Export
Encyclopedia
The term export is derived from the conceptual meaning as to ship the goods and services out of the port of a country. The seller of such goods and services is referred to as an "exporter" who is based in the country of export whereas the overseas based buyer is referred to as an "importer". In International Trade, "exports" refers to selling goods and services produced in home country to other markets.
Any good
or commodity
, transport
ed from one country to another country in a legitimate fashion, typically for use in trade
. Export goods or services are provided to foreign consumer
s by domestic producers
.
Export of commercial quantities of goods normally requires involvement of the customs authorities in both the country of export and the country of import. The advent of small trades over the internet such as through Amazon
and eBay
have largely bypassed the involvement of Customs in many countries because of the low individual values of these trades. Nonetheless, these small exports are still subject to legal restrictions applied by the country of export. An export's counterpart is an import
.
In national accounts "exports" consist of transactions in goods and services (sales, barter, gifts or grants) from residents to non-residents. The exact definition of exports includes and excludes specific "borderline" cases. A general delimitation of exports in national accounts is given below:
National accountants often need to make adjustments to the basic trade data in order to comply with national accounts concepts; the concepts for basic trade statistics often differ in terms of definition and coverage from the requirements in the national accounts:
(USML) is governed by the Department of State
under the International Traffic in Arms Regulations
(ITAR).
The Bureau of Industry and Security
(BIS) is responsible for implementing and enforcing the Code of Federal Regulations
Title 15 chapter VII, subchapter C, also known as Export Administration Regulations (EAR), in the United States. The BIS regulates the export and reexport of most commercial items. Some commodities require a license in order to export. There are different requirements to export lawfully depending on the product or service being exported.
Depending on the category the 'item' falls under, the company may need to obtain a license prior to exporting. EAR restrictions can vary from country to country. The most restricted destinations are the embargoed countries and those countries designated as supporting terrorist activities including Cuba
, North Korea
, Sudan
, Syria
and Iran
(see: Sanctions against Iran
). Some products have received worldwide restrictions prohibiting exports.
An item is considered an export whether or not it is leaving the United States temporarily, if it is leaving the United State but is not for sale (a gift), or if it is going to a wholly owned U.S. subsidiary in a foreign country. A foreign-origin item exported from the United States, transmitted or transhipped through the United States, or being returned from the United States to its foreign country of origin is.
How an item is transported outside of the United States does not matter in determining export license requirements.
Refer to U.S. Census Data for data on exports by industry for 2006.
s are generally defined as government laws, regulation
s, policy, or practices that either protect domestic products from foreign competition or artificially stimulate exports of particular domestic products. While restrictive business practices sometimes have a similar effect, they are not usually regarded as trade barriers. The most common foreign trade barriers are government-imposed measures and policies that restrict, prevent, or impede the international exchange of goods and services.
- limiting trade in nuclear weapons and associated goods (currently only 45 countries participate), The Australia Group
- limiting trade in chemical & biological weapons and associated goods (currently only 39 countries), Missile Technology Control Regime
- limiting trade in the means of delivering weapons of mass destruction (currently only 34 countries) and The Wassenaar Arrangement
- limiting trade in conventional arms and technological developments (currently only 40 countries).
is a tax placed on a specific good or set of goods exported from or imported to a country, creating an economic barrier to trade.
Usually the tactic is used when a country's domestic output of the good is falling and imports from foreign competitors are rising, particularly if there exist strategic reasons for retaining a domestic production capability.
Some failing industries receive a protection with an effect similar to a subsidies in that by placing the tariff on the industry, the industry is less enticed to produce goods in a quicker, cheaper, and more productive fashion. The third reason for a tariff involves addressing the issue of dumping
. Dumping involves a country producing highly excessive amounts of goods and dumping the goods on another foreign country, producing the effect of prices that are "too low". Too low can refer to either pricing the good from the foreign market at a price lower than charged in the domestic market of the country of origin. The other reference to dumping relates or refers to the producer selling the product at a price in which there is no profit or a loss. The purpose (and expected outcome) of the tariff is to encourage spending on domestic goods and services.
Protective tariffs sometimes protect what are known as infant industries that are in the phase of expansive growth. A tariff is used temporarily to allow the industry to succeed in spite of strong competition. Protective tariffs are considered valid if the resources are more productive in their new use than they would be if the industry had not been started. The infant industry eventually must incorporate itself into a market without the protection of government subsidies.
Tariffs can create tension between countries. Examples include the United States steel tariff of 2002
and when China placed a 14% tariff on imported auto parts. Such tariffs usually lead to filing a complaint with the World Trade Organization
(WTO) and, if that fails, could eventually head toward the country placing a tariff against the other nation in spite, to impress pressure to remove the tariff.
The effect of subsidies deters other countries that are able to produce a specific product or service at a faster, cheaper, and more productive rate. With the lowered price, these efficient producers cannot compete. The life of a subsidy is generally short-lived, but sometimes can be implemented on a more permanent basis.
The agricultural industry is commonly subsidized, both in the United States, and in other countries including Japan and nations located in the European Union
(EU).
