Industrial manufacturers expanding overseas
With inherently internationalised supply chains, discover the benefits of taking your business global.
28 November, 2017
If you’re an industrial manufacturing (IM) business, and you already have a strong market for your product in the UK, the chances are you could also find a strong market overseas.
So your strategy now should include international expansion. The global economy is growing and you can take advantage of lower sterling and focus on new growth opportunities.
Needless to say, internationalisation brings with it a lot of challenges. It’s easy to make a wrong move – one that could potentially damage your business as a whole. The key to avoiding major mistakes is to be knowledgeable about your new markets, the risks, and to be fully prepared before you take that first step.
KPMG Enterprise’s Going global report can help. It’s an excellent guide to the ins and outs, and dos and don’ts, of overseas expansion. Hopefully much of what you read will reassure you that international expansion is the right thing for your business. But you’ll find food for thought too, as there are plenty of complexities to consider.
"With trends such as digitalisation and ‘servitisation’, the sector is already being swept along by the winds of transformation.”
Justin Benson - Director, KPMG
We are living in an era of political and economic uncertainty, but I would argue there are lots of positives for IM enterprises to latch onto. Change brings opportunity.
Justin says “with trends such as digitalisation and ‘servitisation’ – a cumbersome word, but a neat summing up of how manufacturers are increasingly moving from selling products, to providing their products as part of a wider service (think software as a service (SaaS or mobility as a service (MaaS)) – we can see the IM sector is already being swept along by the winds of transformation.” He then adds “this ability to be flexible and agile in the face of change means IM enterprises have what it takes to try something new.”
Irrespective of Brexit, if you are not already selling to Europe, you should consider starting, as it’s a large and growing market. Or you may find better opportunities to sell what you manufacture elsewhere – in China or the US, for example. Either way, you should now be thinking of how to exploit international markets.
Before you take the plunge, Justin’s advice is “to find all the data you can on a country and talk to people in the know to pick up on the dynamics and nuances of that particular market. If you can, hire an advisor to conduct a proper market study into the country and get to grips with where the specific potential for growth lies. And don’t stay in your comfort zone – get on a plane and visit the market yourself.”
"Irrespective of Brexit, if you are not already selling to Europe, you should consider starting "
Justin Benson - Director, KPMG
You need to be sure that people in your chosen market will buy your product – and at the right price. Consider how you can be better, cheaper or faster than your competitors.
Online, every company can look global, but make sure you’re not missing out on exports because of flaws in your current channels to market, such as the internet. For example, can foreign buyers easily navigate and understand the site?
If your plan is to invest in production overseas, it’s vital you identify a location that has access to the skillsets you need. It may in fact be more prudent to test the waters by collaborating with a local partner.
“Car manufacturers use local importers very successfully” explains Justin. “However, once there is a sizeable market for vehicles they tend to move to branded national sales operations and potentially think about building a factory to serve the local market or for wider exports.”
‘Network optimisation’ is very important when expanding overseas. Ensuring you have efficient warehousing and distribution operations helps ensure you maximise profitability, and your components and products to your factories and customers arrive on time. Thinking about Brexit, tactical shorter term ideas like siting warehouses near important customers, can offset delays caused by tariff, or non-tariff, barriers.”
Another issue to consider is that goods can be held up when shipped across borders, and these delays may see longer payment terms built into your supply chain than you originally expected.
Ensure your working capital is financed adequately to allow for longer lead times and payment periods. Invest in your relationship with your bank. If possible, finance or re-finance your business to lock in a lower cost of capital.
Want to know more? Just download the KPMG Enterprise report.
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