GETTING STARTED WITH EXPORTS 1 Why Export?

Emergence of recent technological developments eased the individuals to move and communicate faster for lower or even no costs. These opportunities also highly affected the business world; the new age opened the businessmen the gates of foreign markets. Even if there are also several risks of entering foreign markets, exporting mostly serve the advantages given below:

• Increased sales and increased profits:If the firm is performing well in domestic market in terms of sales, exporting presumably would increase the demand by extending the market base to overseas countries and thus the profitability of the firm.

• Faster growth:Selling in overseas markets may help the business grow in size and scope at a faster rate.

• Reduced local market dependence and overcoming of local market fluctuations and vulnerability:If the firm diversify sales into

international markets, it would avoid depending on a single market. In this case a local economic downturn would damage less if the demand in overseas markets remains high.

• Economies of scale:With a larger market base, the firm can save costs by producing on a scale that makes better use of resources; reduce waste by utilizing maximum production capacity and thus increase efficiency.

• Innovativeness by gaining new knowledge and experience in the global market:Exposure to new ideas, approaches, marketing techniques, technology and processes can help the firm develop innovative products and services.

• Domestic and global competitiveness:Trading in the global

marketplace increases the exposure to international best practice, ideas and alternative ways of doing business while improving the chances of competing at home and overseas.

product life cycle

• Enhancement of the company image

• Benefits for domestic economy:With the increase of production capacity there will be a need and chance of employment creation. Besides, turning into an exporting firm and having higher exports than imports may help domestic economy in the reduction of foreign trade deficit, if any.

3.2.2. Why not Export?

Exporting also brings its own set of challenges and risks. These may include:

• Increased costs and risk of lower profit margins:Exporting means costs which are mostly caused by the desire to gain market share, such as the costs of; extra travel, new marketing materials and maybe additional staff.

• Lower sales than expected:Sales may be lower in the beginning and it may take time to see a significant return on the export investment.

• Intense competition:Competition in foreign markets may be higher than expected.

• Late or non-payment risks:To avoid or minimise the risks of non- payment, the firms should research the market conditions in the target country and the credit worthiness of the potential customers before starting exports.

• Legal and regulatory issues:There may be different legal and regulatory issues than the home market such as; border-custom types, legal procedures in the cases of corruption, online security and bribery. It is very crucial to get a good grasp of how the procedures work in the chosen country before starting exports.

• Heavy paperwork:Authorities in the chosen markets may require a lot of documentation from the exporters.

• Cultural differences and language barriers:The firm will be dealing with a new culture by entering a new market. Business culture can even vary between regions of the same country, so local knowledge is vital in

building valuable foreign working relationships.

• Economic and political risks:Risks such as unpredictable economic and political systems issues can deter the firm from expanding into a new market. Awareness about what is happening in the target market may help the firm avoid these issues.

It is generally accepted that starting an export venture despite several risks would still benefit the firm, if the firm carefully assess the above listed advantages and disadvantages and take measures when necessary before entering a new market. Exporting activity would lead to changes in the way the business done and increase awareness within the firm’s own domain making it more innovative and responsive to changes in the market than otherwise it could be.

3.2.3. Company Specific Reasons for Getting Started with Export

The company should answer several questions before starting an export venture and reach company specific reasons and advantages for export activities. The base for this short preliminary self-recognition should be based upon what role the company expect export to play. Specific reasons should be drafted from the answers to the questions asking whether; the company is seeking an increase in profit or sales volume; it would like to develop a broader customer base, to learn more from overseas companies, to become more competitive in the domestic market, to make use of excess production capacity; the company is seeking for a specified level of return on investment from export activities and the company is expecting the export activities to become self-sustaining (one year, two years etc.).

After deciding upon the overweighing reasons, the company may then establish their export strategy accordingly. This way the strategy will be more realistic and precise while pulled away from being general and useless.

3.2.4. Getting Started with Organic Product Exports

Many organic product producers opened up to organic products sector after the recent increase in organic product consumption in the world, especially in developed countries. However, the process of transition to organic production and the importance of gaining consumers’ trust necessitate long term investments and a careful plan.

In case of organic exports, environmental issues should be considered as much as the economic targets the company wants to achieve through exports (profits, investments, sales volume, etc.). The important factor to compete in export markets is to convince the buyers that the product is organic. In this regard, product certification and meeting the conditions of certification are more of an issue.

Another important factor affecting the organic product choice is the social responsibility behaviour of the company (environmental

awareness, following labour rights, perspective to social problems, etc.). Organic product consumers consider the attitude of the company in these regards as a first step of building long term reciprocal trust. In summary, it is crucial for the company to pay attention to the following issues below together with the economic objectives before getting started with exports of organic products:

• Setting ecological and social targets while fulfilling standards, • Determining niche markets and their potential for the company, • Gaining and retaining customers on long term.

A general methodology for setting export objectives is given in the following section.