Critics argue such subsidies cost developing nations $24 billion annually in lost income according to a study by the International Food Policy Research Institute, a D.C. group funded partly by the World Bank. However, other nations are not the only economic 'losers'. Subsidies in the U.S. heavily depend upon taxpayer dollars. In 2000, the U.S. spent an all-time record $32.3 billion for the agricultural industry. The EU spends about $50 billion annually, nearly half its annual budget on its common agricultural policy and rural development.
materialized during the first quarter of the 19th century in the writings of 'classical economists'. While David Ricardo
is most credited with the development of the theory (in Chapter 7 of his Principles of Political Economy, 1817), James Mills
and Robert Torrens
produced similar ideas. The theory states that all parties maximize benefit in an environment of unrestricted trade, even if absolute advantages in production exist between the parties.
In contrast to Mercantilism
, the first systematic body of thought devoted to international trade, emerged during the 17th and 18th centuries in Europe. While most views surfacing from this school of thought differed, a commonly argued key objective of trade was to promote a "favorable" balance of trade
, referring to a time when the value of domestic goods exported exceeds the value of foreign goods imported. The "favorable" balance in turn created a balance of trade surplus.
Mercantilists advocated that government policy directly arrange the flow of commerce to conform to their beliefs. They sought a highly interventionist agenda, using taxes on trade to manipulate
the balance of trade or commodity composition of trade in favor of the home country.
. The locational advantages of a particular market are a combination of market potential and investment risk
. Internationalization
advantages are the benefits of retaining a core competence within the company and threading it though the value chain rather than obtain to license
, outsource, or sell it. In relation to the Eclectic paradigm
, companies that have low levels of ownership advantages either do not enter foreign markets. If the company and its products are equipped with ownership advantage and internalization advantage, they enter through low-risk modes such as exporting. Exporting requires significantly lower level of investment than other modes of international expansion, such as FDI
. As you might expect, the lower risk of export typically results in a lower rate of return
on sales than possible though other modes of international business
. In other words, the usual return on export sales may not be tremendous, but neither is the risk. Exporting allows managers to exercise operation control but does not provide them the option to exercise as much marketing control. An exporter usually resides far from the end consumer and often enlists various intermediaries to manage marketing activities
.
s, cultural differences, different languages and foreign-exchange
situations as well as the strain of resources and staff interact like a block for exporting. Indeed there are some SME's which are exporting, but nearly two-third of them sell in only to one foreign market. The following assumption shows the main disadvantages:
involves sales representatives, distributors
, or retailers
who are located outside the exporter's home country. Direct exports are goods and services that are sold to an independent party outside of the exporter’s home country.
Mainly the companies are pushed by core competencies and improving their performance of value chain.
It is considered to be the most popular option to companies, to develop their own international marketing
capability. This is achieved by charging personnel from the company to give them greater control over their operations. Direct selling also give the company greater control over the marketing function and the opportunity to earn more profits.
In other cases where network of sales representative, the company can transfer them exclusive rights to sell in a particular geographic region.
A distributor
in a foreign country is a merchant who purchases the product from the manufacturer and sells them at profit. Distributors
usually carry stock inventory and service the product, and in most cases distributes deals with retailers rather than end users.
Evaluating Distributors
Exporters can also sell directly to foreign retailers
. Usually, products are limited to consumer lines; it can also sell to direct end users. A good way to generate such sales is by printing catalogs or attending trade shows.
Direct selling over the Internet
Electronic commerce
is an important mean to small and big companies all over the world, to trade internationally. We already can see how important E-commerce
is for marketing growth among exporters companies in emerging economies, in order to overcome capital and infrastructure barriers.
E-commerce eased engagements, provided faster and cheaper delivery of information, generates quick feedback on new products, improves customer
service, accesses a global audience, levels the field of companies, and support electronics data interchange with suppliers and customers.
in their own home county. Then intermediaries export the products to customers foreign markets.
Making the export decision
Once a company determines it has exportable products, it must still consider other factors, such as the following:
is published online and in print and is delivered to embassies, trade centers, consulates, and associations worldwide.
The California Centers for International Trade Development (CITD's) have 13 offices throughout California, each CITD is hosted by a local community college and provides a variety of free or low-cost programs & services to assist local companies in doing business abroad. These include one-on-one technical assistance and consulting, market research, training and educational programs, trade leads and special events.
in the U.S., Tradeget in India
, and Alibaba
in China
.
) and national statistical institutes.
To promote exports, many government agencies publish on the web export market reports by sector and country : USCS
and FAS
in the United States, EDC
and AAFC
in Canada, Ubifrance
in France, UKTI in the UK, HKTDC and JETRO
in Asia, Austrade and NZTE in Oceania. Through Partnership Agreements, The Federation of International Trade Associations publishes studies from several of these agencies (USCS, FAS, AAFC, UKTI, HKTDC), as well as other non-governmental organizations on its website GlobalTrade.net
.
Any good
Good (economics and accounting)
In economics, a good is something that is intended to satisfy some wants or needs of a consumer and thus has economic utility. It is normally used in the plural form—goods—to denote tangible commodities such as products and materials....
or commodity
Commodity
In economics, a commodity is the generic term for any marketable item produced to satisfy wants or needs. Economic commodities comprise goods and services....
, transport
Transport
Transport or transportation is the movement of people, cattle, animals and goods from one location to another. Modes of transport include air, rail, road, water, cable, pipeline, and space. The field can be divided into infrastructure, vehicles, and operations...
ed from one country to another country in a legitimate fashion, typically for use in trade
Trade
Trade is the transfer of ownership of goods and services from one person or entity to another. Trade is sometimes loosely called commerce or financial transaction or barter. A network that allows trade is called a market. The original form of trade was barter, the direct exchange of goods and...
