Conventional wisdom has it that when your currency is weak, it's a better time to begin or expand an export business. And to a certain and very real extent that's true. But is a strong currency a roadblock to export success? I hardly think so.
Now's the time for UK and European companies to step up US marketing.
Since most UK and European brands enjoy an "assumption of superiority," now is the time to enter or expand your presence in the US market. The higher prices you'll be forced to sell at can be justified (if within the realm of reason) by brand attributes -- that is, by marketing. If you can make the business profitable when the US Dollar is at its weakest, imagine what the profits back home will look like when (as is inevitable) the Dollar regains some ground in currency markets.
In addition to the future benefits, let's examine the here and now. When you spend marketing dollars today, they're relatively inexpensive. So, you can afford to imbue your brand with premium attributes (via packaging, advertising, promotion, PR, etc.). Your personnel and distribution costs are likewise less when converted to your home currency. With the exception of the landed costs of goods sold, almost everything else is cheaper when reported to the home office. All that's needed is to convince the American consumer that your brand is worth a little bit more (that's where we come in).
The export case is better for some US companies, too.
Here's where the reverse story isn't quite as appealing...but read on. Since the US dollar is worth less, you can afford to sell your product for less in local currency and achieve desired margins. Or, you can do like your UK and European brethren and maintain (or establish) a premium price point for your imported goods. In the UK and Europe, there's also a certain caché to imports. US brands remain aspirational. Levi's jeans command a premium. McDonald's is still something of a treat (and not just by children). IBM and Dell computers are tops. And of course, there's the iPod.
While you'll be spending more to do everything in the UK and Europe, if you build a pricing structure that is geared toward a premium brand position, these expenses will be tolerable -- and when the Dollar strengthens, the resulting decline in margin will be offset by lower effective costs to do business overseas.
Now, don't you feel like dusting off those expansion plans?
The opposing point of view.
Obviously this isn't advice that everyone can follow. If you're in a commodity business and/or can't (afford to) build the trappings of a premium brand, then this strategy isn't for you. Commodity or least-cost providers with only a local source of supply have a difficult time exporting when currencies work against them. Here's where global sourcing might work to your benefit. If you develop a source of supply outside your home market when your currency is strong, you can build greater profits into your current fiscal year while insulating yourself in the future from rising costs at home.
Comments