Free Zone Aruba – 4 successful export strategies from gateway Aruba
By Anika in Business opportunities, Export on 27. May, 2013No Comments
By Edward M. Erasmus
Head of Operations, Free Zone Aruba
On May 6th-8th, 2013, Aruba hosted a unique gathering of international experts, captains of industry and a variety of companies during the ‘Europe Meets the Americas’ Business Conference. During the forum Aruba was proliferated as a Gateway to companies and organizations from both the European and Latin American continents.
Currently many local and international companies are already making use of Aruba’s ideal location to distribute their goods and services to foreign regions. These companies have found ways to combine the benefits of the free zone status with the island’s attractive characteristics for doing business and have been able to develop exceptionally successful entrepreneurial ventures geared towards international markets.
But what kind of strategy do they follow and what are their key characteristics and critical factors for business success?
This blog provides a brief overview of the strategies and a further examination of key business characteristics and factors that make these export-driven (free zone) companies successful.
A thorough desk research was performed to gather the information, including a review of key company financial and non-financial data, overview of markets and types of customers being serviced, number of products or product lines offered, scope of services, marketing and distribution strategies, and so on.
So here they are:
1. Niche strategy
A niche market refers to a group of consumers or businesses that all have a very specific need or want. Export companies who have adopted a niche strategy are focused on a narrow market segment. These companies have been successful in developing high-end business propositions by offering specific types of goods and services while focusing on a limited number of customers in carefully selected markets.
Key characteristic:
The main characteristic of companies pursuing niche strategies is that they were able stake out unique market sweet spots, those areas that resonate so strongly with target segments that they are willing to pay a premium price in exchange for superior quality. Especially service-driven free zone companies have been efficacious in catering to niche markets.
Critical success factors:
The critical factors or activities required for ensuring the success of a niche strategy are the following:
· High level of expertise in the business sector
· Consistent in the delivery of exceptional quality
· Value(added) driven
· Strong brand image
· High profit margins to compensate for narrow market shares
Building a business proposition around the niche strategy is not as easy as it might sound. Finding profitable new niches in foreign markets requires a set of skills different from those needed to build market share or to create variations of an existing product or service. What these niche-focused companies are good at is that they look for places where no offerings exist, not one where consumers are complaining about existing choices.
2. Intermediation (or brokerage) strategy
Intermediation strategy refers to free zone activities in which a company act as intermediary (middleman) between suppliers and customers located in two separate b2b markets. The main role of the intermediaries is to act as catalysts between two parties (buyers and sellers) to generate business transactions.
Key characteristics:
The main characteristic of the companies following intermediation strategies is that they often explore consumer needs in a particular market for goods and services, and subsequently find suppliers (in other foreign markets) to fulfill those needs. Through their key position in the market, intermediaries help initiate business trade and continue to add value to the future transactions and are therefore able to sustain their business venture by earning commission income on each transaction.
Critical success factors:
The essential factors for business success are the following:
· Strong networking capabilities
· Ample experience in logistics
· Sturdy bargaining power
· Knowledge of language in both markets and good communication skills
· Agile and flexible business propositions that are adaptable to changing consumer needs
Developing a business based on the intermediation strategy does not require huge startup capital, however a company needs to have solid domain expertise and a trusted reputation to be effective in the market. The internet and social media has created tremendous opportunities that come with the enhanced ability to build and cultivate networks. These new technologies can be great mechanisms to enable business intermediation, and many companies in the Aruba free zone are leveraging on the opportunities at hand to generate business.
3. Full-fledged brand distribution strategy
Companies who adopt a brand distribution strategy position themselves as exclusive representatives of well-known brands with exclusive rights to distribute to specific foreign b2b markets.
Key characteristics:
The main characteristic of companies acting as brand representatives is that they not just only take care of the distribution of the goods and services, but they also bear the responsibility for ancillary activities such as storage, product packaging, branding, marketing and after-sales customer service in accordance to the contractual specifications of the supplier.
Critical success factors:
Critical factors for a successful brand distribution strategy are the following:
· Exceptional service (according to the brand requirements)
· High level of expertise in the business sector
· Excellent management of logistical infrastructure
· Impeccable track record
· Knowledge of language and culture in target markets
Brand strategies are mostly applied by light-industrial companies and also by companies that trade in finished goods. These companies have been successful thanks to their compliance with high standards of quality and effective internal business operations.
4. Mixed strategies
Besides the strategies outlined above, many free zone companies have also found ways to develop business concepts using different strategic approaches simultaneously. The free zone regime allows for companies to conduct different export-oriented activities under the same roof.
Please be aware that the above presented strategies are based on aggregated data and using a generic model for categorization. Free zone companies operate in a global environment with constantly changing market expectations and evolving consumer demands and therefore the strategies develop over time.
Maybe these strategies can help you with the start up or expansion of your business. If you have any questions about using Aruba as a gateway you can contact our account executives at account.executive@fzanv.com
We would like to hear your thoughts, feel free to share it with us.