. Export goods or services are provided to foreign consumer
Consumer
Consumer is a broad label for any individuals or households that use goods generated within the economy. The concept of a consumer occurs in different contexts, so that the usage and significance of the term may vary.-Economics and marketing:...
s by domestic producers
Production theory basics
Production refers to the economic process of converting of inputs into outputs. Production uses resources to create a good or service that is suitable for use, gift-giving in a gift economy, or exchange in a market economy. This can include manufacturing, storing, shipping, and packaging. Some...
.
Export of commercial quantities of goods normally requires involvement of the customs authorities in both the country of export and the country of import. The advent of small trades over the internet such as through Amazon
Amazon.com
Amazon.com, Inc. is a multinational electronic commerce company headquartered in Seattle, Washington, United States. It is the world's largest online retailer. Amazon has separate websites for the following countries: United States, Canada, United Kingdom, Germany, France, Italy, Spain, Japan, and...
and eBay
EBay
eBay Inc. is an American internet consumer-to-consumer corporation that manages eBay.com, an online auction and shopping website in which people and businesses buy and sell a broad variety of goods and services worldwide...
have largely bypassed the involvement of Customs in many countries because of the low individual values of these trades. Nonetheless, these small exports are still subject to legal restrictions applied by the country of export. An export's counterpart is an import
Import
The term import is derived from the conceptual meaning as to bring in the goods and services into the port of a country. The buyer of such goods and services is referred to an "importer" who is based in the country of import whereas the overseas based seller is referred to as an "exporter". Thus...
.
Definition
"Foreign demand for goods produced by home country"In national accounts "exports" consist of transactions in goods and services (sales, barter, gifts or grants) from residents to non-residents. The exact definition of exports includes and excludes specific "borderline" cases. A general delimitation of exports in national accounts is given below:
- An export of a good occurs when there is a change of ownership from a resident to a non-resident; this does not necessarily imply that the good in question physically crosses the frontier. However, in specific cases national accounts impute changes of ownership even though in legal terms no change of ownership takes place (e.g. cross border financial leasing, cross border deliveries between affiliates of the same enterprise, goods crossing the border for significant processing to order or repair). Also smuggled goods must be included in the export measurement.
- Export of services consist of all services rendered by residents to non-residents. In national accounts any direct purchases by non-residents in the economic territory of a country are recorded as exports of services; therefore all expenditure by foreign tourists in the economic territory of a country is considered as part of the exports of services of that country. Also international flows of illegal services must be included.
National accountants often need to make adjustments to the basic trade data in order to comply with national accounts concepts; the concepts for basic trade statistics often differ in terms of definition and coverage from the requirements in the national accounts:
- Data on international trade in goods are mostly obtained through declarations to custom services. If a country applies the general trade system, all goods entering or leaving the country are recorded. If the special trade system (e.g. extra-EU trade statistics) is applied goods which are received into customs warehouses are not recorded in external trade statistics unless they subsequently go into free circulation in the country of receipt.
- A special case is the intra-EU trade statistics. Since goods move freely between the member states of the EU without customs controls, statistics on trade in goods between the member states must be obtained through surveys. To reduce the statistical burden on the respondents small scale traders are excluded from the reporting obligation.
- Statistical recording of trade in services is based on declarations by banks to their central banks or by surveys of the main operators. In a globalized economy where services can be rendered via electronic means (e.g. internet) the related international flows of services are difficult to identify.
- Basic statistics on international trade normally do not record smuggled goods or international flows of illegal services. A small fraction of the smuggled goods and illegal services may nevertheless be included in official trade statistics through dummy shipments or dummy declarations that serve to conceal the illegal nature of the activities.
History
The theory of international trade and commercial policy is one of the oldest branches of economic thought. Exporting is a major component of international trade, and the macroeconomic risks and benefits of exporting are regularly discussed and disputed by economists and others. Two views concerning international trade present different perspectives. The first recognizes the benefits of international trade. The second concerns itself with the possibly that certain domestic industries (or laborers, or culture) could be harmed by foreign competition.Process
Methods of export include a product or good or information being mailed, hand-delivered, shipped by air, shipped by boat, uploaded to an internet site, or downloaded from an internet site. Exports also include the distribution of information that can be sent in the form of an email, an email attachment, a fax or can be shared during a telephone conversation.United States
The export of defense-related articles and services on the United States Munitions ListUnited States Munitions List
The United States Munitions List is a list of articles, services, and related technology designated as defense-related by the United States federal government. This designation is pursuant to sections 38 and 47 of the Arms Export Control Act...
(USML) is governed by the Department of State
United States Department of State
The United States Department of State , is the United States federal executive department responsible for international relations of the United States, equivalent to the foreign ministries of other countries...
under the International Traffic in Arms Regulations
International Traffic in Arms Regulations
International Traffic in Arms Regulations is a set of United States government regulations that control the export and import of defense-related articles and services on the United States Munitions List...
(ITAR).
The Bureau of Industry and Security
Bureau of Industry and Security
The Bureau of Industry and Security is an agency of the United States Department of Commerce which deals with issues involving national security and high technology. A principal goal for the bureau is helping stop proliferation of weapons of mass destruction, while furthering the growth of United...
