Why should I consider exporting?
Exporting offers numerous advantages for the firm but, unfortunately, many firms have not taken advantage of the incredible opportunities that exist in the worldwide marketplace. The massive restructuring of political boundaries, the collapse of Communism, the opening of new consumer markets, historic trade agreements, and the new World Trade Organization have created unprecedented opportunities for businesses to export. Ours is a global economy, influenced by the worldwide access of manufacturing technology which has created competitive manufacturers able to produce cheaper, faster, and better. Formerly underdeveloped countries have become serious rivals to established economies due to worldwide links to communication systems and the explosion of television, print, and electronic access to information. There has never been a more opportune time for U.S. firms to capitalize on these market shifts. Therefore, it is critical to a country’s and firm’s growth and competitive advantage to export for the following reasons:
Increase Sales and Profits. If the firm is performing well domestically, it is likely that expansion into foreign markets will improve profitability. Recent data from the U.S. Department of Commerce shows that only 3 of 25 businesses export, although they are all capable of it.
Gain Global Market Share. Over 95% percent of the world’s economic activity is outside the United States.
Reduce Dependence on Existing Domestic Markets. By expanding into foreign markets, the firm will increase its marketing base and reduce internal country competition.
Stabilize Market Fluctuations. By expanding into global markets, firms are no longer held captive to economic changes, consumer demands, and seasonal fluctuations within the domestic economy.
Sell Excess Production Capacity. By exporting, production capacity and length of production runs may increase, thereby decreasing average per unit costs and increasing economies of scale.
Enhance Competitiveness. Exporting is proven to enhance competitive advantage. While the firm will benefit from exposure to new technologies, methods, and processes, the country will benefit from an improved balance of trade.
Created Domestic Jobs. In recent years, U.S. exports of goods and services have supported a total of 1.3 million jobs.
Help Reduce the Trade Deficit. Exports represent eight percent of the U.S. Gross Domestic Product (GDP) out of $7,500 billion of annually traded goods and services.
Find Excellent No Cost/Low Cost Experts in Export. For many firms, the decision not to export is based on the fear of the unknown which are often known as the myths, myopia, and misperceptions of exporting. Trade promotion organizations throughout United States have been established to assist companies that are strong domestically but have not contemplated export markets. These organizations help businesses with every step of the export process.
What should I consider when making the decision to begin exporting?
How do I begin?
Before exporting or expanding into foreign markets, it is important to first assess the firm’s management capabilities. Decide whether the dedicated personnel, resources, and management support are strong enough to complete numerous export transactions. Then it is necessary to conduct appropriate research to select a target market or markets that will be profitable. After researching, develop an export business plan which will allow management to anticipate the future and better understand the company so that informed decisions may be reached. Included in this plan will be a rationale for selecting a particular foreign market which answers the following questions:
Analysis of Domestic Performance
- Why is the business successful in the domestic market?
- What is the current domestic market share of the product?
Firm’s Commitment and Desire to Export
- What are the firm’s objectives in exporting?
- At what level in the firm’s hierarchy are exporting decisions made?
- Who on your staff will be involved with the export process?
- What international experience does management (or any of its employees) have?
- What level of involvement in the export process is the firm willing to have?
- How much risk is the firm willing to take on?
- What makes the firm’s products or services competitive in a foreign market?
- What makes the products or services unique?
- What are the firm’s overall competitive advantages (e.g., technology, patents, skills)?
Finding Out About Targeted Foreign Markets
- What market segments are being targeted?
- How is the firm’s competition performing in international markets?
- Will the product or service be restricted due to tariffs, quotas, or other non-tariff barriers?
- Will patent/trademark protection abroad be essential for your product?
- What product labeling requirements must be met?
- What sort of target market environmental regulations need to be adhered to?
Manufacturing and Distributing the Product
- Will the product be suitable for overseas distribution?
- Will the product be subject to national health or product safety regulations?
- Will the product require local service, supplies, or spare parts distribution capability?
- Will the product require redesign to be saleable overseas?
- What export packaging considerations need to be addressed?
- Does the present manufacturing operation have the capacity to handle the anticipated level of export orders?
Marketing the Product
- How will the product or service be advertised?
- What companies, agents, or distributors have purchased similar products?
- Will an agent or distributor be appointed to handle the export market?
- What territory should the agent or distributor cover?
- Is there a trade show or trade mission that will best highlight your product or service?
- Will the product/service be sold under the same name in the foreign target market?
Pricing and Commercial Terms
- How will a price be calculated?
- What are your service terms?
- What are your payment terms? Credit terms?
- What are your warranty and guarantee terms?
- What are your discount terms?
Financial/Risk Management Issues
- Can the investment and working capital requirements for the export operation be funded from internal resources?
- What additional funding sources are available to augment internal capital?
- Does management have the resources to manage the financial risks associated with exporting?
Many of these issues will be revisited in greater detail as the company conducts more specific product market research and begins to refine its export strategy. In completing this self-analysis, company management should also identify areas where external advice is needed as well as potential sources of external assistance, including trade facilitation organizations (government and private sector) and trade service providers.
How do I determine if my company is “export-ready”?
Exporting has become a lucrative activity for many U.S. companies, but all of them began by making the critical decisions necessary to expand their market outside the USA.
Examine your resources and capabilities
Formulating a solid export strategy requires a critical examination of the capabilities and resources of one’s company.
The following list highlights characteristics common to successful exporters. These will serve as guidelines to help you make those fundamental decisions, or if you are already exporting, to help you identify additional information so you may export more effectively.
- My company has a product which has been successfully sold in the domestic market.
- My company has or is preparing an international marketing plan with defined goals and strategies.
- My company has sufficient production capacity that can be committed to the export market.
- My company has the financial resources to actively support the marketing of our products in the targeted overseas markets.
- My company is committed to developing export markets and is also willing and able to dedicate staff, time and resources to the process.
- My company is committed to providing the same level of service given to our domestic customers.
- My company has adequate knowledge in modifying product packaging and ingredients to meet foreign import regulations, food safety standards and cultural preferences.
- My company has adequate knowledge in shipping its product overseas, such as identifying and selecting international freight forwarders, temperature management and freight costing.
- My company has adequate knowledge of export payment mechanisms, such as developing and negotiating letters of credit.