Breaking Into The Trade Game: A Small Business Guide

PART I: BECOMING AN EXPORT SUCCESS STORY

Chapter 1 Making the Export Decision

Exporting is crucial to America's economic health. Increased exports mean business growth, and business growth means more jobs. Yet, only a small percentage of potential exporters take advantage of these opportunities. It is critical for U.S. businesses to think globally. Your decision to read this book indicates an interest in exporting. However, you may have discovered your company is already competing internationally -- foreign-owned companies are competing with you in your "domestic" markets. The division between domestic and international markets is becoming increasingly blurred. Your business cannot ignore international realities if you intend to maintain your market share and keep pace with your competitors. Making the export decision requires careful assessment of the advantages and disadvantages of expanding into new markets. Once the decision is made to export, an international business plan is essential. This chapter presents the advantages and disadvantages of exporting and offers a sample business plan.

ADVANTAGES AND DISADVANTAGES OF EXPORTING Consider some of the specific advantages of exporting.Exporting can help your business:

• enhance domestic competitiveness
• increase sales and profits
• gain global market share
• reduce dependence on existing markets
• exploit corporate technology and know-how
• extend the sales potential of existing products
• stabilize seasonal market fluctuations
• enhance potential for corporate expansion
• sell excess production capacity
• gain information about foreign competition

• develop new promotional material
• subordinate short-term profits to long-term gains
• incur added administrative costs
• allocate personnel for travel
• wait longer for payments
• modify your product or packaging
• apply for additional financing
• obtain special export licenses

These disadvantages may justify a decision to forego exporting at the present time. For example, if your company's financial situation is weak, attempting to sell into foreign markets may be ill-timed. On the other hand, some companies have been successful selling abroad even before they have made any sales domestically:

Landmark Systems of Vienna, Virginia, had virtually no domestic sales before it entered the European market. Landmark had developed a software program for IBM mainframe computers and located an independent distributor in Europe to represent their product. In their first year, 80 percent of their sales were attributed to exporting. In their second year, sales jumped from $100,000 to $1.4 million -- with 70 percent attributable to exports.

As you can see, there are no hard-and-fast rules as to which businesses should export, and which should not. In the case of Landmark Systems mentioned above, a foreign distributor produced results before any significant domestic sales occurred. Landmark Systems' decision to export, like that of many other small business exporters featured in this guide, was based on careful planning.

THE NEED FOR AN INTERNATIONAL BUSINESS PLAN Behind most export success stories is a plan. Whether formally written down, or sketched out informally at a meeting of your management team, an international business plan is an essential tool to properly evaluate all the factors that would affect your company's ability to go international. An international business plan should define your company's:

• commitment to international trade;
• export pricing strategy;
• reason for exporting;
• potential export markets and customers;
• methods of foreign market entry;
• exporting costs and projected revenues;
• export financing alternatives;
• legal requirements;
• transportation method; and
• overseas partnership and foreign investment capabilities.