(BIS) is responsible for implementing and enforcing the Code of Federal Regulations
Code of Federal Regulations
The Code of Federal Regulations is the codification of the general and permanent rules and regulations published in the Federal Register by the executive departments and agencies of the Federal Government of the United States.The CFR is published by the Office of the Federal Register, an agency...
Title 15 chapter VII, subchapter C, also known as Export Administration Regulations (EAR), in the United States. The BIS regulates the export and reexport of most commercial items. Some commodities require a license in order to export. There are different requirements to export lawfully depending on the product or service being exported.
Depending on the category the 'item' falls under, the company may need to obtain a license prior to exporting. EAR restrictions can vary from country to country. The most restricted destinations are the embargoed countries and those countries designated as supporting terrorist activities including Cuba
Cuba
The Republic of Cuba is an island nation in the Caribbean. The nation of Cuba consists of the main island of Cuba, the Isla de la Juventud, and several archipelagos. Havana is the largest city in Cuba and the country's capital. Santiago de Cuba is the second largest city...
, North Korea
North Korea
The Democratic People’s Republic of Korea , , is a country in East Asia, occupying the northern half of the Korean Peninsula. Its capital and largest city is Pyongyang. The Korean Demilitarized Zone serves as the buffer zone between North Korea and South Korea...
, Sudan
Sudan
Sudan , officially the Republic of the Sudan , is a country in North Africa, sometimes considered part of the Middle East politically. It is bordered by Egypt to the north, the Red Sea to the northeast, Eritrea and Ethiopia to the east, South Sudan to the south, the Central African Republic to the...
, Syria
Syria
Syria , officially the Syrian Arab Republic , is a country in Western Asia, bordering Lebanon and the Mediterranean Sea to the West, Turkey to the north, Iraq to the east, Jordan to the south, and Israel to the southwest....
and Iran
Iran
Iran , officially the Islamic Republic of Iran , is a country in Southern and Western Asia. The name "Iran" has been in use natively since the Sassanian era and came into use internationally in 1935, before which the country was known to the Western world as Persia...
(see: Sanctions against Iran
Sanctions against Iran
This article outlines economic, trade, scientific and military sanctions against Iran, which have been imposed by the U.S. government, or under U.S. pressure by the international community through the United Nations Security Council...
). Some products have received worldwide restrictions prohibiting exports.
An item is considered an export whether or not it is leaving the United States temporarily, if it is leaving the United State but is not for sale (a gift), or if it is going to a wholly owned U.S. subsidiary in a foreign country. A foreign-origin item exported from the United States, transmitted or transhipped through the United States, or being returned from the United States to its foreign country of origin is.
How an item is transported outside of the United States does not matter in determining export license requirements.
Refer to U.S. Census Data for data on exports by industry for 2006.
Australia
Australian Defence Export Control Office (DECO)Barriers
Trade barrierTrade barrier
Trade barriers are government-induced restrictions on international trade. The barriers can take many forms, including the following:* Tariffs* Non-tariff barriers to trade** Import licenses** Export licenses** Import quotas** Subsidies...
s are generally defined as government laws, regulation
Regulation
Regulation is administrative legislation that constitutes or constrains rights and allocates responsibilities. It can be distinguished from primary legislation on the one hand and judge-made law on the other...
s, policy, or practices that either protect domestic products from foreign competition or artificially stimulate exports of particular domestic products. While restrictive business practices sometimes have a similar effect, they are not usually regarded as trade barriers. The most common foreign trade barriers are government-imposed measures and policies that restrict, prevent, or impede the international exchange of goods and services.
Strategic
International agreements limit trade in, and the transfer of, certain types of goods and information e.g. goods associated with weapons of mass destruction, advanced telecommunications, arms and torture, and also some art and archaeological artefacts. Examples include Nuclear Suppliers GroupNuclear Suppliers Group
Nuclear Suppliers Group is a multinational body concerned with reducing nuclear proliferation by controlling the export and re-transfer of materials that may be applicable to nuclear weapon development and by improving safeguards and protection on existing materials.- History :It was founded in...
- limiting trade in nuclear weapons and associated goods (currently only 45 countries participate), The Australia Group
Australia Group
The Australia Group is an informal group of countries established in 1985 to help member countries to identify those of their exports which need to be controlled so as not to contribute to the spread of chemical and biological weapons .The group, initially consisting of 15 members, held its first...
- limiting trade in chemical & biological weapons and associated goods (currently only 39 countries), Missile Technology Control Regime
Missile Technology Control Regime
The Missile Technology Control Regime is an informal and voluntary partnership between 34 countries to prevent the proliferation of missile and unmanned aerial vehicle technology capable of carrying a 500 kg payload at least 300 km....
- limiting trade in the means of delivering weapons of mass destruction (currently only 34 countries) and The Wassenaar Arrangement
Wassenaar Arrangement
The Wassenaar Arrangement is a multilateral export control regime with 40 participating states including many former COMECON countries.It is the successor to the Cold war-era Coordinating Committee for Multilateral Export Controls , and was...
- limiting trade in conventional arms and technological developments (currently only 40 countries).
