Five first steps: what factors affect the operational activities of a forwarding company and economic indicators.
In the modern logistics business environment, global expansion is an important step for many companies seeking to expand their markets and increase profits. However, entering international markets requires detailed consideration of many factors that affect both the operational activities of a forwarding company and its economic indicators. Evgeny Marinov, director and owner of Air Cargo Lines LLC, spoke about these factors and their impact specifically for Mind.
How to find a country for expansion?
At the time of entering the marketIn Bulgaria – it was 2020 – Air Cargo Lines was already four years old, and it had eight employees. The company’s focus was on air cargo transportation of general, perishable and special cargo. The latter refers to, for example, pets. Another area of work was sea freight transportation (LCL and FCL).
The company was faced with the task of finding a country for expansion, since doing business exclusively from Ukraine meant limiting its own commercial capacity. First, it was necessary to choose a country according to certain criteria:
• fast process of company legalization;
• simple process of personal legalization;
• fairly low taxation;
• similarity of mentalities;
• access to the sea;
• preferably – membership in the EU.
After conducting research, it was decided to stop at Bulgaria. The victory of this country was also facilitated by a logistically important factor – its geographical location. The country is located at the crossroads of major transport corridors between Europe, Asia and the Middle East. All of the above makes the country an important hub for transit transportation, a convenient place to conduct legal business and an attractive investment location. The task of expanding to Bulgaria involved preparatory work and the first steps, which are discussed below.
Step One. Market Analysis, Its Features and Needs
At the start of any expansion, there should be a detailed analysis of the market to be entered. When opening a company in Bulgaria, I started by assessing consumer demand, local infrastructure, existing competitors, legislative requirements and logistics features in the country.
All this helped to assess the prospects for business development in a new country, and determine what type of transport to focus on, what products can be transported and which business sector to serve. It also made it possible to understand what legislative and customs restrictions would have to be taken into account at the beginning and in the process of work.
Step Two. Choosing and interacting with local partners
Entering the international market may require cooperation with local logistics, brokerage and forwarding companies. Such a decision is required by the specifics of the local infrastructure or the peculiarities of the legislation. From my experience, I can assure you that the right choice of partners will allow you to:
• ensure compliance with local legislative requirements and standards;
• meet the requirements of carriers (airlines and sea/container lines). This also applies to customs operations (import/export);
• have efficient logistics operations, especially if the company is just starting its activities in a new market;
• minimize the risks associated with cultural and legal barriers.
Step Three. Customs procedures and their subtleties
International cargo transportation is about complying with many customs requirements and regulations. Errors in this process can lead to delays in deliveries, additional costs - and even confiscation of goods. Using my own experience, I can highlight the following criteria that will help avoid such undesirable consequences:
1. Study and adjust customs clearance processes in accordance with the requirements of the country. Another option (see point 2) is to find a strong partner who can effectively close this issue;
2. Monitor changes in international trade agreements, customs tariffs and regulations.
Step Four. Development of transport routes
It is important to choose the optimal transport routes for delivering goods to a new market. Depending on the geographical location, as well as market analysis, you need to choose between sea, air or land transportation. For each route, it is important to:
• assess the cost, speed of delivery and what the unique selling proposition of your service may be, which will make it competitive;
• take into account the peculiarities of transportation across borders. For example, different customs procedures or restrictions on the import of certain goods;
• use technologies for real-time cargo tracking and ensuring transparency at each stage.
Step Five. Warehouse network development
To ensure the effective operation of the logistics network, it is necessary to rent warehouses in strategically important regions. What does this give?
1. Reduction of the time for delivering goods to the end consumer.
2. Reduction of costs for transportation and processing of goods, especially if the warehouse is located close to transport hubs such as an airport or seaport.
3. And, of course, additional income from warehouse services that you can provide to other forwarders.
Building a logistics network for global expansion is a complex process that requires a strategic approach, technological support and a deep understanding of market realities. It is necessary to take into account both local market characteristics and global trends in logistics to ensure stable operation and competitive advantages at the international level.