EXPORT MANAGEMENT FOR SMEs

1. 1. Basic Concept of
Foreign Trade

2.  Malaysian SMEs can be grouped into 3 categories:
Micro, Small or Medium.
 An enterprise is considered an SME in each of the
respective sectors based on the Annual Sales Turnover
or Number Employees
Micro-enterprise Small enterprise Medium enterprise
Manufacturing,
Manufacturing-Related
Services and Agro-based
industries
Sales turnover of less
than RM250,000 OR full
time employees less
than 5
Sales turnover between
RM250,000 and less
than RM10 million OR
full time employees
between 5 and 50
Sales turnover between
RM10 million and RM25
million OR full time
employees between 51
and 150
Services, Primary
Agriculture and
Information &
Communication
Technology (ICT)
Sales turnover of less
than RM200,000 OR full
time employees less
than 5
Sales turnover between
RM200,000 and less
than RM1 million OR
full time employees
between 5 and 19
Sales turnover between
RM1 million and RM5
million OR full time
employees between 20
and 50

3.  An extension of domestic trade.
 The import and export activities carried out
by any nation with another nation or by any
company in one country with a company in
another country. Eg: Japan is a highly
industrialised country export high quality
machineries and import agricultural products
from Malaysia.
 The exchange of services or goods between
different countries.

4. Benefits From Export activities:
 Cost reduction by mass production.
- By entering the international market, a company
can gain advantage from the economies of scale
with the increase of supplies needed for a wider
target market, the cost of production per unit of
product should decrease.
 More profit by increase in sales.
-With an expanded market, sales of product will
increase and company may gained higher profit if
the company continuously supplies and retains
good quality products, innovates and invests in
product development when needed.

5. Benefits From Export activities:
 More market information from larger markets.
-Small business may gain various experiences which
can be used to improve both its domestic and
foreign businesses. It can gain information on
new technologies, new product and marketing
ideas. Such knowledge can be used to develop
better products and sell them effectively.
 Higher reputation by export.
-A small business can also gain market share
globally through exporting. Obviously, when a
company starts doing international trading, it
becomes part of the global market. It will have a
good opportunity to expand its customer base,
and this will bring about better potential for long
term growth.

6.  Development of new markets, new items,
new technology.
- Exporting can lengthen the life of a product.
A typical product has a life cycle of launch-
growth-maturity-decline. An exporting
business is able to extend these stages and
significantly extend the lifetime of its
products by launching it to export markets
while the domestic market is still in the
maturity. Product development to replace
that product in the home market can be
financed by export sales.

7. Benefits From Import activities:
 Maximum profit by cost reduction.
 Buying cheaper from foreign countries.
- Companies have opportunities to find
cheaper sources overseas. E.g: Import goods
from China.

8.  More sales and profit by new supply sources.
 More market information from wider business
contacts.

9.  Development of new markets, new items,
new technology.

10.  To find out good customers.
-E.g. sales distributor who will buy company’s
product and sell them on it’s behalf.
-several conditions of good customers;
1.Competitiveness – Have good knowledge of
markets and familiar with the various
requirements of exporter’s products.
2. Ability to execute contracts/commitments-
Has interest and effort to advise and help
exporter.
3. Ability to settle claims- effective, reliable
and trustworthy when doing his roles/duties.

11.  To find out good customers.
4.Aggressive business policy and strong
intention to expand business.
5.Strong financial standing- Financially sound.
6. Good standing – well represented in the
market.

12.  Management.
-Identify the management objectives;
1. What are the company’s reasons for pursuing
export markets? E.g., to increase sales
volume or develop a broader or more stable
customer base.
2. How committed is top management to an
export effort?
3. What are management’s expectations for the
export program?

13.  Management.
The main field of management is considered
as follows:
- Education of person in charge, ability of
international communication, general
experience off business and knowledge of
international business.
- Top management policy.
- Legal matters: export & import regulations,
intellectual property rights, contracts.
- Clear delegation of authority:

14.  Management.
The main field of management is considered
as follows:
- Clear delegation of authority:
i. Authorisation of decision making must be
given to their staffs depending on their
levels.
ii. The delegation of authority should include
the rights and responsibility for signature of
documents.
- Company rules for document keeping.

15.  Management.
The main field of management is considered
as follows:
- Company rules for document keeping.
i. A company must have their own internal
rules to specify the period of keeping
documents.
ii. For instance;
- Contract notes should be kept
permanently.
- Shipping documents; 5 years.

16.  Financial Plan.
- Management must prepare financial reports
accordance with the business plan; discuss
company’s cash position with before exporting.
- Finance especially for increase of business and
period between longer payment from the buyers
and shorter payment for the suppliers must be
arranged in time.
- The possible time lag between shipment of
goods and payment affects company’s cashflow.
- When arranging sales, ensure payment terms are
defined. Use the internationally recognised
rules.

17.  Financial Plan.
- Minimise foreign currency risks.
-If you sell in local currency, exchange-rate
fluctuations between the date you agree a sale
price and the date your customer pays can
mean you receive less than expected.
-May protect against exchange risk using foreign
exchange contracts and currency options.

18.  Marketing Plan- research on export markets.
1. Identify your target markets – Check which
markets have demand for your product or
service.
2. Find out about difficulties you might face in
certain countries – your professional or trade
association may help with this.
3. Identify the best way to sell your product –
you may sell direct in your home market but
the preferred sales channel in your target
market may be online or via affiliates.

19.  Marketing Plan- research on export markets.
4. Find out about any modifications required to
make your product or service acceptable to
different cultures.

20.  Cultural considerations.
- Management need to understand the culture
of the target market in order to establish a
successful relationship with your customers.
- Analyse local cultural meanings behind your
product brands. For example; bicycles might
be perceived as a leisure item in one country
but as essential forms of transport
elsewhere.

21.  Each groups are required to do a research on
one of the Malaysia’s SMEs from the selected
industry below:
- Agriculture, Livestock, Plantations &
Commodities.
- Food and beverages.
- Furniture and Wood based Manufacturing.
- Transportation and Logistics.