Tariffs
A tariffTariff
A tariff may be either tax on imports or exports , or a list or schedule of prices for such things as rail service, bus routes, and electrical usage ....
is a tax placed on a specific good or set of goods exported from or imported to a country, creating an economic barrier to trade.
Usually the tactic is used when a country's domestic output of the good is falling and imports from foreign competitors are rising, particularly if there exist strategic reasons for retaining a domestic production capability.
Some failing industries receive a protection with an effect similar to a subsidies in that by placing the tariff on the industry, the industry is less enticed to produce goods in a quicker, cheaper, and more productive fashion. The third reason for a tariff involves addressing the issue of dumping
Dumping
Dumping may refer to a subject......in computing:*Recording the contents of memory after application or operating system failure, or by operator request, in a core dump for use in subsequent problem analysis.*Recording a file or medium as a backup....
. Dumping involves a country producing highly excessive amounts of goods and dumping the goods on another foreign country, producing the effect of prices that are "too low". Too low can refer to either pricing the good from the foreign market at a price lower than charged in the domestic market of the country of origin. The other reference to dumping relates or refers to the producer selling the product at a price in which there is no profit or a loss. The purpose (and expected outcome) of the tariff is to encourage spending on domestic goods and services.
Protective tariffs sometimes protect what are known as infant industries that are in the phase of expansive growth. A tariff is used temporarily to allow the industry to succeed in spite of strong competition. Protective tariffs are considered valid if the resources are more productive in their new use than they would be if the industry had not been started. The infant industry eventually must incorporate itself into a market without the protection of government subsidies.
Tariffs can create tension between countries. Examples include the United States steel tariff of 2002
United States steel tariff 2002
The Section 201 steel tariff is a political issue in the United States regarding a tariff that President George W. Bush placed on imported steel on March 5, 2002 . The tariffs were lifted by Bush on December 4, 2003....
and when China placed a 14% tariff on imported auto parts. Such tariffs usually lead to filing a complaint with the World Trade Organization
World Trade Organization
The World Trade Organization is an organization that intends to supervise and liberalize international trade. The organization officially commenced on January 1, 1995 under the Marrakech Agreement, replacing the General Agreement on Tariffs and Trade , which commenced in 1948...
(WTO) and, if that fails, could eventually head toward the country placing a tariff against the other nation in spite, to impress pressure to remove the tariff.
Subsidies
To subsidize an industry or company refers to, in this instance, a governmental providing supplemental financial support to manipulate the price below market value. Subsidies are generally used for failing industries that need a boost in domestic spending. Subsidizing encourages greater demand for a good or service because of the slashed price.The effect of subsidies deters other countries that are able to produce a specific product or service at a faster, cheaper, and more productive rate. With the lowered price, these efficient producers cannot compete. The life of a subsidy is generally short-lived, but sometimes can be implemented on a more permanent basis.
The agricultural industry is commonly subsidized, both in the United States, and in other countries including Japan and nations located in the European Union
European Union
The European Union is an economic and political union of 27 independent member states which are located primarily in Europe. The EU traces its origins from the European Coal and Steel Community and the European Economic Community , formed by six countries in 1958...
(EU).
Critics argue such subsidies cost developing nations $24 billion annually in lost income according to a study by the International Food Policy Research Institute, a D.C. group funded partly by the World Bank. However, other nations are not the only economic 'losers'. Subsidies in the U.S. heavily depend upon taxpayer dollars. In 2000, the U.S. spent an all-time record $32.3 billion for the agricultural industry. The EU spends about $50 billion annually, nearly half its annual budget on its common agricultural policy and rural development.
Exports and free trade
The theory of comparative advantageComparative advantage
In economics, the law of comparative advantage says that two countries will both gain from trade if, in the absence of trade, they have different relative costs for producing the same goods...
materialized during the first quarter of the 19th century in the writings of 'classical economists'. While David Ricardo
David Ricardo
David Ricardo was an English political economist, often credited with systematising economics, and was one of the most influential of the classical economists, along with Thomas Malthus, Adam Smith, and John Stuart Mill. He was also a member of Parliament, businessman, financier and speculator,...
is most credited with the development of the theory (in Chapter 7 of his Principles of Political Economy, 1817), James Mills
James Mills
James Thomas Mills was a politician in Manitoba, Canada. He served as a Progressive Conservative member of the Legislative Assembly of Manitoba from 1963 to 1966....
and Robert Torrens
Robert Torrens
Sir Robert Richard Torrens, GCMG was the third Premier of South Australia and a pioneer and author of simplified system of transferring land.-Early life:...
produced similar ideas. The theory states that all parties maximize benefit in an environment of unrestricted trade, even if absolute advantages in production exist between the parties.
In contrast to Mercantilism
Mercantilism
Mercantilism is the economic doctrine in which government control of foreign trade is of paramount importance for ensuring the prosperity and security of the state. In particular, it demands a positive balance of trade. Mercantilism dominated Western European economic policy and discourse from...
, the first systematic body of thought devoted to international trade, emerged during the 17th and 18th centuries in Europe. While most views surfacing from this school of thought differed, a commonly argued key objective of trade was to promote a "favorable" balance of trade
Balance of trade
The balance of trade is the difference between the monetary value of exports and imports of output in an economy over a certain period. It is the relationship between a nation's imports and exports...
, referring to a time when the value of domestic goods exported exceeds the value of foreign goods imported. The "favorable" balance in turn created a balance of trade surplus.
