In the continually globalising economy, businesses are constantly looking for opportunities to expand beyond their borders. Exporting stands out as a promising avenue for growth, whether it involves tangibles (products) or intangibles (services). However, venturing into international markets with either offering requires an understanding of the fundamental differences that distinguish exporting services from exporting products. This blog post delves into these differences, shedding light on the unique challenges and strategies involved in each.
Understanding the Basics: Services vs. Products
Before diving into the complexities of exporting, let’s clarify what we mean by services and products:
- Products are tangible items manufactured or produced for sale. They can be held, seen and used directly by the consumer.
- Services are intangible and are executed upon demand. They encompass a wide range of activities, such as consulting, banking, design and education.
Key Differences in Exporting Services vs. Products
1. Tangibility and Customisation
Products: Physical goods can be inventoried, require storage and involve considerations around packaging and transportation. Their design and manufacturing generally happen well before they reach the end consumer, limiting the scope for customisation.
Services: Services are intangible, cannot be stored or inventoried, and are often customised to meet a client’s specific needs. Their delivery can be highly dependent on the service provider’s expertise and the client’s active participation.
2. Market Entry and Delivery Mechanisms
Products: Exporting products often involves navigating through customs regulations, tariffs and transportation challenges. Physical market presence, through distributors or retail outlets, can be crucial for market entry.
Services: The delivery of services may not necessitate physically crossing borders. Thanks to digitalisation, many services can be offered online, bypassing traditional customs and regulatory barriers. However, regulatory compliance related to service standards, licensing and professional qualifications may still apply.
3. Cultural Sensitivity and Localisation
Products: While cultural preferences can influence product design and marketing strategies, many products can be sold with minimal adjustments across different markets.
Services: Services tend to be more sensitive to cultural nuances due to their intangible nature and direct interaction between provider and client. Effective communication, a deep understanding of local business etiquette, and sometimes, localisation of the service (including language) are critical.
4. Scale and Margins
Products: Physical products usually involve significant upfront costs in production and distribution but can scale up relatively easily once those investments are made. The marginal cost of producing additional units typically decreases with volume, potentially leading to higher margins.
Services: Scaling service offerings can be more challenging since it often requires additional skilled personnel or more sophisticated technology. However, high-value specialised services can command considerable margins despite these challenges.
Strategic Considerations for Businesses
Businesses looking to expand internationally through exporting must align their strategies with the unique dynamics of their offerings:
- For Product Exporters: Focus on understanding market-specific regulations, building efficient logistics, and developing localisation strategies for your products to meet local consumer preferences.
- For Service Providers: Prioritise establishing a strong online presence, understanding cultural nuances and local regulations related to service delivery, and investing in technology that enhances service delivery and scalability.
Embracing the Opportunities
Exporting, whether it is services or products, offers businesses a path to significant growth. The key to success lies in understanding the inherent differences in how products and services are exported and received in foreign markets. By tailoring strategies to navigate these differences effectively, businesses can unlock new opportunities and thrive in the global marketplace. As the world becomes increasingly interconnected, the potential for exporting both products and services will continue to expand, paving the way for innovative approaches and strategies that embrace these unique challenges.
What support is available?
Small London businesses like yours can thrive in today’s global economy with the help of Global London. The fully funded programme is designed to support London’s small businesses in breaking into international markets, with a focus on women founders and those from minority ethnic groups.
The programme offers a combination of 1-2-1 expert advice from experienced business advisers, masterclasses on specialist topics, peer-to-peer networking, and export readiness workshops, culminating in a European trade mission—all designed to help accelerate business growth.
To participate, your business must meet the following eligibility requirements:
- Be registered in the UK
- Be trading in London
- Have a minimum of three employees
- Been trading for at least 18 months
- Have a turnover and/or investment minimum of £50k
- Looking to grow internationally
Join the other London-based companies that are already on a path to growing their business. Sign up today https://go.newable.co.uk/GlobalLondonProgramme