North East Chamber of CommerceProgramme Review

2013 - 2015

Introduction from Nynzi Maung

Welcome to the Access Programme brochure, celebrating two years of assisting over 100 NorthEast businesses access exporting success!

It’s been an exciting two years managing the NECC’sAccess Programme; and we are proud that our efforts have assisted so many North East companieseither take their first steps to explore or expandtheir existing business in these three dynamic, diverse, challenging and ultimately, very rewardingmarkets – Brazil, Russia and India.

We have worked with and supported over 100companies over the last two years, and it would taketoo long to recount all their stories; but we’d like toshare with you a number of case studies – that wefeel highlight the many common experiences ofworking in Brazil, Russia and India. In addition, inthis publication, we’re including a number of insight

articles we penned outlining the challenges, pitfalls

and top tips to avoid the mistakes of others.

We’ve also summarised highlights from a number

of our events and market visits; and have included

some of the many interesting and useful tweets

on export news and events featured in our three

social media Twitter feeds @accessNEIndia,

@accessNEBrazil and @accessNERussia.

I hope you enjoy looking back on the Access

Programme’s successes to date as much as I have.

Nynzi Maung

International Markets Development Executive,

North East Chamber of Commerce

Contents

Page 2 Introduction from Nynzi Maung

Page 4 Q and A

Page 6-7 Market Analysis

Page 8-9 News and images from workshops, seminars and market visits!

Page 10-11 Reflections on two years

Page 12-13 Access the Conversation

Page 14-15 Case Study: British Engines

Page 16-17 Case Study: Ecco Finishing

Page 18-19 Case Study: Issis Flooring

Page 20-21 I’m British - relationships are for foreigners

Page 22 Taxing the mind in India

Page 23 Go where the growth is in Brazil

Page 24 Shy bairns get nowt

Page 25 North East Companies who have participated in the Access Programme:

SME export statistics

• Only one in five SME’s export, but those that do are 11% more likely to survive.

• 95% of the world’s purchasing power is outside of the UK.

• Due to the width and breadth of global markets, exporters are less likely to be affected by local fluctuations.

• Within two years of exporting, UK businesses could experience on average growth of 30% or more.

• 31% of UK businesses who export employmore and more people in Britain, producingmore than 300,000 jobs across the country.

• The majority of SME exporters (78%) believe 2015 will be a better year for exporting than 2014 was.

Winning the global export race is a jointeffort – when will you sign up?

SOURCES:https://www.youtube.com/watch?v=8dp7QuNXHSo

http://www.telegraph.co.uk/sponsored/business/sme-home/11294809/tips-growing-company.html?utm_content=bufferd9f6e&utm_medium=social&utm_source=twitter.com&utm_campaign=buffer

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What’s your role on the NECC Access Programme?My role has been to provide practical support toNorth East companies wishing to fully exploit thetrading opportunities in these three markets.

Who are you targeting with the Programme? TheERDF funded Access Programme has two targetgroups; those who are experienced exporters andup to now haven’t attempted to penetrate thesemarkets, and secondly those already trading butwho are looking to expand their presence there tothe next stage.

A key objective of mine is to draw attention tothese fast growing economies, highlight the opportunities across a wide range of sectorsalongside a high demand for quality services andproducts. They all have a strong growing domesticconsumption and, great news, they are all very receptive to British expertise, services and products.

What are the common misperceptions aboutthese markets? There is a tendency to perceivethese markets as being ‘too difficult’; but everymarket has its challenges. True, they are not formaking a ‘quick buck’, but they cannot be ignored.Any North East company trading internationally,with a long-term strategy for continued growthand well-spread international customer base, willneed to consider either one or all of these markets.As with any market entry decision, it needs to bebased on good research and a balanced riskanalysis against a sound understanding of themarket’s long-term growth potential.

In a nutshell, what support is available to NorthEast companies, via the Access Programme? TheAccess Programme aims to support companies

with this process, by providing sources for up-to-date intelligence on market opportunities andbalanced information on the risks and challengesof trading. This has been achieved through a seriesof seminars and market visits over the past twoyears, focussing on tangible market opportunities,potential market entry options and technical issuessuch as certification, standards and taxation. We arecontinuing to work with a wide range of organisationsregionally, nationally and internationally, to ensurewe tap into the most up-to-date market and sector expertise.

We also have a Market Development Grant whichcan provide funding for North East companies to‘buy-in’ additional consultancy support to facilitatetheir market entry development, by providing financial assistance to appoint a qualified exportprofessional with hands on experience to assistwith future growth. The Grant is available to companies who are already experienced exporters, but either lack internal resources to develop in these markets, or are in the earlystages of business and as yet are unable to employ the skills of an export professional in theirarea of expertise.

Q&A with Nynzi Maung, Access Programme Manager and InternationalMarket Development ExecutiveAutumn of 2013 witnessed the launch of our innovative Access Programme, designed to help NorthEast companies develop or initiate a market presence specifically in the three expanding markets ofBrazil, India and Russia.