Mercantilists advocated that government policy directly arrange the flow of commerce to conform to their beliefs. They sought a highly interventionist agenda, using taxes on trade to manipulate
Market manipulation
Market manipulation describes a deliberate attempt to interfere with the free and fair operation of the market and create artificial, false or misleading appearances with respect to the price of, or market for, a security, commodity or currency...
the balance of trade or commodity composition of trade in favor of the home country.
Export strategy
Export strategy is to ship commodities to other places or countries for sale or exchange. In economics, an export is any good or commodity, transported from one country to another country in a legitimate fashion, typically for use in trade.Advantages of exporting
Ownership advantages are the firm's specific assets, international experience, and the ability to develop either low-cost or differentiated products within the contacts of its value chainValue chain
The value chain, is a concept from business management that was first described and popularized by Michael Porter in his 1985 best-seller, Competitive Advantage: Creating and Sustaining Superior Performance.-Firm Level:...
. The locational advantages of a particular market are a combination of market potential and investment risk
Financial risk
Financial risk an umbrella term for multiple types of risk associated with financing, including financial transactions that include company loans in risk of default. Risk is a term often used to imply downside risk, meaning the uncertainty of a return and the potential for financial loss...
. Internationalization
Internationalization
In economics, internationalization has been viewed as a process of increasing involvement of enterprises in international markets, although there is no agreed definition of internationalization or international entrepreneurship...
advantages are the benefits of retaining a core competence within the company and threading it though the value chain rather than obtain to license
License
The verb license or grant licence means to give permission. The noun license or licence refers to that permission as well as to the document recording that permission.A license may be granted by a party to another party as an element of an agreement...
, outsource, or sell it. In relation to the Eclectic paradigm
Eclectic paradigm
The eclectic paradigm is a theory in economics and is also known as the OLI-Model or OLI-Framework. It is a further development of the theory of internalization and published by John H. Dunning in 1980....
, companies that have low levels of ownership advantages either do not enter foreign markets. If the company and its products are equipped with ownership advantage and internalization advantage, they enter through low-risk modes such as exporting. Exporting requires significantly lower level of investment than other modes of international expansion, such as FDI
Foreign direct investment
Foreign direct investment or foreign investment refers to the net inflows of investment to acquire a lasting management interest in an enterprise operating in an economy other than that of the investor.. It is the sum of equity capital,other long-term capital, and short-term capital as shown in...
. As you might expect, the lower risk of export typically results in a lower rate of return
Rate of return
In finance, rate of return , also known as return on investment , rate of profit or sometimes just return, is the ratio of money gained or lost on an investment relative to the amount of money invested. The amount of money gained or lost may be referred to as interest, profit/loss, gain/loss, or...
on sales than possible though other modes of international business
International Business
International business is a term used to collectively describe all commercial transactions that take place between two or more regions, countries and nations beyond their political boundary...
. In other words, the usual return on export sales may not be tremendous, but neither is the risk. Exporting allows managers to exercise operation control but does not provide them the option to exercise as much marketing control. An exporter usually resides far from the end consumer and often enlists various intermediaries to manage marketing activities
Marketing management
Marketing management is a business discipline which is focused on the practical application of marketing techniques and the management of a firm's marketing resources and activities...
.
Disadvantages of exporting
For Small-and-Medium Enterprises (SME) with less than 250 employees, selling goods and services to foreign markets seems to be more difficult than serving the domestic market. The lack of knowledge for trade regulationTrade regulation
Trade regulation is a field of law, often bracketed with antitrust , including government regulation of unfair methods of competition and unfair or deceptive business acts or practices. Antitrust law is often considered a subset of trade regulation law...
s, cultural differences, different languages and foreign-exchange
Foreign exchange market
The foreign exchange market is a global, worldwide decentralized financial market for trading currencies. Financial centers around the world function as anchors of trading between a wide range of different types of buyers and sellers around the clock, with the exception of weekends...
situations as well as the strain of resources and staff interact like a block for exporting. Indeed there are some SME's which are exporting, but nearly two-third of them sell in only to one foreign market. The following assumption shows the main disadvantages:
- Financial management effort: To minimize the risk of exchange-rate fluctuation and transactions processes of export activity the financial managementManagementManagement in all business and organizational activities is the act of getting people together to accomplish desired goals and objectives using available resources efficiently and effectively...
needs more capacity to cope the major effort - Customer demand: International customers demand more services from their vendor like installation and startup of equipment, maintenance or more delivery services.
- Communication technologies improvement: The improvement of communication technologies in recent years enable the customer to interact with more suppliers while receiving more information and cheaper communications cost at the same time like 20 years ago. This leads to more transparency. The vendor is in duty to follow the real-time demand and to submit all transaction details.
- Management mistakes: The management might tap in some of the organizational pitfalls, like poor selection of oversea agents or distributors or chaotic global organization.
Ways of exporting
The company can decide to export directly or indirectly to a foreign country.Direct selling in export strategy
Direct sellingDirect selling
Direct selling is the marketing and selling of products directly to consumers away from a fixed retail location. Peddling is the oldest form of direct selling. Modern direct selling includes sales made through the party plan, one-on-one demonstrations, and other personal contact arrangements as...
involves sales representatives, distributors
Distribution (business)
Product distribution is one of the four elements of the marketing mix. An organization or set of organizations involved in the process of making a product or service available for use or consumption by a consumer or business user.The other three parts of the marketing mix are product, pricing,...
