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Exporting Basics

Exporting benefits the nation as well as the firms that export. The nation benefits, because increased exports create jobs, spur economic growth, bring in tax revenues, and improve the balance of payments. For firms, more money is the number one benefit. Whatever your business, you want to make a profit. Exporting helps you do that by increasing your sales income, diversifying your markets, reducing your vulnerability to lags in domestic demand, extending product life cycles, using idle capacity,and reducing unit costs through economies of scale. Exports also help sharpen competitiveness, broaden contacts, and enhance understanding of global markets and cultures. Besides, exporting can be fun if you like to travel abroad and meet new people.

Selling more is the surest way to make more money. Exporting greatly increases your sales potential. If you don’t export, you're competing only for a larger slice of the domestic pie. With exporting, you expand the pie - the entire world is your market. The U.S., for example, is the world’s largest market. Yet, over 95% of the world's population and two-thirds of its purchasing power lie outside the U.S. To illustrate, say your state or province is your current market. It's worth $1 million overall, and you have a 5% share ($50,000 sales). If you branch out to the $10 million regional market, you can double your sales with only a 1% market share. At a 5% share, your sales would increase ten-fold. Next, you expand to the nationwide $100 million market, with the same multiplier effect. Most successful firms do just that. They start locally, expand regionally, and then grow nationally, increasing sales at each stage. But too many of them stop there, as if the world market didn't exist. Why stop at the border? There's no sales barrier that automatically begins where your border ends.

The world market offers new sales options when domestic business slows down. Exports can help offset sales slow-downs during recessions and seasonal changes. When the domestic economy stagnates, the economy in other countries may be growing. As their production and consumption increase, their import demand rises. In your slow periods, rather than accumulate inventory, idle more capacity, or lay off people, explore export opportunities in growth economies. Similarly, when it's summer or winter in your country, it's just the reverse in other parts of the world. When your season ends, these countries are looking for the seasonal products you just stopped selling at home.

As technology advances and tastes change, many products become obsolete or lose their appeal, particularly in highly industrialized markets. But these products may still be valued elsewhere. Over half the world's economies are less developed. They may not need or can't afford your latest model. They may even prefer less costly earlier versions or used or reconditioned products. Pursue exports in markets that still value goods no longer in demand in the domestic market.

Increased exports put idle production capacity to work, often with the same equipment, staff and capital investment. With increased export production and sales, you can achieve economies of scale and spread costs over a larger volume of revenue. You reduce average unit costs and increase overall profitability and competitiveness.