your domestic market for expansion
Here at Think Beyond, we can support you with sizing markets, competitor intelligence, cultural codes and overseas expansion. Where there is a Latin or Spanish element, we can support you further, via both our co-founder and our network of partners.
Finally, why not check a summary of our services for entering new markets.