2. Table of Contents
I. Introduction.....................................................................................................................................................................3
II. Opportunities Export Offers...................................................................................................................................3
III. Export Challenges....................................................................................................................................................4
IV. Tricks to Determine Export Capacity, Resources and Management........................................5
V. Marketing Tools.............................................................................................................................................................7
VI. Market Entry Strategies.......................................................................................................................................9
A. Methods of Market Entry....................................................................................................................................9
VII. Pricing Strategies..................................................................................................................................................11
3. I. Introduction
Exporting is the most traditional and well-established form of market entry strategies.
Simply stated, exporting refers to the marketing of goods produced in one country into
another. While exporting requires no direct manufacturing in a foreign country, successful
exporting warrants a need for significant investments in marketing-related initiatives.
Done right it can be an expensive but lucrative proposition.
It is important to emphasize that all companies face international competition, not only in
export markets, but in domestic markets as well. Becoming internationally competitive is
therefore not only an essential requirement for successful exporters, but also the best
means of defense that local companies can use to counter foreign imports.
Successful exporting contributes positively to a country's economy not only on the macro
level, but on the micro level as well.
II. Opportunities Export Offers
Exporting offers companies many additional opportunities that they cannot obtain from
domestic markets. These include the following:
Increased sales and opportunities; added sales volume may lower the production
cost; lower production cost may improve overall profitability;
Competing in foreign markets should contribute to increasing the company's overall
competitiveness; improving the status of the company by competing in foreign
markets;
Reducing risks by selling to diverse markets; taking advantage of economies of scale
by enlarging the sales base in order to spread fixed costs; compensating for seasonal
fluctuations in domestic sales;
4. Finding new markets for products with declining domestic sales potential, thereby
extending the product's life cycle;
Exploiting opportunities in untapped markets; taking advantage of high volume
purchases in large markets overseas such as the US, Europe and Asia;
Learning about advanced technical methods used abroad; following domestic
competitors who are already selling overseas; testing opportunities for overseas
licensing, franchising or production; contributing to the company's general
expansion; improving the company’s overall return on investment; research and
development costs can be set off against a large sales base; new markets might yield
ideas for further innovations; fluctuations in business cycles can be leveled out by
selling in different markets; declining sales in one market might be offset by a boom
in another market.
III. Export Challenges
Exporting has many challenges, but you can surmount them through careful preparation
and planning. Among these challenges are:
Increased costs: You may have to modify packaging, or your products or services,
and account for short-term costs such as extra travel, production of new marketing
materials and additional staff to adapt to markets abroad.
Level of commitment: It takes time, willingness, effort and resources to establish
and maintain yourself in foreign markets.
Staying in for the long haul: While exporting holds great economic promise for
most companies, months or even several years can pass before you see a significant
return on your export investment.
5. Language and cultural differences: Familiarize yourself with the differences in
language, culture and business practices so you don’t inadvertently offend your
potential customer and lose a sale.
Paperwork: There’s no way around it, foreign governments require a lot of
documentation from exporters of products and services.
Accessibility: You have to be easily available to your foreign clients.
Competition: You must be sure you’re thoroughly familiar with the competition in
your target market.
IV. Tricks to Determine Export Capacity,Resources andManagement
An export-ready business is one that has the capacity, resources and management to
deliver a marketable product or service on a global scale at a competitive price. The trick is
to determine whether this is true of your company and if it isn’t how to make it happen.
Your first step is to think about the resources and knowledge your business already has.
Consider the following as a starting point.
1. Your Expectations:
Clear and achievable export objectives
A realistic idea of what exporting entails and the timelines for results
An openness to new ways of doing business
An understanding of what is required to succeed in the international
marketplace
2. Human Resource
The capacity to handle the extra demand associated with exporting
Senior management committed to exporting
6. Efficient ways of responding quickly to customer inquiries
Personnel with culturally-sensitive marketing skills
Ways of dealing with language barriers
3. Financial and legal resources
Do you have enough capital or lines of credit to produce the product or service
Can you reduce financial risks of international trade
Find people to advise you on the legal and tax implications of exporting
Can you Deal effectively with different monetary systems and ensure protection
of your intellectual property
4. Competitiveness
Do you have A product or service that is potentially viable in your target market
Resources to do market research on the exportability of your product or service
Proven, sophisticated market-entry methods
Can the packaging be easily modified to satisfy the demands of foreign
customers?
Is special documentation required? Does your product have to meet any
technical or regulatory requirements?
5. Transportation
How easily can your product be transported?
Would transportation costs make competitive pricing a problem?
6. Local Representation
Do you require a local representative for marketing efforts?
Do products require professional assembly or other technical skills?
Is after-sales service needed? If so, is it available locally or do you have to
provide it? Do you have the resources to do this?
7. 7. Exporting services
If you’re exporting services, what is unique or special about them?
Are your services considered to be world-class?
Do you need to modify your services to allow for differences in language, culture
and business environment?
How do you plan to deliver your services: in person, with a local partner or by
electronic means such as the Internet?
8. Capacity
Will you be able to serve both your existing domestic customers and your new
foreign clients?
If your domestic demand increases, will you still be able to look after your export
customers and vice versa.
