A master’s thesis study revealed the importance of foreign visits in achieving export success

14.10.2019

Globalization of the world economy is entering a new phase. While some time ago, it seemed like digital technologies are opening the way for a global world and have come to stay, now the trend is being overshadowed by anti-globalism messages. In this turbulence of change, where negotiated agreements are reviewed and reasons for change are sought, personal relationships and the ability to successfully negotiate trade agreements play an important role.

In order to survive in international competition, countries have a natural desire to support their enterprises to help them grow their exports and thus the national economy as a whole. High-level foreign visits are an important tool in developing business diplomacy.

High-level foreign visits are organized to develop trade relations, bring in investment and support the export of enterprises. During such visits, a business delegation consisting of entrepreneurs will accompany the High Representative (President, Prime Minister, Minister or Deputy Secretary General). Between 2014 and 2018, Estonians had 74 high-level foreign visits to 55 countries, most visits were to Japan (6 visits), followed by the United States and Finland (4), China (3), twice to Benin, Israel, Malaysia, Sweden and Singapore,

according to “The role of trade missions in supporting exporters for the years 2014 - 2018”, a Master's thesis defended this spring by Sigrit Tiits, a graduate student at TalTech School of Business and Governance. The survey, carried out as part of the Master's thesis, asked nearly 100 entrepreneurs what they consider important in participating in foreign visits as a member of a business delegation. The responses showed that entrepreneurs attach great importance to setting specific goals before the visit and expect more strategic action from the state both before and after the visit.

Enterprises set different goals for participating in foreign visits - some want to better understand the market potential and assess the potential risks, while others are looking for investors or already selling a product tailored to a specific foreign market. One conclusion to be drawn is that companies with a longer experience in export carry out more in-depth preparatory activities before their visits, while others neglect to do the groundwork, although they understand it’s importance.

The main reasons for participating in foreign visits are:

  • Finding new contacts. The quality of the contacts made during these visits is deemed higher.
  • Developing a more personal connection with existing contacts. By participating in the high-level visit as a member of the business delegation the local partner has more confidence that the Estonian partner is a reliable and valued enterprise.
  • Selling a product or service. Foreign visits speed up the process of entering the target market.
  • Gathering primary information. Meetings with different authorities and the widest possible range of partners will help improve enterprises’ understanding of the risks, regulations and suitability of the target market.
  • Assessment of the competitive situation. Meeting with a foreign partner during a visit provides quick feedback on the ideas being offered and help avoid misunderstandings.
  • Securing their market position in the target market. Visiting partners during a visit with High Representatives enhances the reputation and credibility of an enterprise.
  • Involving new investments. During the visits, Estonian entrepreneurs have found both investors and partners for product development.

The study also mapped the process of organizing high-level foreign visits - with an average of two months' notice in advance, entrepreneurs actually wish to be informed of upcoming visits at least five months in advance, and the best solution would be being aware of future foreign visits up to a year earlier. The longer the notice period, the more important it is for enterprises with less export experience.

Most of the interviewed entrepreneurs saw the value of participating in trade missions as an opportunity to increase their credibility in the target country, and agreed that a high public official has helped open otherwise closed doors. More than half of the respondents agreed that trade missions have helped  them increase export volume and being apart of the business delegation helps reduce the risk of failure in the target market. These very high estimates indicate that the value created by participating in a high level foreign visit delegation may not always be reflected in the financial analysis of the enterprise.

Participation in a business delegation is open for both up-and-coming exporters with few employees as well as for long-standing market leaders. The enterprise has to cover its own travel expenses, but the costs of the on-site programme, transportation and organising meetings are covered by the host. All foreign visits open to business delegations are listed on visiidid.ee, where entrepreneurs can also list the destination countries they are interested in.

X