The term export means sending of goods or services produced in one country to another country. The seller of such goods and services is referred to as an exporter; the foreign buyer is referred to as an importer.
Export of goods often requires involvement of customs authorities. An export's counterpart is an import.
Exporting
Many Manufacturing firms began their global expansion as exporters and only later switch to another mode for serving a foreign market.
Process
Methods of export include a product or good or information being mailed, hand-delivered, shipped by air, shipped by vessel, 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.
Barriers
Trade barriers are generally defined as government laws, regulations, 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 Group - 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 36 countries) and The Wassenaar Arrangement - limiting trade in conventional arms and technological developments (currently only 40 countries).
Tariffs
A tariff 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.
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.
Overview
Advantages of exporting
- Exporting has two distinct advantages. First, it avoids the often substantial cost of establishing manufacturing operations in the host country.
- Second, exporting may help a company achieve experience curve and location economies.
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 chain. 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 to license, outsource, or sell it. In relation to the eclectic paradigm, companies that have low levels of ownership advantages 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. After two straight months of contraction, exports from India rose a whopping 11.64% at $25.83 billion in July 2013 against $23.14 billion in the same month of the previous year.
Disadvantages of exporting
Exporting has a number of Drawbacks:
- First off, exporting from the firm's home base may not be appropriate if lower-cost locations for manufacturing the product can be found abroad. It may be preferable to manufacture where the mis of factor conditions is most favorable from a value creation perspective and to export to the rest of the world from that location.
- A second drawback to exporting, is that high transport cost can make exporting uneconomical, particularly for bulk products. One way to fix this, is to manufacture bulk products regionally.
- Another drawback, is that high tariff barriers can make exporting uneconomical and very risky.
For small and medium enterprises (SMEs) with fewer than 250 employees, selling goods and services to foreign markets can be more difficult than serving the domestic market. The lack of knowledge of trade regulations, 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 SMEs which are exporting, but nearly two-thirds of them sell to only one foreign market.
See also
References
External links
- Import and Export at DMOZ
- UK Institute Of Export
- World Bank Top exporters
