Exporting is the sale of products or goods from the home country where the goods are made or sourced to a foreign country where the goods will be sold. Importing is the opposite. It is the act of bringing foreign-made or sourced items into the country. Importing is often referred to as global sourcing.
Understanding Why Companies Export
Companies export to participate in global trade. Usually, a distributor or export management company conducts the export process. In some cases, an export management company (EMC) acts as an independent company that then performs the duties of an export department. Exporting provides quick access to new and lucrative markets for a business.
Advantages of Exporting:
- Market: Gain access to a new market for goods which helps increase revenue.
- Financial: Provides access to the foreign currency which is highly beneficial for many countries located throughout the globe.
- Manufacturing: Ability to manufacture at even higher volume and purchase sourced materials in higher volumes which benefit volume discounts.
Dangers of Exporting/Exporting
As with any process, there are dangers involved. The buyer can often switch to a cheaper supplier to obtain a better price, or they could opt to start making the product locally which pulls the rug out from under you. In many cases, a buyer might decide to buy from someone who is selling from within their own country of origin. Often having a local presence when exporting is important to create balance and counter possible risks.
Contractual Forms of Entry (Licensing and Franchising)
Contractual forms of entry provide lower up-front costs compared to investment modes. Many companies extricate themselves from unfavorable situations due to contractual forms. Investment modes, such as joint ventures and wholly-owned subsidiaries usually provide higher returns and give a deeper knowledge of the country of origin and import.