, or retailers
Retailing
Retail consists of the sale of physical goods or merchandise from a fixed location, such as a department store, boutique or kiosk, or by mail, in small or individual lots for direct consumption by the purchaser. Retailing may include subordinated services, such as delivery. Purchasers may be...
who are located outside the exporter's home country. Direct exports are goods and services that are sold to an independent party outside of the exporter’s home country.
Mainly the companies are pushed by core competencies and improving their performance of value chain.
Direct selling through distributors
It is considered to be the most popular option to companies, to develop their own international marketing
International marketing
International marketing or global marketing refers to marketing carried out by companies overseas or across national borderlines. This strategy uses an extension of the techniques used in the home country of a firm...
capability. This is achieved by charging personnel from the company to give them greater control over their operations. Direct selling also give the company greater control over the marketing function and the opportunity to earn more profits.
In other cases where network of sales representative, the company can transfer them exclusive rights to sell in a particular geographic region.
A distributor
Distribution (business)
Product distribution is one of the four elements of the marketing mix. An organization or set of organizations involved in the process of making a product or service available for use or consumption by a consumer or business user.The other three parts of the marketing mix are product, pricing,...
in a foreign country is a merchant who purchases the product from the manufacturer and sells them at profit. Distributors
Distribution (business)
Product distribution is one of the four elements of the marketing mix. An organization or set of organizations involved in the process of making a product or service available for use or consumption by a consumer or business user.The other three parts of the marketing mix are product, pricing,...
usually carry stock inventory and service the product, and in most cases distributes deals with retailers rather than end users.
Evaluating Distributors
- The size and capabilities of its sales force.
- Its sales record.
- An analysis of its territory.
- Its current product mix.
- Its facilities and equipment.
- Its marketing polices.
- Its customer profit.
- Its promotional strategy.
Direct selling through foreign retailers and end users
Exporters can also sell directly to foreign retailers
Retailing
Retail consists of the sale of physical goods or merchandise from a fixed location, such as a department store, boutique or kiosk, or by mail, in small or individual lots for direct consumption by the purchaser. Retailing may include subordinated services, such as delivery. Purchasers may be...
. Usually, products are limited to consumer lines; it can also sell to direct end users. A good way to generate such sales is by printing catalogs or attending trade shows.
Direct selling over the Internet
Electronic commerce
Electronic commerce
Electronic commerce, commonly known as e-commerce, eCommerce or e-comm, refers to the buying and selling of products or services over electronic systems such as the Internet and other computer networks. However, the term may refer to more than just buying and selling products online...
is an important mean to small and big companies all over the world, to trade internationally. We already can see how important E-commerce
Electronic commerce
Electronic commerce, commonly known as e-commerce, eCommerce or e-comm, refers to the buying and selling of products or services over electronic systems such as the Internet and other computer networks. However, the term may refer to more than just buying and selling products online...
is for marketing growth among exporters companies in emerging economies, in order to overcome capital and infrastructure barriers.
E-commerce eased engagements, provided faster and cheaper delivery of information, generates quick feedback on new products, improves customer
Customer
A customer is usually used to refer to a current or potential buyer or user of the products of an individual or organization, called the supplier, seller, or vendor. This is typically through purchasing or renting goods or services...
service, accesses a global audience, levels the field of companies, and support electronics data interchange with suppliers and customers.
Indirect selling
Indirect exports, is simply selling goods to or through an independent domestic intermediaryIntermediary
An intermediary is a third party that offers intermediation services between two trading parties. The intermediary acts as a conduit for goods or services offered by a supplier to a consumer...
in their own home county. Then intermediaries export the products to customers foreign markets.
Making the export decision
Once a company determines it has exportable products, it must still consider other factors, such as the following:
- What does the company want to gain from exporting?
- Is exporting consistent with other company goals?
- What demands will exporting place on the company's key resources - management and personnel, production capacity, and finance - and how will these demands be met?
- Are the expected benefits worth the costs, or would company resources be better used for developing new domestic business?
In the U.S.
The U.S. Department of Commerce provides U.S. companies the opportunity to promote their products and services free of charge. To do so, the Export Yellow PagesExport Yellow Pages
The Export Yellow Pages , was a multi-media trade and promotion resource for exporters that provides U.S. companies, exporters and export related service providers across all industries a convenient way to engage in export promotion and establish contacts and conduct business and trade around the...
is published online and in print and is delivered to embassies, trade centers, consulates, and associations worldwide.
The California Centers for International Trade Development (CITD's) have 13 offices throughout California, each CITD is hosted by a local community college and provides a variety of free or low-cost programs & services to assist local companies in doing business abroad. These include one-on-one technical assistance and consulting, market research, training and educational programs, trade leads and special events.
Internationally
There are several global B2B directories and also country-specific directories, such as Kelly's DirectoryKelly's Directory
Kelly's Directory was a trade directory in the United Kingdom that listed all businesses and tradespeople in a particular city or town, as well as a general directory of postal addresses of local gentry, landowners, charities, and other facilities. In effect, it was a Victorian version of today's...
in the U.S., Tradeget in India
India
India , officially the Republic of India , is a country in South Asia. It is the seventh-largest country by geographical area, the second-most populous country with over 1.2 billion people, and the most populous democracy in the world...
