Chapter 1 Preparing for export
1.1 Stimulating exports
Governments have three majors export objectives:
1. General strategy: to improve the competitive position of the domestic business
world with regard to foreign companies
2. Trade policy: to lift as many barriers as possible to foreign trade
3. Export policy: to stimulate domestic companies to do business abroad
The government uses these instruments to stimulate export/international trade:
- Trade policy (international agreements)
- Governments subsidies (export stimulating subsidies)
- Other export instruments (export credit insurance against political risk and
damages arising from a calamity in the export country, contacts with foreign
governments including visits and trade mission abroad, information and
promotion including organizing trade fairs and exhibitions in collaboration with
foreign associates.
A country usually protects its market against foreign competitors. Two important
reasons for protecting a market are (un)employment issues and wanting to avoid
dumping (overproduction).
The government can implement protection in three ways:
1. Import duty: a form of tax raised on the import of an article, making foreign
articles more expensive than local product
2. Import restrictions: number of imports are restricted
3. Non-tariff restrictions: these are the non-financial measures designed to limit
or restrict foreign import.
1.2 Export development
From passive to active exporter
Every once in a while you might send off an order abroad, or you might be facing
overproduction and think you can solve this by selling the extra products abroad. If
you are doing this, you’re a passive exporter.
As an active exporter you will have developed a sold export business plan, which is
founded on sound market research.
,From active export to international marketing
In this phase you familiarize yourself with the foreign market, researching the specific
needs of customers abroad and adapting the elements of your marketing mix to
satisfy those needs.
From international marketing to international entrepreneurship
Now you are intensely focused on the foreign market. Can be done by, for example,
entering into a partnership (collaboration) with a firm operating inside the export
market.
1.3 Reasons for export
Here are some typical incidents that can lead to passive export situations:
- You receive an unexpected request from abroad
- While on holiday, you notice a local demand for an unique product
- Friends or family living abroad point out export opportunities in their country
- At a trade fair you meet an importer looking for the product you are brining on
to the domestic market
Active export is based on strategic considerations such as:
- You want become less dependent on local market demands (too small, high
competition, market has stabilized or decreased)
- Increases in sales lead to increased production and subsequent economies of
scale
- Export can be the solution to production capacity problems
- Being present in more foreign markets increases your commercial
opportunities
- Spreading the entrepreneurial risk increases the likelihood of business
continuity
- Higher turnover better enables the company to pay costs
- Keeps staff employed
- Successful products at home may also have potential in foreign market
- The product may be at the end of its lifecycle at home, but may still be
exploitable in developing markets
, 1.4 Do the export test
1.1 Stimulating exports
Governments have three majors export objectives:
1. General strategy: to improve the competitive position of the domestic business
world with regard to foreign companies
2. Trade policy: to lift as many barriers as possible to foreign trade
3. Export policy: to stimulate domestic companies to do business abroad
The government uses these instruments to stimulate export/international trade:
- Trade policy (international agreements)
- Governments subsidies (export stimulating subsidies)
- Other export instruments (export credit insurance against political risk and
damages arising from a calamity in the export country, contacts with foreign
governments including visits and trade mission abroad, information and
promotion including organizing trade fairs and exhibitions in collaboration with
foreign associates.
A country usually protects its market against foreign competitors. Two important
reasons for protecting a market are (un)employment issues and wanting to avoid
dumping (overproduction).
The government can implement protection in three ways:
1. Import duty: a form of tax raised on the import of an article, making foreign
articles more expensive than local product
2. Import restrictions: number of imports are restricted
3. Non-tariff restrictions: these are the non-financial measures designed to limit
or restrict foreign import.
1.2 Export development
From passive to active exporter
Every once in a while you might send off an order abroad, or you might be facing
overproduction and think you can solve this by selling the extra products abroad. If
you are doing this, you’re a passive exporter.
As an active exporter you will have developed a sold export business plan, which is
founded on sound market research.
,From active export to international marketing
In this phase you familiarize yourself with the foreign market, researching the specific
needs of customers abroad and adapting the elements of your marketing mix to
satisfy those needs.
From international marketing to international entrepreneurship
Now you are intensely focused on the foreign market. Can be done by, for example,
entering into a partnership (collaboration) with a firm operating inside the export
market.
1.3 Reasons for export
Here are some typical incidents that can lead to passive export situations:
- You receive an unexpected request from abroad
- While on holiday, you notice a local demand for an unique product
- Friends or family living abroad point out export opportunities in their country
- At a trade fair you meet an importer looking for the product you are brining on
to the domestic market
Active export is based on strategic considerations such as:
- You want become less dependent on local market demands (too small, high
competition, market has stabilized or decreased)
- Increases in sales lead to increased production and subsequent economies of
scale
- Export can be the solution to production capacity problems
- Being present in more foreign markets increases your commercial
opportunities
- Spreading the entrepreneurial risk increases the likelihood of business
continuity
- Higher turnover better enables the company to pay costs
- Keeps staff employed
- Successful products at home may also have potential in foreign market
- The product may be at the end of its lifecycle at home, but may still be
exploitable in developing markets
, 1.4 Do the export test
