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Exporting Basics

Prospective exporters rarely start with all the attributes that assure export success. However, with reasonable effort and guidance, a company can begin to fill the gaps and reach a point where exporting becomes viable. If you have not exported before, don’t assume the worst. You lack the experience, but not necessarily the potential to export. Every experienced exporter was at one time a non-exporter.

If you believe exporting might be right for you, having weighed the benefits, costs and risks, your next step is to assess your chances for success. For a detailed, customized assessment, take the CITD's on-line Export Readiness Assessment test.

Here are three basic indicators of export potential and success:

• Are you “export ready” as a company?

• Is there a demand for your product in one or more countries?

• Are you likely to be competitive in these markets?

• Is your top management committed to exporting as a new or expanded area of activity? A motivated management is a prime factor in export success. Other export needs can be acquired, such as financing, experience and market exposure, but exporting requires strong management commitment and support over the long haul. Long-term management commitment is critical. Exporting is not a spigot that can be turned on and off at will. It requires patience and adequate resources to develop markets and long-term relationships.
• Are your organizational and marketing practices suitable for exporting? Sound methodology is as critical in exporting as in domestic marketing. If you’ve been successful at home, the chances are that you base your decisions on market research and analysis, have a strong sales and distribution network, effectively promote your company and products, and give priority to customer service. Exporting requires the same sound methodology, but may also need to be adapted for countries with different marketing and distribution practices.
• Could you promptly fill new export orders from present inventory or other sources? Exporters should be able to respond promptly to any new orders they receive. Foreign buyers typically can buy from various sources, and if you can’t fill the order when they want it, they’ll usually find someone else who can. Don’t start or impair a relationship with delays and apologies. If you have idle plant capacity, you’re probably in a good position to fill any new orders. You may already have inventory on hand, or you could increase production fairly quickly without needing more workers, materials or equipment. With that flexibility, you can go after new export business as aggressively as you wish.

Export Demand Indicators

• Has your company received any unsolicited inquiries from foreign firms? Unsolicited foreign inquiries are a strong indicator of export potential. They offer tangible proof that you’ve been discovered abroad. You may not know how or why, but count it as a plus that someone overseas has taken the initiative to search you out. Many companies say they first started exporting only after and because they received unsolicited inquiries.

• If you haven’t been approached yet, don’t be discouraged. A likely reason is not lack of interest, but lack of awareness. Your company and product probably just aren't known abroad, either favorably or unfavorably. You need exposure abroad to pique interest and demand. See Increase Market Exposure Abroad for tips on how to become better known abroad.

• Are products like yours already being exported? If your competitors are already exportingsimilar products, a demand clearly exists that you may also be able to tap.Check official export statistics to see whether and how much similar products are exported. See USITC Data Web for official U.S.export/import statistics (Commodity by Country Series).

Export Competitiveness Indicators

• Are domestic sales of your product doing reasonably well? A strong domestic sales performance is a good indicator of export potential and competitiveness. If domestic sales are increasing, or have at least kept pace with domestic competitors, you could well be competitive abroad. You’ve already shown strength in the domestic market against the same domestic and imported products you’d likely face in export markets.

• Even if your domestic sales have been weak, don’t necessarily assume you’ve lost competitiveness and can’t export. In fact, if your sluggish sales are due mainly to a domestic economic slowdown, or to product obsolescence, exporting may offer a promising outlet. When the domestic economy stagnates, other countries may be booming. As their production and consumption increase, their import demand also rises, including for domestic products.

• Do you have a relatively strong share of the domestic market? Market share is a key indicator of product competitiveness, whether you’re selling locally, regionally or nationally. If your share of that market is already high or growing, or at least holding steady, your product likely has fundamental competitive strengths; e.g., attractive pricing, uniqueness, high quality, strong service and customer support, or other. These competitive assets are as appealing to foreign buyers as domestic.

• A low or declining market share reflects competitive weaknesses not normally conducive to exporting. Because competition is even more intense overseas, the chances are that you would do no better overseas, and probably worse. However, this could depend on the reasons for your low domestic market share. For example, if product obsolescence is the reason, exporting may offer an opportunity. Other countries, particularly lower income or less developed countries, may not need the latest technology and may value yours for its presumably lower cost.

• Is your product price-competitive in the domestic market? Domestic price-competitiveness is a big plus in exporting. Competition abroad is usually stiffer than at home, and price is often a decisive competitive factor. A competitive price is a must for products that are otherwise indistinguishable, such as basic commodities. Even for performance-based products, price often becomes decisive at some point. Unless your product is indisputably superior to the others, or is indispensable, the buyer may ultimately let price be the final determinant. If your prices are competitive domestically, you’re in a strong position to offer very attractive export pricing as well. While you’ll need to add some export delivery costs to your prices (e.g., freight, insurance, etc.), so too will most of your exporting competitors. You can thus retain your relative price advantage in many export markets.

• On the other hand, if you have little or no price advantage domestically, and have no offsetting product strengths (superior quality, uniqueness), exporting may not be a viable option. Given the importance of competitive pricing, you should try to obtain comparative price information before you enter a target market. If necessary, strongly consider adjusting your prices to meet the competition.

• Does your product compare favorably with domestic competitors in features and benefits? It helps to be "superior" in some key way, particularly when you’re higher priced than your competition. Foreign buyers look at product performance, not just cost, when they make procurement decisions (e.g., dependability, versatility, durability, repair frequency, productivity, labor-saving etc.).They will often pay more to get more. If your product fits a niche in the domestic market, or has some advantage over competing products, you have strong export potential.

• If you have no particular qualitative advantages, you may still have export potential. Many of the most heavily exported products are virtually indistinguishable (e.g.,agricultural products, raw materials and semi-manufactures). You and your competitors alike must use price and credit as your main selling points. If you do have a distinguishable product, but it’s comparatively “inferior,” consider markets that are less selective. Buyers in many less-developed, cost-conscious, labor-intensive countries may not need or want the "best" or"latest". They’ll often take a lesser product to pay less (e.g., manually-operated vs. automated equipment, yesterday's technology, no frills models).