The current changes to the global travel industry will have a major and potentially ongoing impact on a company’s trade with global B2B and B2C buyers, as well as with foreign suppliers.
Today’s travel industry is almost unrecognisable. By mid-April it was reported that two thirds of worldwide aircraft had been grounded as a result of the rapidly spreading coronavirus pandemic. Borders have been shut and countries are applying 14-day compulsory quarantine if people visit these countries.
In addition, businesses are also being faced with air freight costs which are reaching ‘abnormal highs’ as a natural consequence of fewer commercial flights significantly reducing capacity. “The price is three times higher – at least - because there is just no capacity,” says Refael Elbaz, CEO of freight forwarding service Unicargo.
What impact will these have on businesses, and how can they continue to maintain valuable international collaborations in a travel-free business landscape?
Under normal circumstances, businesses will typically see multiple benefits to selling overseas. These benefits include increased revenue, an ability to balance seasonal demand, and a brand awareness boost at international level. Under the ‘new normal’ circumstances businesses are finding themselves operating under today, there are even greater advantages. The low Pound value makes British products attractive to overseas buyers, and by geographically diversifying sales, businesses can work to mitigate the risk of dependence on the home market, and on fragile economies.
However, demand in key overseas markets may be lower than in 2019, at least for a while. This may be caused by a shift in customer behaviour and exertion of greater levels of caution as a result of pay cuts, lost jobs and future uncertainties. So is overseas sales an area that businesses should really be continuing to invest in throughout 2020 despite the shipping and travel hurdles?
Yes. However, it’s vital to address key challenges early on in order to generate optimal ROI.
Website analytics, the use of tools such as Google Trends, and a willingness to not just speak to customers but actually listen to what they are saying are effective and efficient ways to monitor demand from overseas buyers and, most importantly, to adapt in order to meet their current needs. Strategy will be key here, especially as resources - financial and human - may be limited. Businesses should be prioritising value proposition to appeal to the right global audience.
Overseas Supply Chains
As many organisations have come to understand, it can sometimes be more cost effective to manufacture products abroad, or obtain necessary components for manufacturing from international suppliers. In fact, more than half of businesses surveyed in a manufacturing trends study noted cost savings of upwards of 20% when doing just that.
Interestingly, it’s not just countries with low labour costs such as India and China that are proving to be attractive to British businesses today. An increasing number of organisations have been demonstrating interest in EU suppliers. With increasing digitisation, nearshore locations seem better equipped for some types of processes that require close cultural alignment with Western Europe.
With reduced travel and increased freight costs, obtaining parts or fully manufactured products from overseas suppliers is an area that is highly likely to be impacted as a result of the COVID-19 outbreak. Other challenges on the horizon include:
- Increased demand for operational suppliers to fill the gap created by closures. 17% of businesses have reported having to find substitute suppliers or materials during the Coronavirus pandemic, which could drive labour prices upwards.
- Reduced availability of raw materials. If a direct supplier is not a problem, their supplier could be. The supplier’s supplier is being cited as the international supply chain’s weak link during the COVID-19 outbreak, which is something to consider.
- The financial situation of suppliers. More than 80% of global businesses are understood to be at risk of closure if lockdown situations last for more than five months. The future of manufacturers and suppliers should be taken into account.
These are all real concerns for businesses utilising international supply chains. However, there are numerous ways of acknowledging and addressing these concerns and developing a strategy that minimises risk.
One effective technique is to conduct due diligence on potential suppliers – this should include their financial situation, certificate checks and expertise. Developing strategies which take into consideration the location of a supplier in terms of transport time and costs under travel restrictions is also important. Another approach to mitigate risk is to look into diversifying the supply chain to reduce reliance on single suppliers.
There are many possible benefits to taking measures to maintain international supply chains at this time, such as boosting the security of the supply to ensure continued customer satisfaction, and new opportunities to listen and adapt to evolving customer needs, such as switching to suppliers with strong environmentally friendly policies.
The Need to Embrace Technology
Regardless of whether international collaboration is being considered from an overseas sales perspective or from an overseas supply chain perspective, there is one vital behaviour that is needed to ensure continuity with foreign businesses and buyers in times of travel restrictions. That is the need to embrace technology to maintain valuable connections and relationships during times of travel restrictions. How can businesses embrace tech? By building the right partnerships.
Software solutions such as Teams, Zoom, B2Match and Skype can be used to seal new contracts with overseas suppliers, as well as conduct meetings online with potential buyers. They can even be used to engage with global audiences to keep them satisfied and informed during times of uncertainty. These tools are key aspects within any good communications strategy.
It’s also important not to overlook the use of beneficial commercial partnerships for aspects beyond just communication. Collaboration with companies on the ground can assist in many ways – from sourcing new products, engaging with local audience or quality control of products being developed overseas. With a video conference call for example, you could quite easily have a local partner checking parts or products, while you monitor via your smartphone or tablet.
The right partner can also assist with vital research into new markets and suppliers too- with innovation being cited as critical to helping businesses not only survive, but thrive under the new normal, this is of particular importance. Our extensive network of international partners can ensure continuation of international trade, even without travel and funding may also be available to support international research.
“Technology is going to be the enabling technology that will keep trade shows and conferences going for some time”, says Rodolphe Soulard, Team Leader at Enterprise Europe Network North West. “With social distancing rendering many business events cancelled, seminars, exhibitions and even brokerage events such as “Care & Industry together against CORONA “ are going online. Thanks to the power of the Internet and connected technologies, businesspeople and individuals can participate from your home location, no boarding pass required.”