CONTENTS

EXPORT STRATEGY ............................................................................................................ 2

ABSTRACT AND LEARNING OUTCOMES ................................................................................. 2
1. THINKING ABOUT EXPORTING............................................................................................ 2
1.1 Going Global SME Strategies in the Global Arena ..................................................... 2
1.2 Getting Started with Exports ........................................................................................ 6
2. SETTING EXPORT OBJECTIVES............................................................................................. 8
3. EXPORT STRATEGY ............................................................................................................. 9
3.1 Market Entry Strategy ................................................................................................... 9
3.2 Product Strategy ......................................................................................................... 10
3.3 Business Process Strategy ........................................................................................... 11
3.4 Production & Operations Strategy.............................................................................. 12
3.5 Financial Strategy ........................................................................................................ 12
GLOSSARY OF TERMS............................................................................................................ 13
SUPPORTING MATERIALS AND LINKS ................................................................................... 14

EXPORT STRATEGY
ABSTRACT AND LEARNING OUTCOMES
The purpose of this training module on Export Strategy is to present basic elements of
export strategy as an introductory to overall export subjects.
By the end of this module the trainees are expected to:
o Evaluate their reasons for why and why not to export
o Set their SMART objectives for export
o How to set individual operations strategies for export
The training module proceeds as follows. The first chapter draws a general picture on
globalisation and its effects for SMEs in the world. The main reasons for starting or not
starting export activities are also explained. Second chapter is about how to set company
export objectives. And the last chapter gives detailed information about how an export
strategy should be developed per individual processes in a business.

1. THINKING ABOUT EXPORTING

1.1 Going Global SME Strategies in the Global Arena
Today globalization is one of the factors which affect most of the firms in the world.
Globalization of trade markets affects and shapes the firms not directly but indirectly. As a
result of competition policies established in the globalization process, the countries have
decreased the import duties and abolished the trade barriers. Therefore, firms are facing
tough competition even in their domestic markets. Competitors from foreign countries enter
the national markets, which were previously protected, with new products and technologies
and affect the behavior and preferences of the consumers in these countries.
Globalization process is accelerating with the technological development. Especially
innovations in the information and electronic technologies disparage the world quickly.
Classic competitive advantage theories are no more applicable in the world trade. Digital
technologies are imposing a new competition attitude in most of the sectors.
Technological development in the logistics and distribution area give the opportunity of
selling the products in the global market electronically to the most of the firms. This provides
huge opportunities to the customers. Customers became able to compare the price and
quality of the product they want globally through their computers, phones or other mass

media instruments. Customers have the opportunity to order the product they want
electronically and make these products sent to their addresses.
As a result, even the small firms which prefer to operate only in the domestic market are
affected by this global competition. Even if these firms do not prefer to export or import,
they face global competition. Undoubtedly, the competitive advantage of the small and
medium sized enterprises (SMEs) compared to the big ones is that they establish close
relations with their customers and their skills in protecting these relations. However, it is
obvious that SMEs will no longer be able to maintain this advantage in such a competitive
world.
In this context, SMEs must catch up the recent developments to survive in the markets
which are different from what they are used to.
The following simple questions are to be asked by the SMEs to draw a new strategy:
1) Can collaborating with an international partner or supplier ensure providing better
service to our customers and strengthen our relations with our customers?
2) Does such collaboration increase our profitability?
3) Can a competitor enter our market and provide service to our customers through
information technologies and todays complicated marketing techniques?
4) How can our customers find new suppliers through internet?
x Change in the customers product preferences
x Change in the customers after sale service and price preferences
x Reduction in the concerns of the customers for doing business with a supplier
which is not established in the national market
If the firm gives positive answers to some of these questions and the change which is tried to
be defined through the above questions is identified in the market, the firm must
immediately develop a new strategy to adapt to the new conditions in the market.
Export as a Strategic Choice for SMEs
For the sustainable growth of SMEs which want to move forward and be developed, export
is the necessary instrument to enter the global market. Export not only ensures growth in
the sales but also provides other advantages;
o Enlargement of customer portfolio
x Mitigate the dependence on limited number of customers
x Mitigate the effect of conditional regional demand fluctuations
o Growth potential in the niche products which might not be demanded in the
national market
o Enlargement of collaboration network, new experiences and as result better service
for the domestic customers