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Market analysis - Why Brazil, India or Russia?

Why Brazil?

Jaime Gornsztejn, Chairman of the Board at BrazilianChamber of Commerce

“There is every reason for North East businesses tolook to Brazil to export, not only is it Latin America’slargest market, Brazil is also the world’s sixth largesteconomy in GDP terms and the world’s fifth most populous country, so needless to say the opportunities are vast – much like the country itself.

With a well-developed regulatory framework andpipeline of opportunities, private sector participationis on the up. The North and Northeast of Brazilcombined is the fastest growing consumer marketin the country, expected to almost triple in size between 2010 and 2020. There are opportunitiesin shipbuilding and supply chain; oil and gas; publictransport and urban mobility – metro and rail; andalternative energy matrix as well as high demandfor quality infrastructure. Sports and major eventsare particularly high on the economic agenda.”

Why India?

Richard Heald, CEO of UK India Business Council

“Over the last two years, the Indian economy hasgrown at an incredible six percent, creating exporting and investment opportunities for UKbusinesses across a range of sectors.

There are three drivers of this growth: emergingsectors, emerging consumers and emerging regions. India is not just about IT and it is certainlynot about call centres. There are tremendous developments happening in sectors where the UKexcels; infrastructure and urban development;skills and education; advanced manufacturing; lifesciences and healthcare digital technology; andretail, lifestyle and logistics. This last of the emergingsectors, leads me on to the emerging Indian consumer. The CEOs of Indian supermarkets saythat UK food and drink products fly off their shelves.The problem isn’t one of demand. It is of supply.British brands are also succeeding in India: Burberry,Superdry, Thomas Pink, The Body Shop, the EarlyLearning Centre, Mothercare, Lush. I could go on.

The third drive of India’s growth is the dynamism in itsemerging cities and States. India is not one country– it is 28 States – and it is not just about Mumbai,New Delhi and Bangalore. There are smaller cities,like Pune, Ahmedabad, and Coimbatore that aregrowing at double digits.”

Why Russia?

Trevor Barton,

Executive Director of the

Russ-British Chamber

of Commerce

“The last 15 months or so have clearly presented

considerable challenges to companies and

organisations involved in business between the

UK and Russia, what with political tensions over

Ukraine, sanctions, the effect of the drop in the oil

price on the Russian economy and a falling rouble.

Also, a lack of predictability as to what things will

look like in one month, let alone a year is off-putting

to potential investors into the Russian market. But

the fundamentals of Russia, which made it the

UK’s fastest-growing export market a few years ago,

have not gone away. If sanctions do not impact on a

UK company’s products and the buyer is not in some

way sanctioned, Russia is still a very interesting

and potentially profitable market thanks to its size,

extensive industrial base, ambition to develop its

infrastructure, aspirational middle class with an

appetite for quality products and a genuine fondness

for the ‘British Brand’.

There are a number of projects in Russia that offer

particular opportunities to UK companies – and

will be snapped up by companies from other

countries if UK companies do not investigate them.

Examples are road, rail and logistics projects, the

development of hi-tech clusters, and the staging

of the 2018 Football World Cup in various cities

around Russia. There have always been many

preconceptions and myths about doing business

in Russia and with the Russians. The truth is that

it is a challenging market, but companies that

invest sufficiently in research, planning and getting

to know the country rarely face difficulties any

worse than in other developing markets, and

those that do develop their business there tend

not to walk away from it.”

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A route to Russia: 30 October 2013

Russo British Chamber and Commerce ExecutiveDirector, Trevor Barton expanded on the excitingopportunities in Russia balanced by a cool assessment of the challenges. And Albion Overseasclarified the complex issues regarding certification.

Selling to India: 3rd March 2015

With the new Modi government there’s a committeddrive to improve ease of doing business in India;within this context UKIBC’s Bangalore Director – ArunNarayan outlined market opportunities in the IT, lifesciences and manufacturing sectors; the importanceof looking beyond Mumbai; and market entry strategy options.

Brazil: Joint ventures & preparing for success:30th January 2014

A panel of expert practitioners from Europe andBrazil provided companies with options on effectivelyentering Brazil via joint ventures; assisting them tothink through the benefits, the challenges and pitfalls;how to overcome them and how to maximize theopportunities offered by this substantial dynamicand growing market.

Russia: Getting ahead of the competition. 21st November 2014

Rufina Baybulatova of UK Embassy in Moscow explained how NE companies can maximize on thegood reputation British brands have in Russia; howthey can stand out from the crowd with minor tailoringfor marketing material for the Russian market, andhow to avoid mistakes which can hinder their marketentry potential.

India: Opportunities in advanced engineering &manufacturing: 18th March 2014

This seminar focused on the automotive, defenceand aerospace sectors, with senior expert, DeveanGeorge from PwC highlighting the considerable opportunities in these sectors for NE companies.

News & images from workshops,seminars and market visits!

