Exporting more goods and services to boost UK productivity
Productivity is the amount of output, or gross value added, per worker per hour worked. It stands to reason that if you can increase the numerator rather than the denominator, productivity increases. Exporting more goods and services is a great way to boost productivity. According to the ONS, businesses that trade internationally are roughly 20% more productive that those who do not. Also, if you export outside of your domestic market, it is a good path to growth. But, where do you start? What should you export? Where is the biggest opportunity? Will my goods or services be relevant for another market? What is the best way to communicate? Who is my competition and what are they doing? These are just a few questions to ask before you start to export. So, let’s dig a little deeper.
Exporting more goods and services
If you were to start a business, particularly when you need external funding, you need a business plan. This covers everything from your strategy and proposition to your pricing and marketing plan. Aside from the obvious financial elements, there is a lot to think about to convince a bank, lender or investor to part with their cash. They need to believe that the plan is credible and that it will work before releasing funds. So, why is exporting viewed differently by many organisations? Entering a new market is a risky venture. Launching a new product is a gamble. Splurging on sales and marketing efforts in the hope of making a profit requires some thought.
Arguably, what is missing in this picture is an export strategy and plan. It could also form one of your strategic objectives, giving it the focus that it deserves. If all of your staff are based in the UK and you have only traded in the UK until now, it represents a leap into the unknown. Sure, you could take something that you produce today or a service that you offer and try to export it overseas. But, how? Before considering the transport and storage of goods bound for export, let alone the paperwork, what is the strategy behind it? Is the decision based on a passing interest or a one-off order from overseas? Is it that you have exhausted UK growth? Is the product or service that good?
Boosting your productivity by exporting
In many companies, exporting is normal. It may represent 5-10% of your turnover and it ticks along. But what if it could become 40-60% of your turnover? What if your approach is hampering your efforts and it is your main opportunity for growth? Unfortunately, it is all too easy to have a small cohort of employees that deal with exports and forget about it. Similarly, once you have found a logistics partner and a freight-forwarding partner, the goods will flow to wherever you send them. But, how do we keep growing, in which territories, in what way, with what proposition and messaging? Sometimes, it is tempting to champion your export success, only to be unaware that it could be ten times larger.
If businesses that export internationally, by the Government’s measurement at least, are 20% more productive, why does everyone not do it? Additionally, it is not just limited to services and Europe is the number one exporter of services worldwide. Here at Think Beyond, we found our own growth by engaging more with overseas markets. Not only are we exposed to different cultures and attitudes but services that work more or less well in particular markets. We also leverage in-depth knowledge of Spanish-speaking countries, from Columbia to Cuba and Panama to Peru. We regularly encounter organisations that face export challenges. They are seeking ways to boost productivity and leverage their competitive competencies more widely.
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Getting goods to market is the easy part
In 2022, the UK exported £815bn of goods and services – a near 25% rise on 2021. Services comprised 49% of the total exported. Yes, it is nearly 50/50. We also registered a trade surplus of £144bn on services, which was more than outweighed by the deficit on goods. 2023 exports totalled £864.5bn, with the EU accounting for 41%. Services exports increased to £153bn – a mere 6% increase. However, there is room for optimism in your planning. Since the population of the EU is just short of 450m people, accounting for 41% of exports, there is clearly huge scope for greater non-EU trade. Since trade routes and freight forwarding is well-established, this isn’t the main challenge. The real challenge is how to plan for and approach markets with which we are less familiar.
The EU and USA account for 63.5% of our exports. English-speaking or close to home are our favourites. Even the mighty China does not take more than 4% of our exports, despite a population of 1.4bn. So, what is the reason? Have you researched your target market? Do you understand the competitive landscape? Have you prepared for the language and cultural differences? Have you tested your proposition in other markets? Do you know how to price your goods or services in another market and currency? Will you risk offense with your product name, logo, slogan or ad campaign? Have you chosen the best route to market? Have you followed local legislation and employment law? In summary, getting to market does seem like the easy part, but will people buy from you?
Getting your ducks in a row with an export strategy and plan
Like an investment, you want to do everything that you can to ensure it makes a return. Exporting more goods and services requires a root-and-branch review of your current capabilities versus current and future opportunities. It also requires a thorough understanding of how best to approach each market with your offering. Sometimes, it won’t be what you currently offer or to the markets you offer it into. Let’s make sure that the business case stacks up and that the plan has you prepared for export success. A paltry 5-10% export share is unlikely to change your fortunes or your productivity significantly. So, what are we waiting for? Let’s start planning toward 40-60%, making each move more likely to succeed than the last.
If you would like to discuss exporting more goods and services, why not drop us a quick message. Alternatively, simply ask us for a callback on our planning services.
Finally, check out related articles on understanding local cultures and entering overseas territories.