Selling to multiple markets allows companies to diversify their business and spread their risk. Thus, companies must carefully weigh the financial risk involved in doing international transactions.
Companies who have excess production for any reason can probably sell their products in a foreign market and not be forced to give deep discounts or even dispose of their excess production. ID Filed under: This might require additional personnel and thus lead to expansion. The intermediaries, which undertake export of goods, provide technical guidance to local suppliers for promoting exports from the Country.
While there are no hard-and-fast rules that can help companies make decision to export and to become successful, understanding the advantages and disadvantages of exporting can help smooth entry into new markets, keep pace with competition and eventually realize profit.
Collections of payments using the methods that are available open-account, prepayment, consignment, documentary collection and letter of credit are not only more time-consuming than for domestic sales, but also more complicated.
Though the trend is toward less export licensing requirements, the fact that some companies have to obtain an export license to export their goods make them less competitive. Indirect exporters can import raw materials, components, spare parts, etc.
Exporting Challenges While the advantages of exporting by far outweigh the disadvantages, small and medium size enterprises especially face some challenges when venturing in the international marketplace.
Entering an export business requires careful planning, some capital, market know-how, access Exporting advantages and disadvantages exporting common pi quality product, competitive pricing strategy, management commitment and realizing the challenges and opportunities without them it is almost impossible to succeed in the export business.
Compensate for Seasonal Demands. Once the product reaches the final stage, maturity in a given market, the same product can be introduced in a different market where the product was never marketed before. Companies whose products or services are only used at certain seasons domestically may be able to sell their products or services in foreign markets during different seasons.
Whether it is unintentional or a deliberate move companies need to evaluate and carefully assess the advantages and challenges of exporting before committing resources. When exporting, companies may need to modify their products to meet foreign country safety and security codes, and other import restrictions.
Additional foreign sales over the long term, once export development costs have been covered, increase overall profitability. Capturing an additional foreign market will usually expand production to meet foreign demand. Being competitive in the domestic market helps companies to acquire some strategies that can help them in the international arena.
Most companies become competitive in the domestic market before they venture in the international arena. Expand Life Cycle of Product. Lower Per Unit Costs. Finding information on foreign markets is unquestionably more difficult and time-consuming than finding information and analyzing domestic markets.
Companies who venture into the exporting business usually have to have a presence or representation in the foreign market. Advantages of exporting The reason for your company to consider exporting is quite compelling; the following are few of the major advantages of exporting: Any company, before committing its resources to venture in the export business, must carefully assess the advantages and disadvantages of exporting into a new market.
Generally such guidance is provided free of cost or at negligible fees. Gain Global Market Shares. For Beginners Advantages of Indirect Exporting: In many instances, the documentation required to export is more involved than for domestic sales.
Since indirect exporters concentrate only on manufacturing aspect, they can exercise their task with a greater degree of specialisation, leaving the responsibility of marketing to export marketing intermediaries.
Companies will not be tied to the changes of the business cycle of domestic market or of one specific country. Whether it is unintentional or deliberate move companies need to evaluate and carefully assess the advantages and challenges of exporting before committing resources.
The following are the advantages of indirect exporting: Because it takes more time to develop extra markets, and the pay back periods are longer, the up-front costs for developing new promotional materials, allocating personnel to travel and other administrative costs associated to market the product can strain the meager financial resources of small size companies.
Selling goods and services to a market the company never had before boost sales and increases revenues. In less developed countries, for example, reliable information on business practices, market characteristics, cultural barriers may be unavailable. Increased Sales and Profits. Many products go through various cycles namely introduction, growth, maturity and declining stage that is the end of their usefulness in a specific market.Learn more about the methods of indirect exporting, including the distinction between an export management and export trading company.
The Advantages and Disadvantages of Indirect Exporting. Menu Search Go. Go. Becoming an Owner. Small Business Entrepreneurship Online Business Home Business Other common. c) Common Pitfalls of Exporting: The firm wishing to export must identify and avoid the major problems that that are often associated with doing business in a foreign market.
This is also necessary to understand the element in export strategy. Advantages and disadvantages of exporting Selling to customers outside Northern Ireland can change your business.
Like any fundamental change to the way you trade, there are risks as well as benefits you should consider. Disadvantages of Exporting: Because exporting does not require the presence of the firm in the country it is exporting its goods or services, the firm usually does not meet with its customers as a result it does not get to learn about the interests of its clients, the competitors and the market.
Direct exporting involves exporting directly to a customer interested in buying your product (rather than to a third party distributor).
You are responsible for handling the market research, foreign distribution, logistics of shipment, and invoicing. Advantages of Indirect Exporting: The following are the advantages of indirect exporting: (a) Less Risk: Indirect exporters are prone to comparatively less risks as the risk of marketing gets transferred to export market intermediaries.
At the same time, these intermediaries are specialised in their own field.Download