Getting the most out of your business in Brazil,Russia India & China. 1st May 2014

This half-day one stop shop event provided NorthEast exporters with the unique opportunity to consult a host of national and NE experts on a widerange of exporting issues such as protecting IP;finding a partner; market entry strategies; taxation;financing exports and customs requirements.

Brazil: Market entry strategies – lessons learnt:5th February 2015

Gareth Moore, HM Consul Recife – Brazil updatedNE companies on the opportunities in Brazil postthe re-election of Dilma Rousseff. Two very differentNE companies - Spearhead Interactive and IssissFlooring emphasized lessons learnt whilst developingbusiness in this potentially most lucrative, butchallenging of markets.

Market Visit to Brazil: 24th-28th November 2014

Brazil is a challenging market for even the mostexperienced exporter. This two centre market visit(Sao Paulo and Rio de Janeiro) was designed toenable NE exporters make the most of their oneweek stay; with pre-visit support (research & advice)and networking and briefing opportunities withUKTI in Sao Paulo and Rio.

Market Visit to Russia: 7th -14th April 2014

Focussed on Moscow and St Petersburg, thismarket visit was designed to provide NE companieswith flexibility and options to pursue their businessopportunities whilst part of an official UK group receiving support from UKTI in Moscow and St Petersburg.

Market Visit to India: 6th-11th October 2014

This market visit was aimed to maximise time inIndia with a two city-centre (Bangalore & NewDelhi) itineraries including B2B meetings with potential Indian buyers/agents; visits to UK companies based in India (learning from thosewho’ve done it); participation at the British BusinessGroup Convention and briefings, workshops andseminars about doing business in India.

Selling to India: What, where & how? 30th July 2014

Steve Toogood, UKIBC North West Director, outlinedthe considerable opportunities for NE companiesin India; highlighting the regional centres of sectorexcellence; and the key issues to take into consideration when choosing an Indian partner.

UKIBC Seminar in New Dehli

HM Consul Rio

India Market Visit with Patricia Hewlett

Alnwick Castle, St PetersburgAbove: Alnwick Castle, St Petersburg

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Nynzi Maung, International Markets Development Executive and Access Programme project manager,met with hundreds of companies, country and sector specialists during her two years at the forefront of helping North East exporters develop their business in Brazil, Russia and India. Hereshe offers her perspective on the experience of promoting the three markets and some of the prejudices, myths and assumptions she encountered.

Two positive things struck me when I first startedworking on this programme; the first was how welcoming all the countries are to British companiesand their products or services; and the second,how many North East companies are already successfully selling to these markets.

The majority of my effort has been to highlight thevast array of opportunities available; but at thesame time the Access Programme has workedhard to address and dispel prejudices and falseassumptions that some companies have which arepreventing them from even looking at these markets.

Myth 1 – Brazil, Russia and India aren’t interestedin NE products

All three markets are very much open for business,they do not have any particular prejudice againstBritish goods or services. Indeed, in certain sectors – ‘made in Britain’ is a badge of qualityand is desirable.

Assumption 1 – Brazil, Russia and India are toodifficult for North East companies to sell to

Over the last two years I’ve been very pleasantlysurprised to meet so many North East businesseswho are interested in selling to these markets andalso those who are seeking to expand their existingbusiness through significant investment in facilities;partnerships or the establishment of a new business.The North East does have products and serviceswhich compete globally on quality and price. Manycompanies understand this and have been investingin their capacity, expertise and drive to tackle andservice these markets. They also understand thatthese are three huge markets, which cannot andshould not be ignored – and need to be part of anycompany’s long-term strategic global sales plan.

Prejudice 1 – Rife with corruption; chaotic business environment; cheap & unsophisticated

As in anywhere in the world (including the UK) we’llencounter corruption; but many NE companies Ihave spoken to have successfully and happily soldto all three markets and not had any problemswith bribery and corruption. Doing business inRussia, Brazil and India is different and they mayseem to be disorganised and lax but – don’t befooled – they are just as professional and serious.And they expect their British suppliers to be thattoo. Experienced and attuned exporters learn tolook beyond the superficial and appreciate, respectand work within that business culture to great effectand success. These are emerging economies thatare experiencing on-going growth. Their Increasingindustrialisation demands more sophisticatedtechnology and an ever expanding middle class

2013-2015 Events Programme

27th September 2013 Access India

30th October 2013 Doing Business in Russia & Gost Certification

30th January 2014 Brazil Joint Ventures, preparing for much success

1st -8th March 2014India Market Visit taking in Mumbai, Bangalore & Pune

18th March 2014Opportunities in Advanced Engineering andManufacturing - Routes to Market

7th-14th April 2014Russian Market Visit taking in Moscow & St Petersburg

1st May 2014BRIC Event

7th July 2014Will my product sell in Russia?

10th July 2014Getting to grips with Brazil

30th July 2014Selling into India what, where & how?

6th-11th October 2014India Market Visit taking in Bangalore & New Delhi

11th November 2014Your business export strategy - Fact or Fiction?

