Introduction to Export Management

What is Export?

Export and Import are two sides of the same coin namely, International trade. International trade refers to the trade among nations, say, between India and Japan. A nation can be represented by its government or by any of its firm or firms. The firm or the government selling any product or service is said to be exporting it, while the firm or the government buying it, is said to be importing.

Why do countries trade?

All countries of the world have not been endowed by nature with the same productive facilities. There are differences in the geographical conditions and natural resources as also in the availability of labor and capital. As a result of this, countries have a deficit of some commodities on try one land and a surplus of certain commodities on the other. For example, India has a deficit of crude oil (petroleum) and a surplus of iron ore among other things. Through international trade, countries aim at meeting their deficits and disposing off their surpluses.

Further, because of these differences in geographical conditions and production resources (inputs), countries find it advantageous to 'specialize' in the production of certain products. Such specialization leads to a surplus which, in turn, gives rise to the need for international trade. For example, India has got an abundance of cheap labor and generally specializes in the production of labor intensive goods. Many buyers in foreign countries, especially in the developed countries where labor are quite costly, find it cheaper to buy such goods from India than to produce these themselves in their own countries. On the other hand, Indian producers looking for avenues to dispose off their goods find it more profitable to sell these in the foreign markets than in the domestic market and thus, an international trade takes place. In other words, specialization also stimulates international trade.

International Marketing V/s Domestic Marketing

There are three basic points of similarities between domestic marketing and international marketing.

1. Both in domestic marketing as well as in international marketing, success depends upon satisfying the basic requirements of the consumers. This necessarily involves finding out what the buyers want and meeting their needs accordingly.

2. It is necessary to build goodwill both in the domestic market as well as in the international market. If a firm has been able to develop goodwill of the consumers, its task will be much simpler than the one which has not been able to do so. The days of caveat emptor have gone and the basic principle now is caveat vendor. In fact, to win over customers, liberal guarantees have to be given and facilities of after-sales service may have to be provided on an extensive scale.

3. Research and development for product improvement and adaptation is necessary both for international marketing and domestic marketing.

Motivation to Export

There are some basic economic reasons which might influence a company's decision regarding export business. These are:

1. Bulk Sales: You have the advantage of selling in bulk. Export orders are larger than those from the domestic market.

2. Relative Profitability: The rate of profit to be earned from export business may be higher than the corresponding rate on the domestic sales. Further, experience shows that there has been a progressive improvement in the unit value realization of certain export products.

3. Insufficiency of Domestic Demand: The level of domestic demand, either at a point of time or over time, may be insufficient for utilizing the installed capacity in full Export business offers a suitable mechanism for utilizing the unused capacity. This will reduce costs and improve the Overall profitability of the firm. Recession in the domestic market often serves as a stimulus to export ventures. In fact, export of engineering goods from India picked up momentum at the time of recession in the Indian economy during 1967-69, when Indian manufacturing units faced with large inventories and weak order book position, turned to export markets. Developing diversified export markets thus provides a firm with a degree of protection against cyclical domestic economic slowdown. But it must be emphasized that there is an inherent danger in looking at exports to merely supplement the domestic business at the time of crisis. Penetrating foreign markets is a difficult job but sustaining them is even more onerous. Therefore, once a decision is taken to enter international markets, every effort will have to be made to retain them. And this can be done only when export marketing operations are recognized as an integral part of the total corporate activity. In fact, what is needed is full involvement in and commitment to exports.

4. Reducing Business risks: A diversified export business may help in mitigating sharp fluctuations in the overall activity of a company. When a firm, is selling in a number of markets, the downward fluctuation in sales in one market, which may be the domestic market may be fully or partly counterbalanced by a rise in the sales in other markets. Secondly, geographic diversification also provides the momentum to growth in as much as a single or a few markets will have only limited absorptive capacity.

5. Legal Restrictions: Governments may impose certain restrictions on further growth and capacity expansion of some firms within the domestic market in order to achieve certain social objective. But there may not be any such restrictions on making investments overseas or the restrictions may be relaxed even in the domestic market, provided the additional capacity envisaged by the company is utilized for exports. In these situations, a firm may contemplate export operations, because it offers a way to achieve corporate growth which may otherwise not be possible. This was the position in India before industrial licensing was virtually removed.

6. Obtaining Imported Inputs: Nations have to export to pay for imports of materials, technology or processes not available within their national boundaries, governments, therefore, may be compelled to impose export obligations on the firms, especially those in need of imported

7. Social Responsibility: In many cases, businessmen themselves feel a sense of responsibility and contribute towards the national exchequer by increasing their exports. Incidentally, by exporting at a time when it is difficult to export they build up their image in the domestic market. They also look at exporting to attain status and prestige.

8. Increased Productivity: Increased productivity is necessary for ultimate survival of a firm. This may lead a company to increase production and then seek export markets. Moreover, in these days of technological developments, bigger companies have to spend a lot on research and development. To meet the increased costs of research and development, larger markets become a necessity and exports become unavoidable.

9. Technological Improvement: Entry into export markets may enable a firm to (i) pick up new product ideas and to add to product line, (ii) improve its product, (iii) reduce costs, and (iv) discover new applications for its product. As was pointed out by Telco Chairman at its 1980 Annual national market and compels us to update our products. This up gradation of our vehicles unmistakably benefits the Indian customer also.