Advantages and Disadvantages of Exporting
Introduction
Companies willing to enter a new market with their products or services have many options and one of them is exporting. I divided exporting into two sub-groups by comparing financial involvement of a company and taking into account their strengths and weaknesses. Then I compared exporting with other market entry strategies, so I could gain further insight to advantages and disadvantages of exporting. In the conclusion I outline which types of exporting fit SME’s and which fit MNE’s.
Low cost exporting (“AT THE GATE” SELLING, EXPORT HOUSES, PIGGYBACKING, AGENTS, DISTRIBUTORS, FRANCHISES)
Advantages
Low cost exporting requires only a small direct investment, if any. It usually carries low risks of financial loss and companies can increase their revenue without additional costs for marketing. Products can be simply bought at the company’s production plant and be exported, even without an agreement with the manufacturer, which is the easiest way. Other than that, there are several ways companies can make agreements with partners (Stock J.R., Lambert D.M., 1983).
These partners usually have already established large international network and they have knowledge of the foreign market, purchasing practices and government regulations, which is very helpful (Stock J.R., Lambert D.M., 1983).
Products need to be sold in a way that attracts customer attention. Exporting partners usually carry a wider product range, therefore they can offer attractive sales packages. Administration and transport costs are spread over all products sold by partner, which helps to keep them as low as possible (Terpstra, V., 1990).
By franchising, a company also gains the ability to gain bigger market share, international growth in addition to low risks of proven business (Duckett, B., 2008).
Disadvantages
A low-cost exporting company usually has very little control. It has limited control over how the products are sold, to whom they are sold and sometimes not even in what
Companies willing to enter a new market with their products or services have many options and one of them is exporting. I divided exporting into two sub-groups by comparing financial involvement of a company and taking into account their strengths and weaknesses. Then I compared exporting with other market entry strategies, so I could gain further insight to advantages and disadvantages of exporting. In the conclusion I outline which types of exporting fit SME’s and which fit MNE’s.
Low cost exporting (“AT THE GATE” SELLING, EXPORT HOUSES, PIGGYBACKING, AGENTS, DISTRIBUTORS, FRANCHISES)
Advantages
Low cost exporting requires only a small direct investment, if any. It usually carries low risks of financial loss and companies can increase their revenue without additional costs for marketing. Products can be simply bought at the company’s production plant and be exported, even without an agreement with the manufacturer, which is the easiest way. Other than that, there are several ways companies can make agreements with partners (Stock J.R., Lambert D.M., 1983).
These partners usually have already established large international network and they have knowledge of the foreign market, purchasing practices and government regulations, which is very helpful (Stock J.R., Lambert D.M., 1983).
Products need to be sold in a way that attracts customer attention. Exporting partners usually carry a wider product range, therefore they can offer attractive sales packages. Administration and transport costs are spread over all products sold by partner, which helps to keep them as low as possible (Terpstra, V., 1990).
By franchising, a company also gains the ability to gain bigger market share, international growth in addition to low risks of proven business (Duckett, B., 2008).
Disadvantages
A low-cost exporting company usually has very little control. It has limited control over how the products are sold, to whom they are sold and sometimes not even in what
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