12th November 2014De-Risking your export finances

21st November 2014Selling into Russia - How to get ahead of the game

24th-28th November 2014Brazil Market Visit taking in Sao Paulo & Rio

5th February 2015Brazil: How to get ahead of the competition

3rd March 2015Selling to India

Reflections on two yearswith a growing appetite and disposable incomemeans that NE exporters can no longer fall backon trying to offload cheap or technologically redundant products.

Much has happened in all three countries in thelast two years. India has seen the election of MrModi, with high expectations that his administrationwill be able to replicate the successful economicturn-around of his own home-state to the rest ofthe country. A major task – but both Indians andBritish exporters remain hopeful that ease ofdoing business in India will improve. Brazilproudly demonstrated to the world that it wasable to rise to the occasion and successfullyhosted the 2014 World Cup. Preparations for theRio 2016 Olympics are in full-swing now and toensure their success Brazilians are looking everincreasingly overseas to suppliers to find solutionsas deadlines loom.

Recent events in the Crimea and the Ukraine,along with the effects of sanctions and the dropin the price of oil have had a detrimental impacton the Russian economy and buying power.However, it still remains a vast market and thiscould be exactly the right time for North East exporters to explore Russia more closely, whilstthe competition are distracted elsewhere. Commitment now to the Russian market in suchdifficult times will be rewarded in the long-runwith loyalty from your Russian clients.

So to conclude with one last observation; North East companies who are exporting and specifically exporting to any of these marketssuccessfully are more likely to be robust, innovative,a global player and sustainable in the long-term.Exporting to Brazil, Russia and India is indeedgood for business.

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Access the conversation

The world is a social place, and we share export news, advice and event informationacross all three of our Access NE Twitter handles: @accessNErussia, @accessNEindiaand @accessNEbrazil. Come and join theglobal conversation.

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Investing in India: long-term approach to success

British Engines is a privately owned engineeringcompany formed in 1922 with headquartersbased in Newcastle upon Tyne. The British Engines group owns six product businessesworking mainly in the energy and constructionsectors. With a turnover of over £150 million,the company currently employs 1,200 peopleboth in the UK and abroad.

Specialising in the design, manufacture and distribution of core industrial components withinfactories across the North East, British Enginescounts a number of the major international oil andgas companies amongst some of its customers,and currently exports 75% of its sales to marketssuch as Europe, North America, Middle East, Singapore, China, Australia, and South America.

Here Group Director, Ron Dodd, who has beenwith the business since the 1950s, explains thecompany’s journey into India so far:

Why India?

Ron said: “Our relationship with India officiallybegan in 2001. British Engines was already tradingthere, however there was a requirement to implementlocal content; which is a common theme in a number

of countries around the world. As the country’stechnology continues to grow it is seeking consis-tently higher locally supplied products, whichspelled out a real opportunity for us.

Ron continues: “India is a country of extremes – wehad some initial perceptions when we originallyvisited, however the India we know today is verydifferent. A combination of modernisation, technologyadvances, improved infrastructure and governmentlegislation has seen the country transform itself in18 years.

“Our initial exploratory visit to India took place in1995, when we made the strategic decision to finda business partner there. This process took time – five years in total. We toured the country onthree separate occasions looking for the right part-ner, but, however the difficulty of sourcing the rightlocation and land purchase issues meant it wasn’tuntil 2000 that we returned to finally set up ourmanufacturing facility in Bangalore, so the processwas by no means a quick one.”

Case study: British Engines

Today the Indian operation employs staff who areall native to India, at its Bangalore factory – BritishEngines India Pvt Ltd. India’s growing hydraulicmarket means the company will be looking to startselling hydraulic motors to the local market.

In terms of first hand advice for North East businessesinterested in developing a market presence withIndia, Ron said: “If I could give just one piece ofadvice to anyone keen on forming a relationshipwith India, it would be prepare to invest in yourpeople. Be it with skills or equipment, understandingat the outset that you will need to invest time andmoney in teaching them your company’s ‘way’ isimperative – there are no shortcuts. Before settingup this operation we made the decision to onlyemploy local people and we have followed thisthrough to ensure that our entire managementteam in Bangalore is of Indian heritage.

“We took the decision to employ Indian staff whowe have invested in from the outset. We haveworked with them to understand our culture insideout, and who challenge us positively at every turn.This team is very involved in the day-to-day runningof the business and we have invested in their training,to ensure they are up to speed and fully qualifiedto take on the job. It can be a costly exercise but itis worth every penny, in my opinion, and it will enable us to take the business into the next stagewith a robust team in place. Our plans for India areexciting and we’re looking forward to the future.”

Ron’s tips to start trading with India:

1. Find a strong business partner – havingsomeone knowledgeable on the ground’ willlay the foundations for your future success.

2. Get your finances in place. It’s not easy todo this, so seek the right advice from theright people to gain that market intelligence.

3. Location, location, location – choose thewrong site for your business and you’ll encounter problems further down the line. It’s also worth keeping in mind that land values in India are on the increase.

