Export

Export is a process in which products are shipped or sent from one country to another country for the purpose of trade or sale; it is the opposite of import. For example, Company A located in the United States sells and sends its products from the United States to Company B located in Germany; in this case, Company A is said to export its products, whereas Company B is said to import (buy from another country) the products of Company A.

Export is not restricted to only physical goods; services can also be exported. Examples of service exports are travel and tourism; transportation; architectural, construction, and engineering services; education and training services; banking, financial, and insurance services; entertainment; information services; and professional business services. Services are more difficult to communicate with consumers and require adaptation to the specific needs of customers. Export and import are important components of international business, as the two together compose international trade. Export is actually is a very popular and relatively easy way to expand into foreign markets. Therefore, it is an important element of global business.

Export has many advantages. Through export, companies can increase their sales and profit margin [Page 637]as the sales price can be higher in foreign countries. As production volume increases in line with export demand, companies are able to decrease their unit cost. Export also provides a kind of spreading of risk, since the exporting company will not anymore depend on only its domestic market; dependence on a single country can be risky in case of an economic or political crisis. Export also decreases the cost of foreign expansion.

However, export also has various disadvantages. As the exporting company does not have physical existence in the foreign market, its knowledge about the foreign market is limited. Therefore, it can miss potential opportunities in the foreign market. Export is also very susceptible to trade barriers and if these barriers increase, companies may have to cancel their export activities. Another fact is that companies themselves do not have power to influence these trade barriers, some of which are tariffs and quotas.

Internationalization

Companies internationalize their operations through different ways (called entry modes) such as sending their goods to other countries (export), establishing sales offices in foreign countries, giving production permission to foreign companies (licensing), partnering with foreign companies (joint venture), acquiring a foreign company, and establishing production and sales facilities from scratch in a foreign country (greenfield investment).

Export does not require much expense and knowledge of the foreign market as much as other entry modes do. Therefore, export is one of the simplest and the least risky ways of internationalization and is usually preferred by small and medium-sized enterprises. The production of the goods generally takes place in the exporter company's country (called domestic market or country); however, marketing, distribution, and customer service activities take place in the foreign country to which the goods are shipped.

Success Factors

There are various issues companies need to consider to be successful in their export activities. First of all, the management needs to have a firm and long-term commitment toward export. Export should not be thought of a daily activity because it requires long-term planning and focus. Second, not every product sold in the domestic market can be sold in other markets. Therefore, companies need to first assess whether their products have potential in foreign markets. Similarity in needs, tastes, preferences, and conditions between the domestic market and the foreign market may be an indication of sales potential in the foreign market. When the products of a company have unique features not available in foreign markets, then this may also indicate the sales potential of the product in foreign markets. Third, demand characteristics also play important roles; the demand for a particular product may be low in the domestic market but very high in a foreign market. In this situation, the product may also have sales potential in the foreign market.

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