SMEs have unique characteristics like their size or ownership structures. Most of the SMEs
are owned by families or small groups of regional entrepreneurs. In the globalization
process, some of these characteristics provide advantages while some of them provide
disadvantages.
Characteristics
Dependence on limited
number of decision makers
(Co-owners and managers
are usually the same people)

Advantages
- Long-term perspective and
stability
- Consistency
- Absence of pressure for
short term success
- Established business
culture and identity
- Responsibility and stability

Close Relations with business

partners and customers

- Success in making future

business relations
permanent
- Capability in collaborating
successfully for common
interests
- Capability and desire in
collaborating
- High adaptation capability
and flexibility
- Quick reactions(decision
making/answering)
- Easy communication within
the organization
- Specialization opportunity
and capability in getting
successful in the application
of niche strategies

Basic Organization

Small Size

Disadvantages
- Limited thinking because of
the limited knowledge and
capacity of co-owners
- Insufficient corporate
culture and capacity in
adapting to new
opportunities and situations
- Inconsistency between the
corporate objectives and
personal objectives of the
firms owner
- Risk of overly concentrating
on the existing business and
enterprise

-Deficiency in capability of
complicated planning and
application for international
- Unwilling to apply
sophisticated organizations
Limited financial and human
resource opportunities:
- Difficulties in compensating
new investments and
business losses from new
activities
- Insufficiently compensating
the cost of market research
promotion activities
- Insufficient number of
employees to undertake
additional duties
- Lack of employee having
international experience

These characteristics are the prerequisites of success of SMEs in export. SMEs should
overcome their certain weaknesses and satisfy certain prerequisites to enter the
international market. These are:
1) The owners of the firms which want to enter the international market and export
should have a strong vision, stability and commitment. Decision makers should
believe that entering in the international markets as a strategy is necessary for the
long-term development and success of the firm. Then they can overcome the
problems on the way through globalization as entering in the export markets is a long
and difficult process. Benefits can be achieved after a long, costly and difficult
process. If the decision makers are not that committed, they will give up exporting as
soon as they face a problem long before the success.
2) In addition to that, exporting requires certain amount of international knowledge and
experience within the company. Without this knowledge and experience, the firms
become dependent on third parties (consultants) advices. Moreover, dependence on
third parties advices is always costly and sometimes unreliable. Therefore, in-house
experiences should be established within the company in time.
If the decision makers own the necessary knowledge and know-how to enter the
international markets, reliability of the objectives determined and methods preferred
increases. It is ideal that the co-owners of the firm or the next generation are being
trained in this direction. It is essential that the co-owners of the firm in the future
have the capacity for international commitments and to represent their firms in the
international environment. If the firm does not own this experience within the
organization, hiring a manager having this experience until gaining this experience or
until the next generation grow up is suggested.
There is another advantage of hiring a manager who is able to let the firm enter the
international market. A person outside the organization will bring new thoughts
which have never been considered before, new applications, a new attitude and a
new culture. Globalization of a SME or another firm starts with making the co-owners
and managers open to novelties. Without this, it is impossible for a firm to enter the
international market. Therefore hiring a manager who has the authority to make
decisions will ease the problem of resistance to entering the international markets
and will help to overcome this problem.
3) Lastly, SMEs should understand that international activities are beyond finding new
customers and buyers in foreign countries. Internationalization of a firm requires
radical changes. This change requires taking risks, radical changes in business culture
and intense learning capacity and these things cannot be achieved casually. In this

process, painstaking and detailed inner change planning and leadership is needed as
this change planning should be part of international activity planning.