4. Recruitment – this is an art in itself in India.It may take a few attempts to build and trainyour team on your product or service offering.

5. Labour rates – it’s swiftly becoming a myththat labour costs are cheap in India. They areescalating at around 15 to 20% a year.

6. Laws and regulations. You need a local expert, who can help you comply fully withthese laws, help you through the properchannels and to understand the sometimescomplex legal landscape. A good businesspartner will help you achieve this.

7. Site specifications – look into any environmental factors that may affect thearea in which you choose to do business. In Bangalore there were certain specificationssuch as ensuring you have a garden areasurrounding the factory.

8. Take full regard of the culture and beliefs.As an example:-

a. VAASTU – an ancient science to get naturalbenefits from five basic elements; sky/space,earth, water, fire and wind are important toour employees in India and these elementscannot be ignored when planning a new officeor manufacturing facility.

9. Be prepared to invest – be it skills orequipment, understand at the outset if you arehiring native staff that you will need to investtime and money into teaching staff your ‘way’.

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Ecco Finishing prides itself on manufacturing machinery which does exactly the job the clientswants – without unnecessary fancy embellishments.

MD and founder Keith Miller was working in the carindustry – the high end user spraying division, wherehe was receiving increasing industrial enquiries forreliable coating application equipment. Not one tomiss an opportunity, Keith responded to this gap inthe market and established Ecco Finishing in 1995.

Ecco Finishing is focussed on manufacturing

equipment for the application of coatings such

as paint or fire proofing. It supplies the oil, gas,

shipping and construction industries; employing

a team of 17 and selling to clients all over the

world. Keith is proud that his company sells

globally, whilst sourcing locally, with the majority

of his components procured within a 13 mile

radius of his Middlesbrough Headquarters.

Keith’s top tips for working with Russians

1. Don’t be put off by the headlines. Take agood hard objective look at the potential ofyour industrial market. Realistically evaluatethe commercial opportunities aside from thegeo-political context.

2. Talk to and listen to those who are alreadydoing business there. Learn from them theopportunities, challenges and realities ofdoing business there – decide for yourself.

3. Take time to find the right partner. Don’tleave it to one visit and expect to find the‘right one’ and give up if you don’t on thatfirst visit. The wait was worth it for Keith.

4. Adapt to Russian requirements, if theywant the literature including all the technicalspecifications in Russian (before they buy)then provide it. Would you buy expensivemachinery with technical specifications written in a language you didn’t speak?

5. And lastly, invest in relations. The Russiansreally value this and the company you will want as a reliable long-term partner is the one to identify and cultivate. Once well-established – this relationship and partnership will be invaluable to sustain thehighs and lows of international trade.

Case study: Ecco FinishingThe KISS (Keep It Simple Stupid) might aptly be applied to Ecco Finishing. Not that their productsaren’t quality machinery – they pay great attention to meeting exacting industry technical requirements;understanding and meeting clients’ specific user needs and readily adapting this machinery towork to maximum efficiency and reliability in a wide variety of environments from the temperaturesof - 40 in Russia to +40 degrees in the Middle East.

Why Russia?

Keith had been considering the Russia for a while,very aware of the vast opportunities possible in theoil and gas industry and the fact that the Russianslack technical expertise in a wide range of associatedservices and products – technically proficient andreliable suppliers being a particular issue.

But how to get in? He first visited Russia in March2013 and after a couple of false starts with potentialRussian partners, came across by accident an oldEnglish industry colleague now based in Astrakhanwith a business focussed on the Russian shipyardindustry. Ecco Finishing had the products and hisEnglish Russian based partner had the Russianknow-how of both how Russia operates and experience working in the UK. A lucky match youmight say.

But it was the company’s industry-wide hard-gainedreputation for meeting customers’ needs, reliabilityin design, delivery and performance that is exactlywhat the Russians wanted and buy. Business isgoing so well, that Russia is now a base to sellinto Kazakhstan and Azerbaijan.

As always, with a good product and service thatbuyers want, payment terms for Russia are 50%upfront. The Russians have no problem with this.Their philosophy is – you want quality – you payfor quality.

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Case study: Issis Flooring

• Listen to clients’ needs: Don’t just persist with

stock solutions; “this attitude helped us identify

solutions to future problems for the Rio 2016

Olympic Committee and resulted in new product

development for us.” Plan and refine your product

and offer. Dave saw dramatic changes in the level

of demand for his products in just two years as

the disability access agenda rose up in importance

in Brazil.

• Business Culture: Brazilians have a laid back

attitude to keeping appointment times. Adapt and

leave plenty of time between meetings. But don’t

mistake this relaxed manner for a lack of commercial

acumen. Pay attention to hierarchy within a meeting

– who’s the ‘real’ decision-maker; not necessarily

the one doing all the talking. Brazilians sometimes

tend to over-enthuse – take care. “Be aware too of

cultural attitudes between North (Recife) and

South (Rio/Sao Paulo) where Southern Brazilians

have a low opinion of Northerners!”

