Introduction to exporting

• 13 November 2007
• Page 1 of 5 : single page

Many businesses have become exporters almost by accident. But others have made a planned study of the markets before taking the plunge. Some have seen their exports grow substantially by strict attention to costing, sales and after sales service, delivery and many other aspects of good service that are essential to domestic and overseas success. Some have even established permanent overseas offices and markets with the best potential while others have undertaken joint ventures with overseas companies to ensure continuity of supply and to maintain an increase in market share.

The major motive for exporting of course is to increase profit but the accompanying benefits such as coping with a downturn in the domestic market often lead to improvements in domestic profitability as well. There are no hard and fast rules for ensuring success in exporting. Among the many benefits commonly shown by exporters are increased efficiency, reduced purchasing costs, more consistent production of flow and spreading of market risk, extended profit cycles, product improvement and opportunities for personnel development.

Before deciding to export you should have a good look at your own business, its goals and its resources and decide whether exporting really suits you.

Should you export?

The decision to export can only be reached when you have carefully evaluated your goals and your firm's ability to handle export sales.

Goals

You might say, "I want to make more profits and I think exporting is a good way of achieving this". This could be true but profits for export are not easy to achieve and require consistent product quality, reliable product delivery and service, competitive pricing and good administrative and financial backing. You might also say that you have excess production capacity and that if you could make more and sell overseas then you would make more profit. This could also be true but don't forget that there are more costs and risks associated with exports than with local consumption.

What about that the demand for your products is seasonal on the home market and exporting will smooth any production requirements. This is probably right, however you need to research your intended market carefully to make sure that its seasonal fluctuations complement those that you have at home. What if you receive enquiries for your product from overseas? So, you come to the conclusion that there is a big demand for your product. You could be right here but you should thoroughly check the competition for your product overseas and evaluate the reasons for the interest in your own product. Carry on and try to determine the reasons for your export drive and evaluate them objectively. This will make your own motivations and expectations clearer to you and will help you make better choices about setting up and export market or not.

Your capabilities

While exporting is desirable for the nation, not all firms are capable of exporting and there are many reasons for this. In order to assess whether your firm should start marketing overseas you need to take a long hard look at your organisation and see whether you have what it takes. Some of the points you need to look at are:

• Product
• Staff
• Experience
• Facilities
• Financial

Let's have a look at these points now.

Product

Does your firm have a product that is suitable for export? The quality of the product must be good and not just good for most of the time, but consistently good. Ideally the product should be one that has found success on the home market and your overseas research shows that the demand for that type of product is present. Your product should be able to provide at least one factor which gives you an advantage overseas.

Staff

Do you have the staff to handle export orders? Selling overseas entails a lot of administration know how and paperwork so you'll need competent and well-informed staff to obtain the necessary permits and other administrative requirements of export sales. You can of course pass all this work over to a freight forwarder or other agent.

Experience

While selling and marketing techniques involved in export sales are similar language, distance, foreign exchange, communication, transport, trade barriers and import regulations further complicate the extra transaction process. Different habits, tastes and customs in overseas markets pose further difficulties in transacting export sales.

Facilities

Do you have the production facilities to handle regular export sales? Simply having some excess stock is not sufficient reason to seek export sales. You need to commit some of your production capacity in the long term to make your initial efforts worthwhile.

Financial

Are you in a financial position to initiate an export drive to finance any delay in payment once your export sales are established? Establishing an export base requires a lot of time and money to research markets, evaluate and establish distribution channels, negotiate suitable agreements and arrange finance. Once your export sales network has been established, further capital is required to finance the extra cost of getting your goods to market and to fund the delay in revenue between the shipment of goods and the receiving your payment.

Summary

Exporting can be profitable; therefore it can lead to more economical production runs, wider product range and reduce seasonal fluctuations. You will need a lot of dedication however plus communication and good management skills to be successful because success in these markets is much more difficult than on the domestic market.

To arrive at your decision, therefore you need to look at your:

• Goals
• Product
• Staff
• Facilities
• Financial backing.

Then after all that, ask yourself if exporting is the best alternative for expanding your business.

Selecting a market

When you've made up your mind to export you can start looking for a suitable market for your product. Your aim is to select markets with high potential and low risk.

Where to find market information

Much of the information required is available from sources within your own country, including foreign trade, diplomatic representatives, industry organisations, trading and merchant banks, export agencies and consultants, customs and forwarding agents.

Points to consider

List all the countries you consider to be potential markets and eliminate those who impose barriers too high for the import of your product or its financing. Find out if there have been any government regulations or restrictions that might affect your export potential or payment. Once you've narrowed down your choice to a short list of the markets, which appear to have favourable conditions, then you should undertake a more thorough market research.