V. Marketing Tools
Developing the right marketing tools is crucial to the success of your business. Below is a
list of tools and tips to get you started:
1. Business Cards
Professionally designed and high quality
Easy to read
In the appropriate language(s)
Consistent throughout your firm
Distinctive and informative
Up-to-date and complete, including area codes, country,
Telephone and fax numbers, postal code, email and website addresses
2. Brochures
Creative and appealing
8. Informative and easy to read, highlighting your uniqueness
Professionally designed and printed
Visually pleasing
3. Customer testimonials
Demonstrate that your company is highly recommended
Represent your best customers
Feature quotes from top executives
Include in your brochure and on your website
4. News articles
Clearly state that your company is a recognized leader
Quote in your brochure
Reproduce on your letterhead
Display in your office
Send to potential clients
5. Videos
Sophisticated and interesting
Professionally produced
Oriented to the quality and benefits of your product or service
Clear and concise
Easily available
6. Website
Comprehensive and informative
Professionally designed
Easy to navigate
Visually pleasing
Up to date and reliable
9. Email enabled
Capable of allowing online purchasing (if appropriate)
VI. Market Entry Strategies
It’s very important for new exporters to partner with someone who’s familiar with the local
business culture.
Developing a market entry strategy simply means finding the best methods of delivering
and distributing your goods.
Based on the market research, you must decide which entry method best suits your needs.
Some factors to considered are:
How is business conducted in your target market and industry sector?
What are your company’s export strengths and weaknesses?
What is your company’s financial capacity?
What product or service are you planning to export?
How much service and after-sales support will your customers require?
What trade agreements or barriers apply to your target market?
A. Methods of Market Entry
The traditional means of market entry fall into four broad categories:
1. Direct exports
For products, you market and sell directly to the client. For services, you
negotiate, contract and work directly with the client.
a. Advantages
A higher return on your investment than selling through an agent or
distributor
Allows you to set lower prices and be more competitive
Close contact with your customers
10. b. Disadvantages
You don’t have the services of a foreign intermediary
Customers or clients may take longer to get to know you
2. Indirect exports
For products, you market and sell to an intermediary such as a foreign
distributor. You can also retain a foreign agent or representative who does not
directly purchase the goods.
For many new exporters, an intermediary may be the best way to enter a
market.
3. Partnerships and acquisitions/investments
You might find it advantageous to partner with a local company whose strategic
position complements or enhances your own.
A well-structured partnership can benefit both parties in the following ways:
Your partner can complement your capabilities and provide the local expertise,
insights and contacts
Each company focuses on what it does and knows best
Both partners share the risk
You can pool ideas and resources to help keep pace with Change You can
approach several markets simultaneously
Your partner may provide technology, capital or market access that you might
not be able to afford on your own
Partnerships may help resolve problems related to professional accreditation,
movement of personnel across borders, and tax and legal status In a highly
competitive global market, combining the technical and financial strengths of
two businesses can make both more competitive
11. VII.Pricing Strategies
In the process of determining a final export price, there are a number of pricing strategies
that you could follow, but obviously only one strategy that you will follow at any time.
Whatever pricing approach and associated strategy you choose; your starting point is
always the costing exercise. Unless you know exactly what your costs are, whichever
approach and strategy you follow will always be a risk as you may be selling at a price that
does not cover your costs and therefore you will be losing money with every sale that you
make! Your costs represent the basis upon which your final export price is built. Once you
have calculated your costs, then you may want to choose from one of the following
strategies.
Price is the amount of money charged for a product or service. Price = product + service +
profit + image.
Price will include the cost of producing your product, the cost of providing any needed
services that may accompany the product, the amount of profit that you need to make in
order to stay in business. Often the firm is trying to portray the best quality or the lowest
price. Therefore, price can be a direct reflection of quality or even perceived quality.
Following are several basic pricing strategies considered when making decisions for
export.
1. Economy and Premium: Premium pricing is adopted when there is a substantial
competitive advantage, and the product or service is unique and economy pricing
strategy when the cost of marketing and manufacture is kept at a minimum.
2. Penetration or Low Price: This first model uses a low profit margin to penetrate
the market. It is designed to grab market share quickly.
Penetrating the market with an exceptionally low priced item creates a broad
customer base. It also provides high value for the dollar to the customer.
3. Skimming: This is appropriate for some product to be priced as high as the market
will bear. However, few buyers are attracted, and lower sales volumes can be
achieved when price is such high. This strategy is often used when a new product is
12. introduced into the market, and is in great demand. For this strategy, the product or
service is charged high because of a substantial competitive advantage. This high
price tends to attract new customers into the market, and then falls due to lower
unit cost as economies of scale are achieved. Skimming is the opposite of
penetration and is a high priced model, sometimes called "top pricing." The idea
behind this pricing strategy is to return high profits, even at the cost of losing a large
number of customers
4. Competitor’s pricing: To attract the largest number of customers and generate
consistent turnover, it may be necessary to set price not too high, not too low, just in
the middle in line with other competitors. Prices are tagged to the competition and
profits are acceptable. “In the long run, no single pricing strategy will always work
best, and producers should be prepared to adjust to any opportunities or dangers
which arise in the ever changing market.
For export pricing, exporters should consider other factors such as freight and
transport, duties, and risks.