• You can’t do it effectively at arms’ length: Plan

for and invest in local expertise. After a certain

number of visits which verified demand and interest

in his products, Dave realised he needed an agent

to help him identify the key clients to pursue and

maintain the relationship. Brazilian clients want the

security that they can deal with your representative

in Brazil – not you 1,000km away. In addition, local

expertise will facilitate and ease navigating the

labyrinthine processes of doing business in Brazil.

You need a Brazilian partner in order to register

a company.

So, the patience and persistence have certainly

paid off for Issis Flooring: After three years and

four visits they have identified opportunities and

raised serious interest amongst a number of key

potential clients – Olympics, Port of Rio, Oderbrecht,

universities and a number of major city metro

systems. Dave is now looking to rent an industrial

unit to meet the demand and orders generated

through their visits; this includes two significant

orders from Rio Port and Corinthians Football Club

and registering to supply the Olympic Committee.

They have now also appointed an agent to work

full-time as part of a joint venture.

Patience, persistence and a sense of humour: Pursuing business in Brazil.

On the face of it, Brazil was not the first obviousoverseas market for Dave Wagstaff, ManagingDirector of Issis Flooring to tackle.

Old hands will tell you to head for Europe first: dip a toe into Ireland, where there’s a commonlanguage and similar business culture. But it wasthe enthusiasm of a local UKTI adviser for hisproduct and knowledge of opportunities in theBrazilian market that persuaded David to commissiona market research report; take a punt and buy aairline ticket to Rio. That was three years and fourvisits ago and he hasn’t looked back since.

Issis Flooring

• Established in 2002 by Dave Wagstaff in Northumberland

• Manufacturer of portfolio of anti-slip and emergency evacuation systems – two systems: Secure Step and Flexi-Tact Glow

• In last five years they have sold products to 35 UK universities

• Branding is now incorporated within the safety element of productions

Top Tips for pursuing business in Brazil

• Patience & persistence: Dave was warned andheeded that you won’t secure a contract on yourfirst trip. He needed to demonstrate commitmentto the market via a number of visits; slowly, incrementally making progress. Each visit he increased the number and variety of potentialclients and partners. “you learn something neweach visit.”

• Being market ready: Do as much desk researchbefore you get out there. Get all materials (especially any technical instructions) translatedinto Brazilian Portuguese. “videos with picturesand diagrams demonstrating technical benefitsworked a treat.” Ensure your interpreter (professional or agent) is experienced linguisticallyin both languages and commercially minded. Have a pricing strategy worked out beforehand (i.e Issis had to include 100% for duty). By thesecond visit, Dave knew that in order to be competitive he would need to be looking at some kind of joint venture.

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with eyes closed and arms folded but they don’tmean to be rude. Be prepared to field personalquestions. “how much do you earn?” is common;they are just curious and the more the relationshipis working, the more they will take an interest inyou. Personal questions are normal in Russia,where there is literally no word for “privacy” as weunderstand it. Try not to bluster indignantly by theway of response!”

So, if we want to truly succeed in doing businessin any one of these markets (and from what I hearand read - in other parts of the world too) - we,the British are going to have to drop our diffidentand reserved manners; and invest time and effortin getting to know our potential overseas clientsand partners first. And you never know, it couldnot only be that start of a very successful and lu-crative business contract, but also "the beginningof a beautiful friendship." (Casablanca. Rick toCaptain Renault). Enjoy the adventure!

“Be prepared to field personal questions. ‘Howmuch do you earn?’ is common; they are just curiousand the more the relationship is working, the morethey will take an interest in you. Personal questionsare normal in Russia, where there is literally noword for “privacy” as we understand it. Try not tobluster indignantly by way of a response!”

Nynzi concludes: “Perhaps more than in mostcountries, it pays to read some of the literatureand learn even a tiny bit of Russian. They will respect the fact that you have made the effort.

“If we look at relationships out of the context ofbusiness, they form an essential part of our dailylives. They are a powerful thing which, in my opinion,can be used to an advantage when setting yourstall out to do business with each of these markets.”

I was talking to a friend recently, who works inPR, and the conversation turned to the subjectof business relationships. PR is of course a veryrelationship-driven industry and one that is builton honesty and trust. This got me thinking...

I work on daily basis with business people whowork just with Russia, Brazil and India respectively.They all tell me how doing business in their part ofthe world is unique to anywhere else; and decidedlydifferent to doing business in the UK. I’ve hadenough of these discussions now to realise thatit’s not the Brazilians, Russians or Indians who aredifferent – but it’s we the British, and our ways ofconducting business – that are at odds with therest of the world.

The British business culture is focussed on contractual interactions. We’ll happily meet a potential new business partner for the first time;work through an agenda and discuss business issues and leave without knowing anything personal about the people with whom we wereacting in that meeting.

That’s not how they do it in India, Brazil or Russia– relationships are key! And if you want your businessto succeed there, you’ll need to spend time understanding the business culture; adapting to itand working on building strong, robust relationshipsbuilt on trust, whilst learning and appreciating theirway of doing things.

