More small companies are selling goods and services direct or through intermediaries to foreign buyers. According to the U.S. Small Business Administration about 70% of U.S. companies that export have less than 20 employees. Three major reasons for the surge of small business exporters: 1) the emergence and opening of new markets in Asian, African, the Americans and Eastern Europe; 2) the increased number of trade agreements that is helping to reduce regulations and eliminate import tariffs and 3) the ease of use and low cost communication and transportation technologies.
Advantages of Exporting
Increased Sales and Profits— selling goods and services to a market the company never had before boosts sales and increases revenues. Additional foreign sales over the long term, once export development costs have been covered, increases overall profitability.
Enhance Domestic Competitiveness— most companies become competitive in the domestic market before they venture in the international arena. Being competitive in the domestic market helps companies to acquire some strategies that can help them in the international arena.
Gain Global Market Shares— by going international, companies will participate in the global market and gain a piece of their share from the huge international marketplace.
Diversification— selling to multiple markets allows companies to diversify their business and spread their risk. Companies will not be tied to the changes of the business cycle of domestic market or of one specific country.
Lower Per Unit Costs— capturing an additional foreign market will usually expand production to meet foreign demand. Increased production, can often lower per unit costs and lead to greater use of existing capacities.
Compensate for Seasonal Demands— companies whose products or services are only used at certain seasons domestically may be able to sell their products or services in foreign markets during different seasons.
Create Potential for Company Expansion— companies who venture into the exporting business usually have to have a presence or representation in the foreign market. This might require additional personnel and thus lead to expansion.
Sell Excess Production Capacity— companies who have excess
production for any reason can probably sell their products in a foreign market and not be forced to give deep discounts or even dispose of their excess production.
Gain New Knowledge and Experience— going international can yield valuable ideas and information about new technologies, new marketing techniques and foreign competitors. The gains can help a company’s domestic as well as foreign businesses.
Extra Costs— takes more time to develop extra markets, pay back periods are longer, up-front costs for developing new promotional materials, travel and other administrative costs associated to market the product can strain the meager financial resources of small and medium size companies have.
Product Modification— may need to modify products to meet foreign country safety and security codes, and other import restrictions.
Financial Risk— collections of payments are not only more time-consuming than for domestic sales, but also more complicated.
Export Licenses and Documentation— some companies have to obtain an export license to export their goods or services and that can make them less competitive. The documentation required to export is more involved than for domestic sales.
Market Information— finding reliable information on foreign markets is unquestionably more difficult and time-consuming than finding information and analyzing domestic markets.
Analysis̶ ̶ The advantages clearly outweighs the challenges. Nevertheless, before committing resources to the export business, companies have to thoroughly assess the risks and benefits associated with exporting.
Tekle Sebhatu of Roseburg is the owner of an online international business training company, is a part-time business instructor at Umpqua Community College and is a SCORE counselor in Roseburg. He can be reached by