Chapter 15: Exporting, Importing, and Countertrade
If you’ve ever bought something over eBay from a foreign seller, you’ve been directly involved in
an export transaction.
Many of the products you use everyday are imported from other countries.
In fact, thanks to the decline in trade barriers promoted by the WTO and regional agreements like
NAFTA and the EU, exporting and importing have become easier than ever.
Because it’s easier, we’ve seen the volume of exporting increasing in recent years. Today, firms of
all sizes engage in exporting, and face the challenges of identifying export opportunities, dealing
with the problems of doing business in foreign markets, working through the process of export
financing and getting insurance, and learning how to protect themselves against foreign exchange
risk.
We’ve touched on some of these areas in earlier chapters, but in this chapter, we’ll look at the
process of exporting and importing in more depth.
Why is exporting attractive?
Well, by exporting, firms can quickly increase the size of their market.
Rather than simply relying on the domestic market for their revenues, by exporting, firms can
increase their profits by viewing the world as their market.
As you’ll see in the Management Focus in your text, FCX Systems was able to substantially increase
its market by exporting. Similarly, recall from the Opening Case that MD International successfully
built a business exporting medical equipment to Latin America.
Despite the opportunities however, we know that while many large firms are proactive about
exporting, smaller firms often wait for export opportunities to come to them. We say they take a
reactive approach to the process.
Sometimes, this lack of initiative by smaller companies occurs because the firms don’t really know
just how great the opportunities are, nor how to pursue them.
In some cases, a bad export experience in the past, can keep a firm from pursuing new export
opportunities. In addition, novice exporters sometimes fail to realize just what’s involved in the
exporting process, and then react negatively when something goes wrong.
, What are the disadvantages of exporting?
Firms can run into numerous pitfalls when they begin exporting including doing a poor market
analysis, having a poor understanding of competitive conditions, using a marketing effort that fails
to recognize both the need to customize a product or to make appropriate distribution
arrangements and promotional campaigns, and simply having a general lack of understanding of
the skills required to enter a foreign market.
Some firms are also surprised at the amount of paperwork involved in exporting.
How can firms improve their export performance?
One way to improve the chance for success is to take advantage of export assistance programs
that are offered by governments, or hire an export management company.
What type of assistance is available?
The type of assistance offered varies by country.
Germany and Japan for example, have developed extensive institutional structures for promoting
exports.
You may have heard of Japan’s Ministry of International Trade and Industry or MITI for instance.
Japanese firms can also take advantage of the knowledge and contacts of the sogo shosha, the
country’s great trading houses that have offices and contacts all over the world.
In Germany, trade associations, government agencies, and commercial banks all provide export
assistance to firms.
Where can American firms get export assistance?
In the U.S., exporters can collect information from the U.S. Department of Trade where they can
get a “best prospects” list and also participate in the various trade events the Department of
Commerce organizes.
The Small Business Association, or SBA, is another good source of information for U.S. exporters.
Some companies prefer to hire another company to handle their exporting.
Export management companies, or EMCs, are export specialists that act as the export marketing
department or international department for their clients.
EMCs usually work in two different ways.
One way involves setting up the exporting operations for a firm with the understanding that the
client will take over once things are established.
The other way involves setting up the exporting process for the client, and then continuing to
manage it for the firm.
If you’ve ever bought something over eBay from a foreign seller, you’ve been directly involved in
an export transaction.
Many of the products you use everyday are imported from other countries.
In fact, thanks to the decline in trade barriers promoted by the WTO and regional agreements like
NAFTA and the EU, exporting and importing have become easier than ever.
Because it’s easier, we’ve seen the volume of exporting increasing in recent years. Today, firms of
all sizes engage in exporting, and face the challenges of identifying export opportunities, dealing
with the problems of doing business in foreign markets, working through the process of export
financing and getting insurance, and learning how to protect themselves against foreign exchange
risk.
We’ve touched on some of these areas in earlier chapters, but in this chapter, we’ll look at the
process of exporting and importing in more depth.
Why is exporting attractive?
Well, by exporting, firms can quickly increase the size of their market.
Rather than simply relying on the domestic market for their revenues, by exporting, firms can
increase their profits by viewing the world as their market.
As you’ll see in the Management Focus in your text, FCX Systems was able to substantially increase
its market by exporting. Similarly, recall from the Opening Case that MD International successfully
built a business exporting medical equipment to Latin America.
Despite the opportunities however, we know that while many large firms are proactive about
exporting, smaller firms often wait for export opportunities to come to them. We say they take a
reactive approach to the process.
Sometimes, this lack of initiative by smaller companies occurs because the firms don’t really know
just how great the opportunities are, nor how to pursue them.
In some cases, a bad export experience in the past, can keep a firm from pursuing new export
opportunities. In addition, novice exporters sometimes fail to realize just what’s involved in the
exporting process, and then react negatively when something goes wrong.
, What are the disadvantages of exporting?
Firms can run into numerous pitfalls when they begin exporting including doing a poor market
analysis, having a poor understanding of competitive conditions, using a marketing effort that fails
to recognize both the need to customize a product or to make appropriate distribution
arrangements and promotional campaigns, and simply having a general lack of understanding of
the skills required to enter a foreign market.
Some firms are also surprised at the amount of paperwork involved in exporting.
How can firms improve their export performance?
One way to improve the chance for success is to take advantage of export assistance programs
that are offered by governments, or hire an export management company.
What type of assistance is available?
The type of assistance offered varies by country.
Germany and Japan for example, have developed extensive institutional structures for promoting
exports.
You may have heard of Japan’s Ministry of International Trade and Industry or MITI for instance.
Japanese firms can also take advantage of the knowledge and contacts of the sogo shosha, the
country’s great trading houses that have offices and contacts all over the world.
In Germany, trade associations, government agencies, and commercial banks all provide export
assistance to firms.
Where can American firms get export assistance?
In the U.S., exporters can collect information from the U.S. Department of Trade where they can
get a “best prospects” list and also participate in the various trade events the Department of
Commerce organizes.
The Small Business Association, or SBA, is another good source of information for U.S. exporters.
Some companies prefer to hire another company to handle their exporting.
Export management companies, or EMCs, are export specialists that act as the export marketing
department or international department for their clients.
EMCs usually work in two different ways.
One way involves setting up the exporting operations for a firm with the understanding that the
client will take over once things are established.
The other way involves setting up the exporting process for the client, and then continuing to
manage it for the firm.