With this in mind, I called on some friends in myAccess network to get advice on how we theBritish should use this insider-knowledge on customsand habits to our advantage.

Kevin McCole of the UK India Business Counciladvises: “Indians place great value on relationships,so take the time to develop contacts and build a bond. There are many ‘Indias’ within India, andthere are now 29 States, each with its own government – it’s more diverse than the EU. So be aware of the cultural and regulatory diversity,and be cautious about generalisations. India has a reputation for being bureaucratic, but that’s notprivate sector India. Many businesses are familyrun and hierarchical, and fast moving. If you’ve gota good relationship with the decision-maker in acompany, you can do a deal.”

Gareth Moore, British Consul in Recife, warns firsttime British exporters to Brazil: “in Brazil, businesswill only be done after several visits and bondingover topics such as food, family and football. Whatworks in the UK or other markets won’t necessarilywork in Brazil. Don’t try and change the Brazilians– sometimes “their way” of doing things may feelfrustrating and different, but it will pay dividendstaking the time to fit your model to the local marketand language. Be persistent. It can take time to getthings off the ground in Brazil, but don’t confusethis for inefficiency. People don’t always respondto emails, instead they may prefer face-to-facediscussions or negotiations.”

David Cant, Managing Director at Albion Overseasoffers the following advice on building Russian relations: “Don’t be surprised if the Russians ‘actdifferently’ in business; they may arrive late formeetings, their tie might be at half-mast or theymay wear a T-shirt. They may even sit listening

NECC’s Access Programme Leader Nynzi Maung was invited to share expert insight exploring howthe region’s businesses can exploit opportunities in Brazil, India and Russia. Here, Nynzi considerswhether North East companies are, when it comes to promoting their product or service, still sellingthemselves short and whether or not the British are in fact the odd ones out in business.

I’m British - relationships are for foreigners

20 21

Brazil is often referred to as a high cost country tooperate within, with a complex and at times cripplingtaxation regime and distinct banking system –each of which can reasonably act as a deterrent toany prospective UK company seeking to invest.

However, Brazil is a very substantial market in itsown right with significant growth still expected.Despite the oil rush that may drive fast changes inthe economy, manufacturing remains crucial asBrazil develops. Although operating costs arehigh, this is countered by a Brazilian appetite toopen up more to foreign investment.

Taxation on imports on both goods and servicesare considerable, but with careful structuring, investment can often be cheaper in the long-runthan importing, especially after taxation is takeninto account. Having suffered from hyperinflation in the 1970s and 1980s, Brazil now has a very sophisticated banking system with higher liquidity.

The key to a successful operation in Brazil is tostart slow; be prepared to invest time and effort tounderstand the market and all the issues that areinvolved; to find the right people and build trust.

Here Ray Jones, Head of Business Consulting atRTC North, offers some market support advice forcompanies making steps towards investing in Brazil:

1. “Brazil operates protectionist laws and some relate to the supply of government contracts,

which generally need the supplier to demonstratethe product or service being procured has a percentage of Brazilian labour/materials content.The percentage of local content can vary wildlyand has been seen up to around 70% to 90% insome cases. Build your Brazilian business modelincorrectly around the supply of these contractsand you could find yourself having invested heavilywithout being able to sell to your customers.”

2. “Brazil has Federal VAT (IPI) and State VAT(ICMS). Federal VAT can vary greatly depending on the product or service and State VAT differsfrom state to state. Getting this wrong on multipletransactions can lead to heavy financial penaltiesand cash flow problems.”

3. “Stringent banking compliance requirements inresponse to money laundering fines imposed onbanks means opening a bank account is not guaranteed. Recently, a $1bn US company wasturned down for a bank account without being givena reason after setting up their Brazilian company.”

4. “Shareholders are required when forming acompany and need to have domicile Brazilian legalrepresentation registered. Sourcing trusted representation can be difficult and costly if you get it wrong.”

5. “Brazilian Labour laws are complicated and involve extra salary payments such as bonusesand considerable employer paid social taxes.Make sure you have a solid understanding ofthese at the outset to avoid your employmentbudget escalating well beyond budget.”

Companies wishing to explore opportunities specifically in Brazil should look towards the manyavenues of support available.

Go where the growth is in Brazil

On a previous market visit to India, the news anddiscussions with business people was dominatedwith the current general elections – who will win?What impact will that have on the economy andtrade generally? It was assured that whomeverwins will be very conscious of the vital importanceof Foreign Direct Investment (FDI) and trade to thegrowth and strengthening of the Indian economy.

Understanding your taxation liabilities when exporting needn’t be a complete foreign language.The following observations from Nicholas Parkinsonand Anjul Mathur, from the UK and Indian respectiveaffiliates of leading tax and advisory firm GrantThornton, highlight that India continues to be anattractive investment destination.

They comment: “India’s attractiveness as an investment destination hasn’t waned on accountof its large consumer and human capital base, buthas created an opportunity for foreign playerslooking for a greater role in the Indian market.

