Exporting is an international business activity, where one exports products to overseas countries, to get greater profits than possible on the local market. It is the main means to boost the country’s economy and create a fiscal surplus. Expanding exports is crucial to increase foreign currency earnings, creating favorable conditions for imports and developing jobs for people.
All of the disadvantages of exporting can be overcome
Entering into any kind of business you will have to face the specific challenges and the difficulties. the import-export business has different challenges than the local business. In the following, we will look at the cons of exporting.
1.The dynamics of export markets
Not all of the items in your country will be easy to export. Exporting to foreign markets requires a lot of planning, effort, and analysis. Sometimes things are not under your control. For example, when the demand from foreign markets is declining, but the supply will increase because the output of major producing countries is still increasing, then it can be very difficult to find new customers with a satisfactory price-level. This is a global competition.
In fact, most of the private export enterprises participating in the export business, are small-scale enterprises with low turnover and limited ability to self-promote their products to find markets and customers.
With weak competitiveness, many businesses lost their orders. Moreover, many businesses have not paid adequate attention to export marketing and promotion and market expansion. Usually, small companies don’t have departments directly involved in dealing with partners, procedures such as sample introduction, orders, invitations, etc. Those stages must be through intermediaries doing logistic services
To survive and expand, the exporter must put great efforts into international marketing. For you as an exporter, getting export orders and fulfilling these as well as possible, is the most important lesson.
Also, in international business, it is crucial, that one is dealing with the commodities with what he has a competitive advantage! Because along with the rapid, complicated and unstable transformation of the market, if you want your business to survive, it is inevitable that you supply something which is valuable and competitive on that market.
2.The right products and the right market
It is difficult enough to find the right product for a specific market. There require many things to be accomplished: market research, research of other enterprises that provide similar products, indicating the pros and cons consumers have been pointing out regarding their existing products. There is fabricating or finding the existing product that remains the pros of the existing products yet overcomes the cons of the previous ones.
The difficulties in one market will not necessarily be the same in another market. After the series of hard work in order to have a successful product in one area, one might have to repeat and to even compare and contrast the two markets when venturing into a new area. Pr-assuming that a successful product in one place shall be the same in another can lead to major loss of money, as the result may not be the same.
Therefore, it is critical to study your product and the markets you plan to venture into. Keep in mind the citizens’ needs, and the complexity of cultural differences. Never assume a thing, every assumption must be proved.
We advise for every exporter, to conclude and put together a comprehensive export business plan.
3.The tariffs
Export taxes are enacted by the government to manage exports in a way that is most beneficial to the country. This tool is usually applied only to very few export items to supplement the state budget and restrict exports to fully meet the domestic consumption demand for such goods.
In addition to export duties, more importantly, the import tariffs also have an impact on business performances. An import tariff is a tariff that the importing country imposes on one unit of import. Therefore, it will increase the total costs for the enterprises who are doing the importing. If one country rises the import duty significantly, it will reduce the volume of the product(s) entering into that country. USA- China trade war is an ideal proof and example of this.
4. The quotas
Quotas are construed as state regulations on the highest number of items or groups of enterprises that are permitted to be exported or imported. The exporting country will set an export quota to adjust the number of exports and improve export efficiency.
The importing country will set an import quota to limit the number of goods imported into the country, to protect domestic production, resources and improve the balance of payments. Like tariffs, both export and import quotas can be a disadvantage for your exports, sometimes limiting your growth.
5. The technical standards
In addition to the tariff and quota instruments, there is another more sophisticated tool increasingly used by many countries. It is the setting of quality standards and techniques for imported products. This non-tariff measure also aims to limit the amount of import and export goods of the business. The requirement of meeting foreign standards can be the biggest obstacle or disadvantage of exporting if you are a small entrepreneur.
In order to export to Europe for example, most of the developing countries’ businesses are still unable to meet strict food safety and quality regulations. Facing the trend of global integration, the wave of import is growing strongly, all import and export companies must have methods to comply with strict food hygiene and safety regulations.
6. The currency exchange rate
The exchange rate is the purchasing power of one currency against another. The purchasing power of a currency is the solvency of a monetary unit with a certain quantity of export goods associated with international payment. In international payment, people often use strong currencies like USD to pay.
If the exchange rate rises, which is equivalent to the increase in the value of a foreign currency against the local currency, then export activities will be encouraged. Conversely, if the exchange rate decreased, it would inhibit the development of export activities.
For example, the US-China trade war has caused the Yuan to depreciate significantly against the US dollar, helping enterprises to import cheaper textile and fabric materials from China. It also helped China companies to get more orders, even the big tariffs were in place on the USA side.
In the near future, the US-China trade war will spread, commodities such as fabrics and yarns will affect firstly and directly, this is an opportunity for the domestic textile industry.
China can locate the production facilities to the neighboring countries to take advantage of labor costs, trade and detour into the United States. International economic integration is gradually reducing tariff barriers to facilitate exports but limits by non-tariff technical barriers such as quality standards, models, brands and product specifications, the origin of goods will remain.
7. Relationships with partners
Most of the businesses themselves perform all stages of the import and export processes and activities. This will lead to businesses will take a lot of time and sometimes have difficulties from the partner. Therefore, please pay attention to establishing and maintaining good relationships with professional partners such as cargo transportation, customs services, banking, customs services, representation attorneys.
In our exporters/importers guide, we have listed some trusted companies with whom you can work.
8. The national infrastructure systems
The national infrastructure system also has a great impact on exports. A country with a developed system of roads and bridges will contribute to promoting products and improving the ability of enterprises to participate in the international trade market. Especially, wharves, railway stations, and ports have a direct impact on the export activities of enterprises.
If this system is built in accordance with the general requirements of the international market, it will be a positive factor affecting the export activities of enterprises. In contrast, the system of seaports, railway stations and unloading stations that do not meet the minimum technical requirements will cause suspicion from foreign partners and it is likely that they will lose some export-import opportunities.
So, this is a case mostly for less developed countries in Africa, Southeast- Asia.
9. The financial capability
Some exporters have not been properly aware of the importance of prices in global markets, the competitiveness is still low. Much of the pricing is based on competitors’ prices. The exporters have not been really active in researching the market needs to formulate price strategies.
The working capital of exporting enterprises is still low. This means the purchasing and stocking of goods are limited, this is also the reason why exporting enterprises have not been able to take the initiative in pricing. Moreover, due to the low ability to rotate working capital, the exporters are always in a state of running out of capital, although having mortgaged assets to borrow from banks still cannot guarantee business capital for businesses.
To do international trade, requires significantly more working capital (cash) than doing the local business. But there are many ways, to overcome this problem if the profitability of your business is high enough.
10 The complex procedures and documentation
Complex procedures and documentation in export-import business is sometimes the biggest barrier for the exporters-importers today. The procedure is still cumbersome, lack of transparency, the attitude of civil servants is not appropriate, lack of objective … makes businesses costly and difficult.
Until now, the exporters-importers still have to struggle with public authorities on administrative procedures. Not only that, some national policies are changed abruptly to disadvantage for some specific industry export-import companies.
This is also the case for most nations of Africa, south-east Asia, and Asia general.
Although the import-export business has disadvantages, it has significant advantages which will out-weight the disadvantages, these advantages will be the motivation and goals which are worth your effort.
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