Monday, September 6, 2010

Some home truths about doing business abroad, an article in the Financial Times featuring Illustration Ltd

By Jonathan Moules
Published: September 6 2010 12:25 | Last updated: September 6 2010 12:25

Last year, Priestmangoode, the London-based design consultancy behind Virgin’s Pendolino trains and BT’s Home Hub broadband box, had no British clients – its entire £3m turnover came from abroad.
This was a challenge for a business that employs only 24 people – albeit one involved in significant international projects, such as sculpting China’s new high-speed rail fleet or laying out the interior of Lufthansa’s A380 planes.
“Our staff can be working from six continents,” founder Paul Priestman admits. “It is a bit of a juggle.”
If only more small British businesses had such problems.
The Federation of Small Businesses estimates that as little as 5 per cent of its membership of more than 213,000 companies gains any revenue from abroad, in spite of the general belief that exports are often the best way to grow.
The language barrier, local regulations and fear of not getting paid are all common excuses for not venturing abroad, the business group admits. Those that do take the plunge often end up getting their fingers burnt because they have not properly thought through the process.
Research by the British Chambers of Commerce (BCC) found that only a fifth of those companies that export took a strategic approach. Those that did, however, recorded the highest export growth.
The most common mistake made by companies exporting is that they don’t do it for themselves, according to Robin Godfrey, head of the BCC’s export marketing research service.
He has encountered this problem many times in his role providing support to would-be exporters on behalf of UK Trade & Investment, the government agency.
“Instead of looking at the world and saying ‘where should we invest next?’, a company will get an e-mail from someone in New Zealand and then rationalise why they should set up an operation over there,” Godfrey explains.
“In fact, the person has contacted them from New Zealand because they are interested in their own business, not the company in the UK, so if that company then goes to New Zealand, they will be doing it for someone else.”
Godfrey’s team tries to help UK companies pick their own ideal export country using a process the BCC calls market selection.
This involves a business owner placing 20 target countries on a board split into four quadrants, dividing them between the big and small markets, then again between those that are easy or difficult to enter.
The idea is to get companies to concentrate first on the easy target markets, most often Ireland and the Netherlands for UK-based companies. Often, only experienced exporters should consider the difficult markets, such as the US and China, Godfrey says.
“It is about being very clear in your head about how you identify your export markets,” Godfrey says, adding that research and actually visiting the country should all be done before taking the plunge and exporting.
Priestmangoode was an exporter from the day it started trading in 1986 because Priestman had already done work for Japanese companies while studying at London’s Royal College of Art. He notes that the UK alone would never have provided enough business for the company to reach its current size.
To succeed in exporting you need to be prepared to travel at short notice, Priestman says. “We have some very, very wealthy clients, who will see what we have done and ask us to a meeting tomorrow in San Francisco or New York,” he explains.
Travel can have additional benefits, Priestman adds. Talking at international conferences, for instance, is a great way to develop links with potential clients. Priestmangoode recently clinched a deal with Brazilian aircraft manufacturer Embraer as a result of a speaking engagement with the British Council in São Paolo.
Priestman also believes in the importance of research to understand the nuances of different cultures. Consulate offices can help provide cultural training, for a small fee, he notes. However, he also makes sure he travels with an interpreter.
“The worst thing you can do is to think you know better,” he says. “In China, for instance, I have learnt a lot from their manufacturers doing things in different ways. A lot of what we do is out of date.”
Illustration, which provides artwork for advertisers, publishers and print media, is another international UK-based business. Its workforce is less than 20-strong and spread across India, China, Germany, Australia and the UK.
A few years ago, the company picked up a significant contract to provide the artwork for BMW’s Mini campaign in China, which started director Harry Lyon-Smith thinking about opening an office in Shanghai.
However, it took him six months just to get a single response to an online advert for a Chinese agent.
When the office finally opened, Lyon-Smith found that the opportunity he thought existed for freelance illustration work was extremely hard to sell to the Chinese market, where potential customers were happy using their own in-house graphics teams.
The situation was saved by Lyon-Smith changing tactics and using the Chinese illustrators he had hired to provide an alternative product for Illustration’s western clients.
“It was not what we planned, but now we are getting far more work for the Chinese artists into the west than we are getting into China,” he explains.
As Illustration found, being bold is important but you may then have to be creative to solve the cross border problems.

To Add a little more to this article, here is the original note given to the FT:

Initially in order to find the right Agent to represent us, we placed a window on our homepage for all Chinese viewers, using an IP locator software. The window read in English, saying we were looking for a bilingual agent who knew the illustration market and could develop our agency in China. This window appeared for over six months before any response, but then one weekend I received three e-mails, and subsequently several more. One of the initial e-mails was from Tianyin who is now our agent, and doing a great job.

One of the first things we did was to build up the number of Chinese artists that we represented and start marketing them into our Western markets, this proved to be successful and immediately gave a revenue for the agency. Since then we have been tackling the more challenging task of introducing our western artists to the Chinese advertising industry. The budgets that we require to make it worthwhile for Western artists is a lot more than the usual fees paid in China, but as the middle classes increase and the marketing budgets grow and we are beginning to see more interest. In fact the other day we had our dream scenario which was having a Chinese client commission three of our Chinese artists, this made us feel like we could really make it work in the country long-term.

For us our success to date in China has been based on finding a great colleague, who is committed to the business and industry, is fluent and open in their transactions, which combined with a structure and well-established practice creates reassurance for all those involved.

On a practical level we had to translate the website and interestingly have a new logo that could mean something and be pronounced in Chinese.

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