Alternative Avenues for Expanding Through Exports
Abstract
"For the decade of the 90's, the arms race has been replaced by the export race. A
company that isn't exporting by the year 2000 will be left behind -just like a company
today that isn't using computers is far behind the times," stated Department of Treasury
Secretary Lloyd Bentsen ( 4, p.ll ). Bentsen hit the nail on the head with that statement.
Exporting should be taken seriously by every company in the United States, regardless of
their size. U.S. companies are losing market share in the domestic market because of
tremendous amounts of imports to compete with; therefore, U.S. firms need to discover
where they have a comparative advantage and export to that country's market.
Chapter II examines the reasons why a firm would choose to export along with
some of the barriers a firm will face once they have made the decision to engage in
international trade. The U.S. market may be shrinking because of the increased
competition from foreign imports, but overseas markets are growing. And, the growing
foreign markets provide a chance for U.S. firms to make up for the losses in the domestic
market. The opportunities to export products to foreign markets provides firms with a
chance to extend a product's life cycle and increase their profits. Unfortunately, these
chances are neither free nor easy. Exporters have to deal with barriers such as quotas and
tariffs which are specifically designed to protect domestic producers and restrict
competing foreign corporations. Trade barriers need to be taken into account when
exporting, but they do not outweigh the advantages gained from engaging in exporting.
Chapter III discusses some alternative avenues that exporters can follow in order
to secure their products in foreign markets. Indirect and direct exporting are the two main
categories that most export activity falls under. For the most part, indirect exporting uses
an export intermediary, such as an Export Management Company (EMC), to get their
product to the foreign market. Inexperienced exporters and small firms usually find that
indirect exporting best suits their export needs. On the other hand, direct exporting is
essentially direct trade between a domestic producer and a foreign buyer. This method is
often preferred by larger companies or by firms with previous international trade
experience. Technology licensing, joint ventures, and overseas expansion are also popular
and profitable methods American companies consider when choosing to export their
products.
The United Kingdom, as a potential export market for U.S. companies, is
discussed in Chapter IV. The U.K. is the world's fifth largest trading nation, and they
rely heavily on imports due to the fact that they have very few natural resources. For
example, they need to import about one-third of their food. It is estimated that imports
will make up twenty-two percent of their GDP in 1995. Since both countries speak
English, business can be conducted relatively easily, and the U.K. can be used as a
stepping stone to the rest of the European Community (EC). Chapter IV shows that the
United Kingdom represents a vast market with great potential for U.S. exporters.
It can be concluded that exporting is an excellent way for firms to make profits
because it provides a firm with more than one market in which to sell their product.
Expanding to an overseas market, when done correctly, can only help a firm grow.
Dennis Donovan, Senior Managing Director of the Wadley-Donovan Group, made an
excellent point when he stated, "There are a number of reasons to locate overseas, but the
basic common thread is that it makes good sound business sense" (2, p. 62).