1.2 Getting Started with Exports

1.2.1 Why Export?
Emergence of recent technological developments eased the individuals to move and
communicate faster for lower or even no costs. These opportunities also highly affected the
business world; the new age opened the businessmen the gates of foreign markets. Even if
there are also several risks of entering foreign markets, exporting mostly serve the
advantages given below:
-

Increased sales and increased profits: If the firm is performing well in domestic
market in terms of sales, exporting presumably would increase the demand by
extending the market base to overseas countries and thus the profitability of the
firm.
Faster growth: Selling in overseas markets may help the business grow in size and
scope at a faster rate.
Reduced local market dependence and overcoming of local market fluctuations and
vulnerability: If the firm diversify sales into international markets, it would avoid
depending on a single market. In this case a local economic downturn would damage
less if the demand in overseas markets remains high.
Economies of scale: With a larger market base, the firm can save costs by producing
on a scale that makes better use of resources; reduce waste by utilizing maximum
production capacity and thus increase efficiency.
Innovativeness by gaining new knowledge and experience in the global market:
Exposure to new ideas, approaches, marketing techniques, technology and processes
can help the firm develop innovative products and services.
Domestic and global competitiveness: Trading in the global marketplace increases
the exposure to international best practice, ideas and alternative ways of doing
business while improving the chances of competing at home and overseas.
Improvement of quality and price combination of products and product life cycle
Enhancement of the company image
Benefits for domestic economy: With the increase of production capacity there will
be a need and chance of employment creation. Besides, turning into an exporting
firm and having higher exports than imports may help domestic economy in the
reduction of foreign trade deficit, if any.

1.2.2 Why not Export?

Exporting also brings its own set of challenges and risks. These may include:
-

Increased costs and risk of lower profit margins: Exporting means costs which are
mostly caused by the desire to gain market share, such as the costs of; extra travel,
new marketing materials and maybe additional staff.
Lower sales than expected: Sales may be lower in the beginning and it may take time
to see a significant return on the export investment.
Intense competition: Competition in foreign markets may be higher than expected.
Late or non-payment risks: To avoid or minimise the risks of non-payment, the firms
should research the market conditions in the target country and the credit
worthiness of the potential customers before starting exports.
Legal and regulatory issues: There may be different legal and regulatory issues than
the home market such as; border-custom types, legal procedures in the cases of
corruption, online security and bribery. It is very crucial to get a good grasp of how
the procedures work in the chosen country before starting exports.
Heavy paperwork: Authorities in the chosen markets may require a lot of
documentation from the exporters.
Cultural differences and language barriers: The firm will be dealing with a new
culture by entering a new market. Business culture can even vary between regions of
the same country, so local knowledge is vital in building valuable foreign working
relationships.
Economic and political risks: Risks such as unpredictable economic and political
systems issues can deter the firm from expanding into a new market. Awareness
about what is happening in the target market may help the firm avoid these issues.

It is generally accepted that starting an export venture despite several risks would still
benefit the firm, if the firm carefully assess the above listed advantages and disadvantages
and take measures when necessary before entering a new market. Exporting activity would
lead to changes in the way the business done and increase awareness within the firms own
domain making it more innovative and responsive to changes in the market than otherwise
it could be.
1.2.3 Company Specific Reasons for Getting Started with Exports
The firm should answer several questions before starting an export venture and reach
company specific reasons and advantages for export activities. The base for this short
preliminary self recognition should be based upon what role the company expect export to
play. Specific reasons should be drafted from the answers to the questions asking whether;
the company is seeking an increase in profit or sales volume; it would like to develop a
broader customer base, to learn more from overseas companies, to become more
competitive in the domestic market, to make use of excess production capacity; the
7

company is seeking for a specified level of return on investment from export activities and
the company is expecting the export activities to become self sustaining (one year, two years
ect.).
After deciding upon the overweighing reasons, the company may then establish their export
strategy accordingly. This way the strategy will be more realistic and precise while pulled
away from being general and useless.

