Global Marketing

a. In today's interconnected global economy, the question of whether or not to export seems academic. It nevertheless demands asking due to the substantial risk and resources called for in expanding sales internationally.

Pursuing export markets is recommended in a number of situations:

demonstrated international demand for your products

higher international prices for your manufactured goods

moderate or slow domestic market growth with strong, unsaturated or growing markets abroad

competitive pressures in your domestic market reducing prices and margins

competitors leveraging their profitability in foreign markets to increase their market share in your domestic market

relatively low labor or capital costs as compared with foreign manufacturers

strategic needs: capital, technology, capacity, partners, government assistance, etc.

intangible needs conforming with multi-cultural or internationally oriented corporate culture

If you choose to export, you will need begin by performing market research to evaluate the suitability of foreign countries for your export products. Then, if promising export markets are identified in this process, you can begin preliminary business discovery to determine if reliable and interested distributors, customers and suppliers exist in your target countries. Eventually you might initiate discussions with strategic partners whose contacts and market clout can support your export program. All of this information will provide you with the appropriate tools to enter the market or make a calculated postponement of your international expansion.

However, before you begin this effort, you should ask yourself the following questions:

Is my firm large enough?

Initial market research and business discovery are not costly, and a company can conduct such research with the assistance of regional experts, consultants or even internal resources. However, in the event that export promotion is justified, your company will need to invest in marketing, promotion, salaries, training and other areas. Most companies that attempt foreign exports and international marketing generate at least $2 Million in revenues annually and can support an international marketing budget of at least $100,000 per year. This represents the "entry-level" annual cost for a serious marketing campaign that aggressively and actively opens up no more than three foreign country markets to your products. Anything less will simply not meet basic marketing and promotional costs of entry.

What is my domestic competitive and market situation?

If intense domestic competition warrants focusing on improving local production and distribution, export sales may not be the best use of corporate resources. However, if foreign firms are a substantial source of competition, exporting into their home markets or altogether new markets will defend your company against price gouging and cross-regional "subsidies" (i.e., plowing earnings from sales of high-priced goods in one region into offering the same goods at low prices in your home market).

What are my financial objectives?

Several concerns related to financial planning warrant export sales:

Exporting stabilizes a company's cyclical changes in sales and profits by allowing the company to sell to foreign markets in boom times while its home market is in recession.

A growing company's home market size eventually limits sales and earnings. Where corporate strategy or shareholder expectations demand continued revenue and earnings growth, foreign export markets can respond by eventually delivering additional customers.

Companies with differentiated or low priced goods perform very well in foreign markets. Differentiated or "specialized" products can be sold for higher prices abroad than domestically. Low priced goods and commodity products (e.g., industrial parts) can easily undercut foreign competitors' market share. In either case, higher margins can result from exporting.

On the other hand, export sales require substantial up-front investment in the form of market analysis, trips to the region to secure the required relationships, and ongoing support of export activities with promotional campaigns (like rebates). Additional areas related to exporting that require significant expenditure include safety and technical certifications, compliance with local laws and modification of existing products to meet foreign needs (e.g., conversion from English to Metric or vice versa). Since these costs affect a company's bottom line, they must be considered as well.

What strategic initiatives require an international presence?

Your company can leverage the international presence developed through international marketing and exports in a number of directions:

access to low-cost production based on low cost materials and labor

high-tech production allowing for higher quality or efficiency

access to capital

facilitate sourcing of low-cost raw materials and components

procurement of critical technology (to save costs, improve quality or add features to existing products)

development of local partnerships key to your domestic or international strategy

favorable government-backed financing associated with exporting to certain countries -- i.e., U.S. government backed export assistance programs (Eximbank) or investment programs (Foreign enterprise funds)

What is your time-frame and how much risk can you tolerate?

No foreign market is free from challenges, including lost shipments, delays, cultural miscommunication, corruption, unforseen competition, political upheaval, arbitrary government action, sudden changes to regulations and other risks. Working with partners such as distributors, manufacturers and consultants who bring expertise and connections in your region of choice minimizes this risk.

However, due to ubiquitous levels of risk (even in developed nations), you should be prepared to accept setbacks and always view exporting as a long-term, strategic