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    Time for Strategic Planning

     

     
     
    International Trade Forum - Issue 1-2/2008

    While the world economy is slowing down, exporters from developing countries should be positioning themselves for the recovery and a boost in ethical trade.

    People around the world are waking up to a new economic reality and asking themselves what impact the economic maelstrom will have on ethical trade, developing nations and consumer conscience. The most practical exporters should also be asking what strategies they should use to survive or even benefit from the crisis.

    The first suggestion is, don't panic. In many respects the crisis is near bottom. We are not entering a 10-year global recession, and governments have demonstrated that they will do whatever it takes to get spending moving again. While the global economy will not recover as quickly as it unwound, the same interconnectivity that caused the rapid collapse will bring about its regrowth. Greed will return and to some extent it will be good. It will replace fear and once economies stabilize, investments will resurface and consumers will follow.

    If you can't find the ethical consumer, it's not because they've disappeared; they are just shopping elsewhere. Chase them. Consumers in the largest markets have pulled back on broad spending, spending instead at discount retailers and in smaller amounts. They haven't lost their desire for ethical products, just the means to pay for them. Ethical shoppers may be flocking to mass discount retailers, but those same retailers want ways to cost-effectively meet their consumer conscience and this could effectively help to mainstream ethical trade.

    However, to do business with mainstream retailers and get more favourable terms, you must proactively go to them rather than wait for them to come to you. If this sounds too expensive, hire someone on commission or team up with another supplier to co-fund.

    It's a good time to invest in capacity building - consider grants and pro bono contributions. As research by Ethisphere Institute (http://www.ethisphere.com/) indicates, once premium prices begin to exceed 3% over comparable non-ethical products, the ability to capture market share begins to erode. Naturally this correlation is even stronger in a weak economic enviroment. However, through building production economies of scale, migrating up the production value chain and taking advantage of the strong dollar, a savvy exporter can gain share.

    While respected groups such as ITC are one avenue for partnerships, an enormous and largely untapped resource is the philanthropic sector in the developed world, which includes many organizations that would provide grants to support ethical trade. A quick search of contractors on a website such as www.elance.com turns up hundreds of professional grant writers, many of whom will identity funding organizations and write grants for less than $20 an hour.

    Going to lobbyist and public relations firms and asking for pro bono (free) support is another option. With the economic slowdown, many such firms have idle time that they might be willing to apply to your ethical trading cause.

    Pick the ethical angle and flaunt it. When large retailers raise the ethical standards required of suppliers, companies that have already invested in ethical production will have a head start. That said, a supplier cannot be all things to all people, so choose which issues you want to tackle first (e.g. carbon-neutrality, worker welfare, animal testing) in a method called 'measured measures'.

    © Giles Kershaw

    Each issue has a separate cost and return on investment; knowing what those are leads to sensible, sustainable choices. Putting your message out on the Internet and showing great transparency will help cut through the clatter. Trying to do all things at once could easily send a company bankrupt.

    Take a fresh look at the United States market. Many ethical trading initiatives focus on the EU, and the United Kingdom in particular, while overlooking the $13 trillion market in the United States. Not only are American consumers interested in ethical trade but, with the more than 30% drop of many global currencies against the US dollar, exporters' products are more attractive.

    Safety is a good seller. One of the most dominant themes to emerge in consumer products is safety (or lack thereof). Harmful, even fatal, chemicals and contaminants have turned up in the EU and the United States in products ranging from pet food to infant formula. Companies are therefore increasingly looking to partner with ethical suppliers to ensure a less risky supply chain.

    If your company has tight safety standards and a strong safety record, this is worth bragging about as safety continues to sell well in a troubled economic environment. What's more, it will be kept in the consumer conscience post-recovery by the inevitable continued failures of others.

    If you are selling an ethically produced and traded product, you need to identify your consumer and pitch them your story. Ethical consumers are self-selecting and want to emotionally self-identify with the products they're purchasing. Once they are comfortable with a product's efficacy, the more they can enjoy the perceived good that comes from their spending power, and the more likely they are to spend. This is arguably even more important in a troubled economy. So whatever the story is that makes your product interesting, unique and ethical yet effective - use it.

    And finally, while pursuing the preceding seven points, remain merciless on costs. While economic downturns can be a good time to strategically invest to capture competitive advantage, don't be foolhardy. Renegotiating contracts with your sub-suppliers is fair game, and engaging employees in the importance of keeping costs down can pay dividends.

    The end is nigh! Not the end of the world, but the end of this economic crisis. Smart exporters take steps now to prepare for it.

    How to ride out the storm

    • Don't panic
    • Chase the ethical customers
    • Build capacity - consider grants and pro bono expertise
    • Pick your angle and flaunt it
    • Take a fresh look at the United States market
    • Safety is a good seller
    • Know your market and hone your story
    • Remain merciless on costs