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When I was in industry, and working with our vendors, subsidiaries (and other companies), the issue of exporting to expand sales was discussed as an option – normally with reservations (on their part) do to misconceptions about the unique challenges.
Read the points below, and discuss why companies (especially with this challenging economic environment we have in the U.S.) should consider exporting to expand business.
Four Common Misconceptions about Exporting
Your company has to be big
While large companies do the most volume of international trade, smaller companies are also taking advantage of the opportunities available in foreign markets. In fact, according to the U.S. Department of Commerce’s Exporter Data Base, 89 percent of successfully exporting American firms have fewer than 100 employees. Product quality, price, and service rather than size determine a firm’s success in the export market.
You must have a big export department
The size of a company’s export department depends upon how products are marketed. A direct exporter sells to a foreign company and is responsible for the transport of the product to the foreign destination. These types of exporters tend to be firms that consistently move large volumes of product overseas. The export department consists of several specialists for marketing, finance, transportation and insurance. On the other hand, if the company ships sporadically and in small quantities, then the transportation and marketing responsibilities can be handled by one employee.
Many companies begin as indirect exporters, selling and delivering to an intermediary in the United States. Several types of export intermediaries exist and will be discussed in Chapter 2: Export Intermediaries. If a company becomes an indirect exporter by selling through an intermediary, more in-house expertise is required than for domestic sales, but less than would be required of a “direct exporter.” When a firm becomes a direct exporter, it will need an in-house export capability.
You must have substantial volume
The fact that many smaller companies are actively involved in international trade is a testament that substantial volume is not a market entry requirement. Foreign buyers look to U.S. suppliers for three key reasons: First, there is an image of quality for U.S. products. Second, U.S. suppliers often have products or capabilities that are specialties for the importer. Finally, an importer typically is looking for a relationship with a provider that has a quality product at a fair price with continued availability. If a U.S. company merely wants to sporadically sell excess capacity outside the U.S., exports will probably be disappointing. However, if the company is willing to devote even 10 percent of production capacity to foreign markets and the servicing of these accounts, then it can expect to build substantial and permanent trade. Providing service to the first few non-U.S. customers is extremely important. Thus, the volume of product marketed is not as important as the consistent product supply. A company that is not committed to exporting often makes this mistake. Do not take your foreign representatives for granted; lack of service and attention to foreign accounts can cripple your efforts to export.
You must be fluent in foreign languages
Occasionally management will cite the lack of in-house foreign language capability as an impediment to entry into international trade. Foreign language skills are helpful when marketing and negotiating export agreements but not essential. When correspondence and documents in English will not suffice, exporters can outsource translations and interpretation. Language skills facilitate cultural and social relationships. However, success depends more upon the sound management of the business relationship than language abilities.
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