“A foreign company looking to set up operations inIndia can consider the option of operating eitheras an Indian entity (e.g. wholly owned subsidiary,Joint Venture with an Indian Partner, Limited LiabilityPartnership) or as a foreign entity (liaison office,project office). The decision between the optionsmust be made in mind of varying compliances andtax requirements.

Repatriation of profits / cash

“Dividends are freely repatriable post payment ofdividend distribution tax by the Indian companydeclaring the dividend. Statutory permissions arenot necessary for dividend pay-outs and foreigncapital invested in India is generally repatriable,along with capital appreciation after payment oftaxes due.

Taxation

“The Indian government is working to make the Indian tax regime more robust. Domestic companiesare subject to tax rate of 30% (plus applicable surcharge and education costs), which is competitive. Various deductions and allowancesare available to businesses, whilst mergers andacquisitions are tax neutral, subject to conditions.

“To provide relief from double taxation acrosscountries, India has entered into Double TaxationAvoidance Agreements (DTAA) with more than 90countries, including the UK. The DTAAs overridethe provisions of the Indian tax laws, ensuring theyare more beneficial to the investor.”

“Non-residents have the option to secure an advance ruling from the relevant authority to determine the tax liability of a transaction in advance. This enables advance planning, avoidingpotential future disputes.

“Similarly, taxpayers may seek an Advance Pricing Agreement (APA) to determine the arm’slength price of a transaction upfront, helping to understand their tax liability and consequently mitigating tax litigation at a later stage.”

Steps have been taken by the Indian Governmentto ease the regulatory environment and generalbusiness conditions. It’s a work in progress, butthe future seems bright.

NORTH EAST businesses can exploit opportunities in Brazil, India and Russia, but first it’s vitallyimportant to shed light on taxation issues for those considering trading with India.

Taxing the mind in India

22

North East Companies who have participated in theAccess Programme:

I recently came across an article on the Institute of Directors’ website, written by an American entrepreneur titled ‘What UK businesses must doto boost international expansion’.

The author asserted that in comparison to othernations, the British are not very good at sellingthemselves.

Whilst I didn’t agree with the article in its entirety, Istarted to wonder whether North East businessesare sometimes guilty of selling themselves short –particularly when it comes to their own productsor services.

After sharing these thoughts with my professionalnetwork, some useful insights arose as to howNorth East businesses – many of whom are doingan excellent job selling overseas – can improvetheir selling techniques.

Selling yourself top tip 1: Use the British reputation to your advantage

Analyse and assess your company’s particular addedvalue for a client. Being British holds a considerablesway in some markets so be sure to build on this.

In the instance of Russia, the executive director ofthe Russo-British Chamber of Commerce, TrevorBarton, explains: “Understand the power of theUK’s reputation in Russia for quality, reliability and honesty. UK-based companies should takeadvantage of this when marketing themselves andtheir products, whilst of course doing nothing toundermine that reputation!

Selling yourself top tip 2: It’s a long-term relationship you’re selling

For each of the markets of Brazil, India and Russia,you’re not selling a product or service – you’rehopefully entering into a long-term, mutually benefi-cial and profitable relationship.

Dr Stan Higgins, CEO of North East IndustryProcess Cluster, agrees with this and advises:“Having spent time helping companies find new

business in India I have found the only way of gettinggood, reliable business is to visit regularly, attendsector events and be persistent. Invest the time tofind that trusted local partner and remember thatbusiness is a two way experience.”

Selling yourself top tip 3: Understand whatyour potential clients really need

Just because your offering sells well in one marketdoesn’t necessarily mean it is right for another,even if it is in the same sector.

You need to understand your potential client’sneeds. You’re providing them with the solution to their problem – effortlessly, cost effectively and better than anyone else, so have confidencein that.

Selling yourself top tip 4: Be professional – invest in expertise

Executive director of the Russo-British Chamber of Commerce, Trevor Barton, explains: “Surroundyourself with good advisers and facilitators – customs agents, lawyers, tax advisers – peoplewho have experience in the chosen market.Money spent earlier on getting reliable advice willsave much expense and heartache in the long run.”

British Consul in Recife, Gareth Moore, supportsthis view. He explains: “It’s really important to doan initial market visit and speak with organisationssuch as UKTI. Our experts can give invaluable advice and save you hundreds of man hours, introduce you to key local contacts and distributors,and, crucially, can put you in touch with reliablelawyers and accountants – essential for doingbusiness in countries such as Brazil.”

In a nutshell, ‘shy bairns really do get nowt’ hencewhy a bold approach towards selling a business isneeded. A positive and confident outlook is essential– but it needs to be underpinned by a solid professional approach based on excellent research,which will stand North East businesses in goodstead for successful export relations.

Shy bairns get nowt

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North East Chamber of Commerce, Access Programme

Telephone number: 0191 386 1133

Company Address: Aykley Heads Business Centre, Aykley Heads, Durham, DH1 5TS

Company Website: www.necc.co.uk