Exporting

Definition: The selling of goods and services produced in one country in another country

The U.S. market for almost everything is huge, but it's not large enough for many entrepreneurs. For these growth-minded business owners, the rest of the world is their oyster. Seeking international growth offers opportunity aplenty by going global as an importer-exporter. Some of the specific advantages presented by successfully growing globally include:

  • You can extend the sales life of existing products and services by finding new markets to sell them in.
  • You can reduce your dependence on the markets you have developed in the United States.
  • If your business is plagued by destabilizing fluctuations in your markets due to seasonal changes or demand cycles, you can even out your sales by tapping markets with different or even countercyclical fluctuations.
  • You can exploit corporate technology and know-how.
  • Finally, by entering the global marketplace, you'll learn how to compete against foreign companies-and even take the battle to them on their own ground.

The overriding reason to go global, of course, is to improve your potential for expansion and growth. The obvious opportunities are the markets in Canada, Mexico, Europe and Japan. But those only scratch the surface. There are many other fast-growing, less competitive markets.

Along with promise, going global carries an equally heavy load of peril. From chasing too many opportunities to getting whacked by currency fluctuations, the game of international expansion has many threats that domestic-only businesspeople never see. You can grab the brass ring of growth by going global, but only if you avoid the pitfalls.

Many have blundered, but that doesn't mean you have to. Below are some of the most common exporting mistakes:

  • Failing to plan your strategy.
  • Chasing inquiries the world over. Just because dozens of countries show interest doesn't mean you're ready to market your product everywhere. Patience is key.
  • Assuming if it works in America, it'll work anywhere. But that's not true--you need to tailor your sales and marketing efforts to each country. Don't ignore the cultural differences that shape the marketplace. The same goes for pricing, shipping, payment terms and packaging.
  • Assuming business will be done in English. Familiarize yourself with the local language.

Today almost all entrepreneurial strategies for international expansion should take currency fluctuations into account. Often, the number of dollars it takes to equal a unit of a particular foreign currency can make the difference between a deal worth doing and a deal that would be a disaster.

When the dollar is weak against a foreign currency--it takes more dollars than usual to buy a unit of the foreign currency--it strengthens exporting entrepreneurs in a few ways. If the entrepreneur keeps prices level, those prices look lower to a buyer dealing in, say, Japanese yen or Mexican pesos.

The simplest way for exporters to deal with currency risk is to insist that all deals with foreign partners be done in dollars. However, that can drive away potential customers who prefer to do business in their local currency.

Few nations have experienced governmental and economic systems as stable and long-lasting as those in the United States. As a result, many U.S. companies that venture overseas are completely unprepared for overseas instability. If an economic crisis impacts your business, take the following steps:

  • Assess your financial capability.
  • Obtain information. A good local partner also comes in handy. You'll need somebody on the ground who can tell you what the status is there.
  • Save your client base.
  • Acquire legal representation by hiring local lawyers.
  • Remain focused on your goals.

As an international entrepreneur, you face risks every day you do business. The cargo you're exporting could fall off the ship, or it might get stolen in transit. Or maybe a customer went out of business and didn't pay for the last shipment you delivered. Even acts of nature can throw a wrench into an otherwise smoothly functioning global business. So if you haven't already, it's time to consider whether or not you're prepared for what the future might bring.

Insurance offers protection, peace of mind and much more. The types of coverage available to exporters are numerous and include cargo insurance (to protect your goods in transit), credit insurance (to protect against nonpayment), fire and theft insurance, and foreign investment and trade risk insurance (for confiscation or expropriation of your property overseas).

Policies can be purchased separately or in a package deal offered by many insurers. To determine the kind of protection you'll need, consider each country and situation individually, and research the risks involved. You may even want to talk to a professional consultant.

Of course, certain situations allow for a degree of chance. If you have a relationship with a customer in a politically stable country, such as the United Kingdom, you might choose to forgo credit insurance. But it probably wouldn't be a good idea if you're shipping to Africa, which insurers consider to be the riskiest part of the world.

The cost of insurance depends on many factors, such as where you are shipping cargo, who your customer is, how valuable the goods are, and the means by which you ship. And policies, which expire anywhere from after one transaction to after one year, should be continually reviewed.

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