The rewards of building a strong export market are multifold – you build better systems and competencies in terms of production, marketing, design, commercial handling, affirms Kishore Khaitan, Managing Director of Basant Fibertek.
Basant Fibertekstarted its journey into exports in 1998. While the journey has been long and challenging, it’s been highly rewarding both in terms of experience & learning as well as financially. Currently, 50% of our sales comes from exports and we export to all parts of the world and to over 40 countries.
India has many good suppliers of textile machinery spares and accessories though most of them are in the small-scale sector. While many of them are quite innovative, not many have not been able to sell their wares in the export market successfully. It is hazardous and costly, to say the least, to venture into export markets without first strengthening your base. Hence, before we take a deep dive into the subject of boosting exports, let’s first look into the shortcomings of many parts and accessories manufacturers.
As mentioned earlier, most manufacturers are in the small-scale sector. This means they have imitations in terms of capital resources, managerial resources, infrastructure, systems and strategic focus. But usually, what such companies lack in resources, they can make up with their entrepreneurial resourcefulness, provided they have the ambition to grow fast and globally.
The main issues or constraints associated with small manufacturers in India are:
- Poor record in timely delivery – usually they fail to deliver within committed time
- Inconsistent quality – from batch to batch, they are not able to maintain consistent quality
- Inefficient process of manufacturing – their manufacturing processes usually involve a lot of manual labour activity and little automation. Wastage and rejections are also likely to be higher than desired.
- Lack of strong brand image – small companies do not invest enough resources in building their brand image through their logo, packaging, promotion, website etc.
- Poor after-sales service – many small companies do not focus on after-sales service, especially in case of customer complaints. Trying to pass on the blame on the customer may save them from the cost of replacement or rectification but it results in losing not only the customer but also in creating a reputation.
- Lack of in-depth knowledge about the application of their product – many manufacturers are good at copying the original product and producing the imitations cheaply. As a consequence, when their customer faces a problem, they have no clue how to solve it.
- Over commitment – during the sales process, small producers tend to over-commit about the life and performance of their product without having tested and proven their claims. As a result, when they cannot live up to their commitment, they tend to lose the trust of their customer very fast.
- Price based competition – small suppliers mostly try to sell their products by offering an attractive discount on the established manufacturer’s prices. This forces to always face cut-throat competition resulting in always struggling to manage their finances and cannot afford to spend on R&D or upgradation of their manufacturing facilities.
There may be several other factors worth mentioning regarding the constraints of small manufacturers but the above-mentioned are the main reasons affecting the growth of most of them. To become successful in exports, the first step a local manufacturer needs to take is to establish a good reputation in the home market. It would be foolhardy to dream of exporting if one cannot develop a set of regular and loyal clients in India who are happy using their products and services and are willing to refer other clients to them as well.
All factors influencing a company’s ability to export can be divided into two broad categories: external and internal. In the internal category, the above-mentioned 8 constraints need to be overcome in order to enhance the company’s capacity to serve export markets successfully. Until and unless a company has the ability to meet consistently the demanding requirements of the export markets, it cannot achieve any meaningful success in exports. In order to overcome the above-mentioned constraints, the company should embark on an internal transformational program that focuses on the following:
- Build reliable systems– a systems driven approach is necessary to define standards, standard operating procedures, process control and final inspection procedure to ensure that nothing but the best quality is consistently build and supplied. It is important to maintain proper records of all production activity and quality control documentation to enable tracing backwards any product under complaint to when it was produced, who produced it, what materials and machines were used and which batch of raw material was used. If you don’t know what created the problem, you can never solve it.
- Focus of continuous improvement – Whenever a problem or mistake is identified, efforts of management should be to institute a system or practice that can ensure that the mistake will never be repeated. One should always attempt to eliminate the root cause rather than fixing only the current problem somehow. If the management is committed, results will start coming and steady improvement can be seen in both productivity and business growth.
- Reduction in cycle time and rejects – There are always bottelenecks and constraints in any production system, many of which may be non-production related eg. planning, sales coordination, logistics, inventory management, etc. By setting goals for improvement in cycle time and reduction of rejection levels, the management can ensure that system constraints are constantly identified and removed, thus improving both cycle time as well as reducing rejection. This helps in increasing production capacity, reducing costs and improving quality consistency.
- Understanding user needs and process requirements deeply – It is quite common to have a customer not able to exactly define what improvement he would prefer simply because he cannot visualise what is possible. Famous examples are mobile phones, internet, robots, courier service. Each of these have been massively disruptive and rooted out legacy businesses, yet people couldn’t visualize their impact when the technologies were first introduced. Hence, a supplier should endeavor to understand the user’s needs enough to identify how he can add value by either solving their problem or saving time & cost or improving quality and productivity for their customers.
- Under-commit and over-deliver – The best way to build trust and reliability is to always deliver more than what you have committed. Once you win over the trust and confidence of the customer, you don’t need to undercut the price to get orders. Try and meet the requirements of the most demanding customers as this serves as a barometer of your competitiveness.
Once a company has built strong internal systems and culture, it is ready to explore overseas markets. Let’s now look at the external factors influencing exports:
- Nature of the market–each country differs in terms of character and scale of the market. Hence an aspiring exporter must choose his entry market carefully. It is best to choose a market in close geographical and cultural proximity where the level of technology and machinery in common use is quite similar to the company’s domestic customers. If some Indian expatriates work there, it’s even better!
- Nature of competition – it must be studied who are the major competitors and their relative strengths and weaknesses vis-à-vis your company. For instance, if another Indian company is already active in the market or there are several other non-OEM suppliers competing against each other, changes of entry improve. If the prices prevailing in the market are much higher than what you offer, barrier to entry is lower. If your product performance is superior to other suppliers, your chances of success are brighter to that extent.
- Market segment – one needs to choose which market segment you wish to cater to. Would you be able to make a strong pitch to big clients, small ones or middle sized? Would you like to serve those with old machines or latest models? Would you like to serve those who need service support or those who only want to buy parts?
- Trust building – no customer abroad feels comfortable dealing with a new vendor from overseas. Hence, it is crucial to maintain a regular presence in the initial months. When the customer sees you are visiting regularly even without getting any business, he feels you are committed to serve the market. If you get hold of a reputed agent, it helps speed up this process of trust building. However, export marketing is a long-term game and one should have patience for 2-3 years before seeing significant fruits from the efforts.
In conclusion, one must see exports development as a new venture. Your domestic credentials don’t count as much as your performance in that country. You have to build your reputation there brick by brick with patience and perseverance. The rewards of building a strong export market are multifold – you build better systems and competencies in terms of production, marketing, design, commercial handling.
You also build a growth oriented, progressive company culture and a broader vision and strategy for the business. Success in exports can be financially rewarding and also builds resilience by reducing dependence in the local market. Finally, the satisfaction of succeeding in tough markets and seeing your reputation and stature in the industry soar has its own personal and financial rewards!
