Interview with Simon Bedford

Interview with Simon Bedford, regional sector specialist for overseas joint ventures and investment, discusses what is making companies choose to set up overseas and where the opportunities are for Yorkshire & Humber businesses:

Can you give us an overview of what is happening in your sector in relation to export growth in the region?

The role is not so much working in a sector but on market entry strategies with companies that have moved beyond exporting and actually want to set up an operation in an overseas market. Therefore we are assisting companies looking at alternatives to direct exporting through an agent or distributor which may involve setting up a branch office, licensing, franchising, strategic alliance, joint venture or a wholly-owned subsidiary.

An increasing number of companies are seeing the need to develop their business overseas with some permanent presence for a variety of reasons. These include the benefits of lower operating costs overseas, the know-how and skills of overseas workers and also the idea of using a base overseas as a platform for subsequent exporting into neighbouring territories.

We do not assist importers or companies wanting to “outsource” or “offshore”.
In the last 4 years very few companies visited were planning to simply move their operations overseas just for cost reasons.

Is this a sector that is particularly important to the Yorkshire and Humber region?

There is an increasing interest from companies in the region in foreign direct investment (FDI) in fact most companies, appear to have some sort of plan. They may be planning on expanding overseas as a proactive way of developing their business, or as a defensive reaction believing that if they do not do it now, they might not be here in five years time. This is particularly true for traditional manufacturing companies in the region.

How does activity in this sector from the Yorkshire and Humber region compare with exports from the sector in other regions?

In other regions of the UK the advice, support and assistance given to companies interested in overseas joint ventures and other types of FDI is different, either because there is not a UKTI specialist appointed to the role or that the service has been outsourced to a consultancy.

It works well in Yorkshire and the Humber as there is a close relationship with the international trade advisors who are very supportive and refer companies that they identify as moving beyond exporting in an overseas market. We also work closely with intermediaries and service organisations in the region, which include banks, lawyers, accountants, consultants and membership organisations such as CBBC and BABC.

It is probably fair to say that traditional manufacturing companies are looking at overseas joint ventures and partnerships because it is something that they feel they have to do to stay in the game. However, we are seeing high growth and high tech companies increasingly interested to set up international collaborations and for example in  sectors such as ICT, and Creative and Digital, companies  tend to look at overseas partnerships at an early stage in the company life as the logical way to develop.

Which are the biggest geographical markets for this sector?

In the last four years about 40 to 50% of contact from companies has been in relation to doing business with China, and in particular in setting up a joint venture.  However, this is not an easy market and companies may well consider the financial implications but underestimate the time and commitment required to build up relationships with prospective partners and to follow the project through to the final stages. Our joint venture guide (available as a PDF on the Trade Yorkshire site) outlines the stages of Identifying, Establishing and Managing Overseas Joint Ventures.

In the last year there has also been a significant amount of interest in India. Companies may have established an operation in China, or  realised it was not the right market for them or are just more comfortable going to India  where they speak English, use the English legal system, play cricket and where the British are still very well respected.

There is also interest in several countries in Central Europe, such as Poland, Hungary and the Czech Republic.

Romania and Bulgaria coming into the EU brings about new opportunities but for many companies these countries are not yet sufficiently developed in terms of infrastructure and may be seen as too high-risk. However, undoubtedly we will see and hear a lot more of Romania and Bulgaria in the next few years.

The USA is also another area of continuing interest and indeed the US is the UK’s biggest trading partner. A lot of companies want to have a US presence, which initially may be a representative office or a local engaged manager.

 Australia and South East Asia are other regions for FDI but there is surprisingly little interest in South America at the present time.

Which geographical markets are growing the fastest?

China has definitely been the fastest growing market in recent years. However, there is an increasing amount of interest in India which, if anything, based on the number of client contacts, is now exceeding China for interest from firms in our region as a destination for FDI.

Central Europe is also attracting a lot of interest, probably because it is easier to manage – for example flights are shorter and cheaper than travelling to countries outside of Europe. Markets in Central Europe may not offer the lowest perceived set up and operating cost, but overall in terms of time and money they can work out to be the best option, and a good board decision.

Are there any particular market entry strategies favoured in this sector (e.g. using an agent/ joint ventures etc)?

In many cases companies are already selling direct or have been dealing with an agent or distributor so some type of FDI can be the logical development. Companies may consider, for example, opening a branch office, setting up a local distribution company or undertaking a joint venture. They have possibly realised that whilst using an agent or distributor in the early market development was the right approach, to take business to the next level a local operation will be necessary, so are considering various other market entry strategies.

Are there any challenges/ milestones specific to this sector that companies would have to overcome in order to succeed in overseas markets?

There are many factors which can influence the success of an overseas joint venture and many steps in the process. The Yorkshire company should make the case for the project, select the right market and produce a business plan. After this it is about finding the right partner, finalising the structure, and drawing up a workable agreement. Does the partner have the right capabilities, the same agenda and are they are trustworthy? Companies should carry out due diligence on their prospective partner and after that it is a case of building up the relationship. Finally, who will be responsible and how will the operation be managed?

There can be many cultural issues and it is the people that will make the difference so recruitment and training are critical.

The senior management team need to be committed and plans should be implemented to monitor performance and ensure that the venture stays on track. 

Are there any key organisations/networks which could help people in this sector with planning their overseas trading?

In my role I aim to be the best networker so that if I do not have all the answers I know someone who does!  UKTI is a worldwide organisation and we can call on our commercial teams in all the major countries in the world.
We also have excellent relationship with partner organisations, intermediaries and the business schools at the major universities in the Yorkshire region so that we can offer any company interested in setting up overseas support tailored to their requirements.

Could you give us a brief indication of your background and experience in this sector?

I have enjoyed a successful career in export sales and marketing in the private sector. This has involved running a large export department and extensive travel overseas particularly in the Middle and Far East, Africa, and the USA.

Over 30 years I have developed new and existing business through direct sales or establishing local operations.

As I also run my own International Marketing Consultancy I have worked   independently with some private clients over the last few years, primarily on export development, market research, and running export training courses.
I am one of the key presenters on the Passport to Export course in Yorkshire and the Humber and present masterclasses including Managing Agents and Distributors and Financial Risk.

I am also an Associate Lecturer in International Business and Marketing at Hallam University, Sheffield.

In what ways can you assist Yorkshire and Humber companies in this sector?

A large part of what I do is going into companies to discuss what the senior team want to achieve. We can then discuss the available options and the suitability of different strategies. Basically, the service I provide is tailored to each individual company, because every company is different and has different needs and goals.

The best thing I can do for companies throughout the region is to be a good listener and respond to them in whichever way is appropriate. This could involve recommending a UKTI programme, putting them in contact with another company that has been through the same experience, and/or referring them to one of the many partner organisations we work with for specific assistance and advice (legal, financial etc).

We should be responding to the need of the organisation and offering the assistance that is appropriate for the company at that particular stage in their overseas venture.

Any other points of interest?

For anyone who manages to read to the end of this interview I would have liked to have been a Rock drummer in another life.

But it’s never too late!