, and Alibaba
Alibaba.com
Alibaba Group is a privately owned Hangzhou, China-based family of Internet-based businesses that includes online marketplaces that facilitate business-to-business international and domestic China trade, retail and payment platforms, a shopping search engine, and data-centric cloud computing...
in China
China
Chinese civilization may refer to:* China for more general discussion of the country.* Chinese culture* Greater China, the transnational community of ethnic Chinese.* History of China* Sinosphere, the area historically affected by Chinese culture...
.
Challenges
Exporting to foreign countries poses challenges not found in domestic sales. With domestic sales, manufacturers typically sell to wholesalers or direct to retailer or even direct to consumers. When exporting, manufacturers may have to sell to importers who then in turn sell to wholesalers. Extra layer(s) in the chain of distribution squeezes margins and manufacturers may need to offer lower prices to importers than to domestic wholesalers.Statistical data and market reports
Data on the value of exports and their quantities often broken down by detailed lists of products are available in statistical collections on international trade published by the statistical services of intergovernmental organisations (e.g. UNSTAT, FAOSTAT, OECD), supranational statistical institutes (e.g. EurostatEurostat
Eurostat is a Directorate-General of the European Commission located in Luxembourg. Its main responsibilities are to provide the European Union with statistical information at European level and to promote the integration of statistical methods across the Member States of the European Union,...
) and national statistical institutes.
To promote exports, many government agencies publish on the web export market reports by sector and country : USCS
United States Commercial Service
The United States Commercial Service is the trade promotion arm of the U.S. Department of Commerce's International Trade Administration, which helps U.S. companies succeed in markets around the world. Led by Assistant Secretary of Commerce and Director General Suresh Kumar and located across the...
and FAS
Foreign Agricultural Service
The Foreign Agricultural Service is the foreign affairs agency with primary responsibility for the United States Department of Agriculture's overseas programs—market development, international trade agreements and negotiations, and the collection of statistics and market information...
in the United States, EDC
Export Development Canada
Export Development Canada is Canada's export credit agency. It is a Crown corporation wholly owned by the Government of Canada, which provides financing and risk management services to Canadian exporters and investors in up to 200 markets worldwide, with spread across all provinces in Canada, and...
and AAFC
Agriculture and Agri-Food Canada
The Department of Agriculture and Agri-Food, also referred to as Agriculture and Agri-Food Canada , is the department of the government of Canada with responsibility for policies governing agriculture production, farming income, research and development, inspection, and the regulation of animals...
in Canada, Ubifrance
Ubifrance
Ubifrance is the French agency for export promotion. It succeeds "Centre Français du commerce extérieur".Its headquarters is on Boulevard Saint-Jacques, 13th arrondissement of Paris. UBIFrance has 66 economic missions in 46 countries and more than 1,400 employees in France and abroad responsible...
in France, UKTI in the UK, HKTDC and JETRO
JETRO
is an independent government agency established by Japan Export Trade Research Organization as a nonprofit corporation in Osaka in February 1951, and reorganized as the Ministry of International Trade and Industry in 1958 to consolidate Japan's efforts in export promotion...
in Asia, Austrade and NZTE in Oceania. Through Partnership Agreements, The Federation of International Trade Associations publishes studies from several of these agencies (USCS, FAS, AAFC, UKTI, HKTDC), as well as other non-governmental organizations on its website GlobalTrade.net
GlobalTrade.net
GlobalTrade.net is run by FITA Online, the online global trade services division of the Federation of International Trade Associations , together with partners the United States Commercial Service, UK Trade & Investment, Hong Kong Trade Development Council , ThomasNet, Alibaba.com, Kompass and...
.
See also
- Commodity currencyCommodity currencyA commodity currency is a name given to currencies of countries which depend heavily on the export of certain raw materials for income. These countries are typically developing countries, eg...
- Commodity Classification Automated Tracking SystemCommodity Classification Automated Tracking SystemCommodity Classification Automated Tracking System is an alphanumeric code assigned by Bureau of Industry and Security to products that it has classified against the Export Administration Regulations...
- Export-oriented industrializationExport-oriented industrializationExport-oriented Industrialization sometimes called export substitution industrialization or export led industrialization is a trade and economic policy aiming to speed up the industrialization process of a country by exporting goods for which the nation has a comparative advantage...
- Export performanceExport performanceExport performance is the relative success or failure of the efforts of a firm or nation to sell domestically-produced goods and services in other nations....
- Export-led growthExport-led growthExport-led growth is an economic strategy used by some developing countries. This strategy seeks to find a niche in the world economy for a certain type of export. Industries producing this export may receive governmental subsidies and better access to the local markets...
- List of countries by exports
- SalesSalesA sale is the act of selling a product or service in return for money or other compensation. It is an act of completion of a commercial activity....
- International tradeInternational tradeInternational trade is the exchange of capital, goods, and services across international borders or territories. In most countries, such trade represents a significant share of gross domestic product...
- ImportImportThe term import is derived from the conceptual meaning as to bring in the goods and services into the port of a country. The buyer of such goods and services is referred to an "importer" who is based in the country of import whereas the overseas based seller is referred to as an "exporter". Thus...