The oil and gas industry has always been a global business, from the early shipping innovations of the Shell Transport and Trading Company in the 1800s to the present-day liquefied-natural-gas cargoes moving commodities across global markets.
AnTech has been developing technologies for the industry since 1992, with the exporting of technology a major part of the business from the start. The firm started out by making bespoke products before developing its own product lines. These are primarily focussed on smart drilling equipment for boosting oil well production and equipment that allows data to be safely transmitted to engineers on the surface. The former is exported as a service whereas the latter is a combination of service and goods export.
AnTech’s international growth has been an industry success and is only one example of the many fantastic opportunities to export and grow a business in oil and gas. Expanding international sales effort will lead to new opportunities and revenue streams, regardless of current experience with international exports.
Here are four key tips for expanding international trade that can apply to any busines:
1. Conduct Market Research/Survey
Conducting market research and survey is crucial before a new market entry as these can help illuminate the opportunities or threats for your business.
First, market research entails market sizing and growth potential. Market size and its growth is a gauge of “the pond,” where you will be “fishing,” if you are deciding on new market entry. If the current market is small and has no potential for growth, it will be tough for new players. However, if the current market size is significant, and its growth is expected to be tremendous, it is worthwhile to conduct further evaluation.
After getting a clear picture of the market size and its potential, current and emerging players have to be thoroughly understood. With too many players in the market, competition will be high and either the lowest price in the market or having niche advantage (proprietary technology) will ensure business viability.
Lastly, barriers to entry and exit have to be evaluated. Some of the key considerations for barriers to entry include minimum capital investments, foreign entity establishment, and manpower localization requirements. Companies rarely pay attention to barriers to exit, and it can be a very cost-intensive exercise. Barriers to exit include local laws around decommissioning (labour law, sales tax), logistics, and financial.
2. Use a Professional Network
A new country means new laws, customs, and general business practices to be understood. The fastest way to get oriented in a new potential market is to speak to someone who has done it before. Every company learns lessons as they enter new markets, and consulting with trusted, experienced people will help develop a better understanding about the target market.
The only limitation on who to speak to is that they should have experience in the target market, otherwise, the broader the group surveyed, the better. Understanding other companies’ stories of success and failure helps develop a narrative of how a new market operates and how to be successful there.
Even if an immediate network yields no connections to the target market, networking groups in the target country or government-provided international trade advisors offer another avenue to finding the necessary resources.
Draw up a list of pertinent questions before talking to experienced contacts. However, even casual conversations can provide enlightenment on successful market entry.
Here are some examples of factors to consider:
- What is the normal tendering process in the country?
- Where are the industry hubs?
- What is the experience of businesses of a similar size with winning new work?
- What are the average rates for the planned service/equipment?
- How easy/difficult is shipping equipment?
- What are the rules on visit and working visas?
- Is an agent necessary?
- Can an LLC have 100% foreign ownership?
3. Start Slow But Plan To Accelerate
It is easy to overcommit to new markets and be drawn into markets when offering a highly desired product. However, once committed, it is much more difficult to draw back. For example, certain countries require annual licence fees or office leases which are hard to unwind later if sales fail to materialize. A poor international sales strategy can lead to a death by a thousand cuts.
But a balance must be struck. There are significant opportunities for growth in international markets, but they will not materialize without some focus and commitment. There are stages of commitment to work through as an understanding of the market develops. Some questions to facilitate planning include,
- Can operations be based from home while finding a base in a new market?
- Would a local agent provide value?
- Are there key targets who can evaluate target market interest in the planned export before committing?
4. Work With Key Partners
Business is rarely a zero-sum game. An attractive market likely holds other parties that stand to benefit from the entry of a new product, giving them an incentive to help the new entrant succeed.
A strong and mutually beneficial relationship provides access to key markets without the need to commit to a local entity until absolutely necessary. The relationship will also supercharge the all important sales network.
Some companies start in a client or partner company’s yard while sales are primarily through that partner or to that client. This can work well to begin with as there is limited expenditure on facilities and administration. However, the need to work around whomever is providing yard space constraints flexibility locally as well as limits room to grow. As a result, it is important to be able to quickly secure an independent facility when the time is right.
Sales can also work well through a partnership with a local company. This might be an agent or other local service companies that benefit from the new technology. Enabling additional revenue for a company provides them with incentive to present the new technology to their clients as it will help them win work themselves. This can reduce startup investment to the travel costs necessary to train their sales team.
In some countries an agent will be the key partner. Make use of network contacts to select a good agent. In some countries, the relationship with an agent is almost indefinite and exclusive, so it is important that the relationship works for both parties. A bad relationship could, in effect, close access to that market. A good agent should be able to handle the scale of business and the local administration that goes along with that. For a service company, sales is only one aspect of an agent’s job. They should also support with logistics, visas, legal, tax compliance, etc.
The above four points—conducting market research, leveraging a professional network, starting cautiously with plans to accelerate, and developing the proper relationships with key partners—are the key areas to focus on when attempting business growth through international expansion. There are significant potential gains from properly executed international expansion for most companies, and it is something that every business should consider. Approaching the new markets in a careful and considered manner are keys to laying the groundwork for success. Good luck!