2. SETTING EXPORT OBJECTIVES

Formulation of export objectives marks the start of strategy stage. This stage is meant to
provide the company with a sense of direction: a clear understanding of the future business
activities, elimination of doubts, second thoughts and a clear view of the tasks and
challenges that lay ahead.
Based on the market conditions and developments analysed before and companys state of
export readiness (for more information please see module on Export Planning and
International Pricing), it is time to define into detail what the company really want to
achieve, where, when and how. In other words, the company now should be able to
formulate sound objectives. These objectives should provide the building blocks for the
companys targets. Therefore they should be SMART: Specific, Measurable, Achievable,
Realistic and Time-led.
x

x
x

Specific: Goals need to be clearly defined and unambiguous. When goals are specific
they tell you what you need to achieve, by when, by whom and how much it is going
to cost.
Measurable: Objectives should be quantitative, expressed in terms of sales value,
sales growth, market share, number of customers and etc.
Achievable: Objectives should be set as attainable as possible. There is no point in
setting goals that are impossible to reach. They should be based on the companys
strengths and its critical success factors (internal) and market opportunities
(external).
Realistic: Realistic goals are also the ones that are achievable. To be realistic, one
should be willing and able to work towards the main objective and all the necessary
resources should be available.
Time-led: The goal should be set as they will be attained in a specific time period.

Specific objectives and their contexts can be regarded as follows:

x
x
x
x

Financial Objectives: The level of profit and return on investment desired to achieve,
Sales Objectives: Number of foreign markets desired to export to and timing, level of
export sales desired to achieve in a specified time period,
Learning Objectives: New skills and knowledge desired to acquire,
Production Objectives: Level of production capacity that desired to operate.

3. EXPORT STRATEGY
Strategy is all about developing a sense of direction for the company. On the basis of the
conclusions of the environmental and competitor analyses (for more information please see
the module Export Planning and International Pricing), now it is time to develop a strategy
for realising the objectives.
The selected strategy will be determined by the nature of the product or service and by the
conditions and requirements in the companys potential markets. Development of an export
strategy involves development of; market entry, product, business process, operations and
financial strategies.
The management team committed to exporting will take sufficient time to work through and
accurately address the below issues. They will establish the levels of corporate commitment
and responsibility the company is prepared to undertake to identify and develop expected
export opportunities.

3.1 Market Entry Strategy

This stage involves determining target market segments, choosing the market entry mode
and selecting the right trade partners.
After selecting target markets it is time decide on the mode of sales in overseas markets.
There are several ways of getting started in exports. Which path to chose will depend on the
businesss broad strategy, its commitment to export and its capacity to handle complexity.
5.1.2 Market Entry Modes 1
Export Entry Modes:
x
x
x

Direct exporting through local sales representatives or distributors,

Indirect exporting through intermediaries agents,
Countertrade through barter or payment in kind or promises to make future
purchases.

Contractual Entry Modes:

x
x

Licensing - patents, copyrights, special formulas, designs, trademarks and brand

names,
Franchising hotels, fast food chains, car rentals and etc.

Victorian Government Business Centre (2009), Opening Doors to Export connects you to world-class export assistance,
Melbourne, Australia

Investment Entry Modes Foreign Direct Investment:

x
x
x

Strategic alliances
Joint ventures
Wholly owned subsidiaries

3.2 Product Strategy

Selecting and preparing the product for export require not only product knowledge but also
knowledge of the unique characteristics of each target market. The company may need to
do some degree of adapting the selected product for sale outside domestic markets before
starting exports. The company will also need to conduct consultancy with prospective
customers, wholesalers, agents and other bodies to determine the best strategy for selling
the products in overseas markets.
The company should carefully screen; the ability of product to satisfy foreign needs; the
need for modification or development of a new version for the foreign market; specific
features, such as design, colour, size, packaging, brand, labels and warranty that the product
should have; pre and post sale service requirements and etc.
The product may need to be adapted to target markets government regulations, geographic
and climatic conditions, buyer preferences or standards of living. The most important aspect
for product adaptation is conforming to the foreign government product regulations. These
regulations are being imposed by the governments for the purposes of protection of
domestic industries from foreign competition, customer rights and etc.
3.2.1 Engineering & Redesign
Exporting may necessitate some fundamental changes in engineering and design of the
products before it is ready to be sold abroad. If the company is producing and planning to
export electrical products, it should consider the electrical standards of the target country.
Because phases, cycles or voltages may differ from region to region or country to country.
3.2.2 Labelling & Packaging
Language and culture of the target country are important factors to consider when preparing
the product for export. The package of the product is as important as the product itself
when the cultural differences are considered. Because what they first see is its package and
they always prefer the product to be labelled in their own language.
When labelling the product, the company may consult with its foreign partners and learn
what kind of a label would be more appealing in that market.

