Strategic Reasons to Export
If you are looking to export you may have asked yourself, "Is it worth all the effort?" Exporting can be one of the best ways to expand your business:
- Grow your bottom line (companies that export are 17 percent more profitable than those that don’t).
- Smooth your business cycles, including seasonal differences.
- Use production capabilities fully.
- Defend your domestic market.
- Increase your competitiveness in all markets.
- Increase the value of your intellectual property should you choose to license it.
- Increase the value of your business should you choose to sell it.
As the volume of trade grows and barriers to trade fall, competition in a company’s domestic market intensifies, particularly from foreign competitors. Competition in our own backyard and enter new markets for our products and services overseas:
- Ninety-five percent of the world’s consumers live outside the United States. That’s a lot of potential customers to ignore.
- Foreign competition is increasing domestically. To be truly competitive, companies must consider opening markets abroad.
- Exporting is profitable.
- Exporting helps businesses learn how to compete more successfully.
With significant projected growth in global trade, fueled in large part by newly affluent consumers in China, India, and other developing economies, the challenge for businesses of all sizes in the United States is how to dip into this incredible revenue torrent.
As global trade grows, companies that engage in it report a shift in income derived from their export sales compared with sales in their domestic markets. A study of U.S. exporters found that 60 percent of small companies in the survey derived 20 percent of annual earnings from exports, while 44 percent of medium-sized companies did. When asked whether export sales would grow at least 5 percent per year for the next 3 years, 77 percent of the small companies and 83 percent of the medium-sized companies said they would.
You might reasonably respond by saying, “That’s all well and good, but do I have what a person in another country will buy?” Companies that produce an amazing array of products and services have grown their businesses through exports. Some of what’s sold is unique, but most is not, relying on other factors such as superior customer service or marketing to close the deal. The businesses and people behind them are excellent at business fundamentals and passionate about expanding globally.
Companies that do not manufacture products can profit from exporting by providing wholesale and distribution services.
Another answer to “Why bother to export?” is that exporting adds to the knowledge and skills of everyone in a company who does it. Doing business in a market that’s beyond one’s borders can have a transformational effect on its practitioners. The experience of forming new relationships, getting up close and personal with another culture, figuring out how to meet the needs of others, and learning how to be inventive in addressing new business challenges not only is personally rewarding; it also leads to improvements in products and makes companies stronger in whatever market they compete.
As one small exporter reports, “Exporting is easier than we imagined. Exporting opens your horizons to what’s going on in the world economy. We need to take that step outside ourselves and develop relationships and open doors. It may start out small. It did for us. But it’s growing. We are a better company and better managers. Maybe even better persons. And to me that’s what success is all about.”