What are 3 advantages of exportation?

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Comments (5)

What's your opinion?

Specific answers which are easily understood. thanks

Ahmed from Kenya

These countries are also affected by natural disasters especially those who depend on agricultural produce, they can be affected by cyclones

Peace from Zimbabwe

IT is VeRyy UsEEefUULLLll. thanXXXXX !!111111111

vikram from India

According to me it should be added that what benifites can government also get,not only the business or firm. Overall advantages and challenges are good n useful.

Guddu from India

Given comments are good but as the purpose of student if it would have added some basic features like- "Advantages and disadvantages of the export for a sustaineble growth of India", like these topic's may help us.

Economies around the world depend on imports and exports. There are various challenges of exporting that every business will have to face. However, businesses that plan their exports well will be profitable in the long run.

However, there are certain challenges to exporting that every business that plans to become an exporter will have to face. In this article, we will explain the key challenges as well as the advantages of exporting.

Table of Contents:

• What is Exporting
• The Challenges of Exporting
• The Advantages of Exporting
• Conclusion

What is Exporting?

Exporting, in simple terms, is the act of selling goods & products manufactured in one country but then sold in another. The goal of exporting is to expand into new markets and get better gross margins compared to their home country.

For almost every business around the world, exports are crucial to scale and grow their business. Exporting also helps diversify a business’ revenue and protect it.

The Challenges of Exporting

There are specific challenges and difficulties in doing any kind of business. Following are some challenges you might face as an exporter:

1. Finding new potential buyers

Exporting to foreign markets requires prior planning and analysis. For instance, it is not easy to find global buyers easily for your products since you might not have any references in such markets. You will also have to create a strategy wherein cultural difference doesn’t come in the way of impacting your business.

Finding the right buyer isn’t a cake-walk. However, with tools like Trademo Intel, you can find reliable and emerging buyers for your product categories and create a list of potential buyers. You can request a demo for our platform today!

2. Finding the right market for a specific product

Choosing the right product to export to a particular market is one of the greater challenges in global trade. Every market has different needs and requirements. It is important to research the markets that you’re aiming to capture, figure out buyers in said markets, and note the product trends for the same.

While every exporter wants a profit, it is important to optimize how you supply it to various regions of the globe. The right markets can make or break your business model. To choose the right markets, you need a supply chain data & research platform that will help you make data-driven business decisions.

Suggested Reading: How to Choose the Right Product to Export

3. Import/export duties & tariffs

There are export duties levied on certain products by the government. Apart from export duties, there are also import tariffs that impact the exports. An import tariff is a tariff that a country imposes on one unit of import.

Therefore, it will increase the total costs for the customers who are going to buy/import your product. If your target country increases the import tariffs, then it might affect the viability of your customers to buy your products.

To overcome this challenge, you need to be able to price your products with import and export tariffs in mind. Ensure that you are able to ship these goods to your customers at a competitive price. One way to price your supply competitively is by using a freight forwarder.

Suggested Reading: What is Freight Forwarding?

4. Quality standards

In addition to the import/export tariffs, the requirement of meeting foreign quality standards can be a big challenge for exporters. For instance, there are strict regulations when it comes to the export of food and beverage products, which many businesses fail to meet for new markets. For instance, when it comes to spices, standards set by ASTA (American Spice Trade Association) is what is expected in many parts of the world.

However, there’s also the FAQ (Fair Average Quality) standard that is also accepted in other parts. Apart from meeting the quality standards, you also need to pay attention to branding, labeling, and packaging as agreed between you and the buyer.

5. The currency exchange rate

The exchange rate is the value of one currency for the purpose of conversion to another. For international payments, people often use strong currencies like USD. If the value of a foreign currency increases against the local currency, then export activities are encouraged.

Conversely, if the value of a foreign currency decreases, it inhibits the development of export activities. For instance, the value of Yuan depreciated against USD because of the US-China trade war. This, however, helped businesses to import cheaper products from China to US, despite huge tariffs being implemented by the US government.

6. Pricing strategy

The pricing is based on the price offered by your competitors. Many exporters are not really active in researching the market to create the right pricing strategy that impacts their competitiveness in global markets.

While pricing your products for export, it is important to keep import and export tariffs in mind too. Try to undercut your competitors in pricing. If you do not know how your competitors are lowering your prices, studying detailed shipment data might help you accomplish that.

Trademo Intel provides suppliers with shipment data from around the world that allows you to find, monitor, and research your competition.

7. Compliance and Documentation

The complex set of compliances is one of the biggest challenges for exporters today. The compliance process is many times cumbersome and lacks clarity. Furthermore, relevant authorities and bureaucracies can sometimes make running an export business costly and difficult.

The Advantages of Exporting  

Exporting your commodities can be a very profitable for your business. Every business that wants to grow, eventually plans to scale for global needs. The benefits and advantages of exporting outweigh every single challenge that your business might face:

1. A good product will always sell

One of the first advantages of exporting is that a good product will always sell. Exporting is a business that can be started by anyone with a good idea and product. You don’t need to have a college degree or come from a business school to start your export business. All you need is the right product at a competitive price.

Your product should be of good quality and be able to meet the needs of your customers. Most importantly, the world is more open and connected than ever before.

2. Limitless market (the main advantage of exporting)

You can sell your product in almost all countries in the world today i.e. the market is limitless. Selling your products in your native country can limit your market size to that of the local market. However, exporting products abroad gives you unlimited opportunities to showcase your talent and earn big.

Selling your products globally can help you build up your brand reputation and quintuple your revenues. While it was not possible to sell your products to almost all countries in the world just a few decades earlier, today it is!

You can start finding buyers for your new market with Trademo Intel! Try it today!

3. Foreign markets can offer higher prices

The prices for your products on the foreign market can be significantly higher, than in the local markets because of the cost arbitrage between the two countries. Of course, this also depends on the markets you venture into and your product categories. This is quite often the main reason why businesses look start exporting globally.

Explore: What are Incoterms?

4. Govt benefits for exporters

Exporting goods or services abroad is one of the key activities, which brings foreign currency into your country and helps create foreign currency reserves. That’s why the governments give many incentives and benefits to exporters.

Government provides rebates in service tax, VAT (value added tax) to exporters. For instance, in India, exporters are offered cash incentives for export of products under 38 categories. Also, banking institutions give special loans to exporters with robust business plans. The more you export, the more benefits you gain!

5. Payments received faster than in local market

Sometimes, in the local markets, if the competition is really high, then the businesses get their payments after 2-3 months of goods being sold. While exporting to foreign countries, one might expect the payment even before goods being exported.

Of course, this all depends on the payment terms and negotiation with the buyer. However, with international buyers, payments are protected by various laws and you can generally sell your products at a higher price.

Conclusion

Starting an exporting business has its own challenges and advantages. These challenges and obstacles can, however, be overcome by proper planning. The advantages of exporting to foreign markets and the business opportunities it brings along obviously outweigh the challenges.

The global markets will present you with unlimited opportunities, which you generally don’t get if you are doing business locally. So go on ahead, and grow your business today!

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