Beginner's Guide to Exporting

Why Export ?

Companies export because of the following reasons :

Amongst the reasons companies export are:
  • To expand sources of revenue
  • To diversify markets and reduce risk
  • To enhance competitiveness
  • To achieve economies of scale and utilise access capacity
  • Saturated domestic market

Are You Ready?

Before venturing into export markets, companies should consider :

  1. Production
    • Able to expand production capacity to cater for export demand (e.g, new machines)
    • Adequate supply of raw materials
  2. Financial
    • Healthy financial standing
    • Access to funding (commercial and government)
    • Understanding of payment instruments
  3. Human Capital
    • Sufficient trainable and knowledgeable staff (e.g. customs and logistics,INCOTERMS)
    • Multi-skills and multi-lingual work force
  4. Marketing
    • Sufficient marketing collaterals
    • Access to various distribution channels
    • Knowledge in export market strategy (refer to export market plan)
  5. Export Requirements and Compliance
    • Conform to mandatory international standards, accreditation and certification
    • Comply with export and import requirements (permit, licensing and quota)
  6. Legal
    • Comply with international legal requirements
    • Understanding of Free Trade Agreement (FTA)
    • Awareness on Intellectual Property Rights (IPRs)
    • International Sales Contract
    • Knowledge in arbitration and dispute settlement

Myths Of Exporting

  • Bad debts in exporting – The risk of non payment can be mitigated by using internationally accepted terms of payment e.g. Letter of Credit
  • Establish locally before exporting – If the opportunity exists and is viable, companies should start with exporting before selling to the local market.
  • There is only one (1) terms of sale – There are different types of terms of payment to suit the different modes of transportation
  • Avoid unfamiliar or difficult market – The key to selecting any market is proper marketing research and sufficient preparation
  • Too small to export – There is an array of market entry strategies to suit various types of exporters and target markets. Whilst large companies typically account for far more total exports but the real fact is that vast majority of exporting firms in most countries are small and medium sized enterprises (SMEs)
  • Cannot afford to export – There are various [financial and non financial] efforts and schemes by the government to assist e.g. trade financingschemes to assist and exporters’ development programmes
  • Cannot compete with large overseas companies – Other competitive factors play a large role including intellectual property (IP), quality, service, and consumer taste - these may override the size of thecompany
  • Exporting is too complicated – The steps in exporting are systematic and its process and practice is consistent worldwide. There is an abundance of resources available online that helps the first time exporter about all ins and outs of exporting
  • Exporting is too risky – With proper training and advice export risks can be adequately mitigated. Selling anywhere has risks even in the domestic market, but it can be reduced by using Letters of Credit (L/Cs) payment terms

source from MATRADE