10

3.2.3 Installation & Warranties

Another element of product preparation that the company should consider is the ease of
installing the product overseas. Installation instructions are worthless unless they can be
easily understood by customers or technicians that are assigned for installation. Translations
for installation instructions should be made for target country language or to minimize
confusion in any case, preassembling certain parts of the product before shipping may help
installation after purchase.
Likewise, warranty information can be source of confusion for foreign customers. The scope
of warranty should be clearly stated in customers language. Besides, the fact is that the
stronger the scope of warranty the easier to break into a new market.
3.2.4 Pricing
The last, but not least, issue about the preparation of the product for foreign markets is
pricing strategy. Price is important, because it is the only element of the marketing mix that
generates income, all others cost money. That is why all the aspects of pricing strategy
should be carefully screened. These aspects can be summarised as; the factors affect the
prices settings, product sensitivity to prices changes, type of pricing policy to be
implemented (high profit/low turnover and/or low profit/high turnover), discount policies
and etc.
Detailed information about pricing strategy can be found in Export Planning and
International Pricing module.

3.3 Business Process Strategy

Export process has some other aspects like shipping, insurance, negotiation with buyers,
intellectual property rights, organisational and staff requirements.
x

x
x

Shipping: In consultation with shippers, the company should find the right shipping
method for the delivery on time and affordable cost. The options are; trucking - still
popular, but declining; rail a good option for shipping to seaports for transport
abroad; air faster and safe but expensive and not covering all destinations; ocean most common method, economic but slow delivery.
Insurance: The company should decide whether to insure the goods for loss or
damage during transit and/or for default by the buyer.
Negotiations: Through negotiations with buyers, the company should determine
terms of trade that will govern the sale. Detailed information can be found in
International Negotiations and Contracts.
Intellectual property protection requirements should be determined.

11

Organisational Structure: The company should outline how the export function will
be organised, determine the place of this function in the organisational chart, and
outline roles and responsibilities, determine whether there is a need for additional
staff and expertise.

3.4 Production & Operations Strategy

After a comprehensive evaluation of production capacity, the company should be able to
determine whether; the current production capacity will allow market expansion and thus
the need for more production, to expand product capabilities to meet market demand and
additional cost, there are seasonal fluctuations in demand for the product, the viable order
quantity could be achieved to ensure corporate profitability and there are changes required
for design of packaging and labelling of products.

3.5 Financial Strategy

The last, but certainly not the least important aspect of the export strategy is of course the
export financing. The company should finalise the decision of whether there will be a need
for additional capital commitment required for the entrance to export markets. An outline of
financial needs in relation to additional production capacity, pre-shipment finance, working
capital and post-shipment finance will be needed.
It is a fact that, the export drive needs the financial stability and strength that comes from a
reliable cash flow. So, a comprehensive financial plan that reflects the financial strength of
company would be helpful for the export venture. The most important objective of the plan
is ensuring the company always has sufficient cash or operating lines of credit.

12

GLOSSARY OF TERMS
TERM

Economies of Scale

Joint Venture

Market Segment

Non-payment Risk:

Production Capacity

Strategic Alliance

Subsidiary
Vulnerability

DEFINITION
Achievement of lower average cost per unit through a larger
scale of production. Economies of scale can be accomplished
because as production increases, the cost of producing each
additional unit falls.
Firms intending to enter overseas markets will have larger
market base and save costs by producing on a scale that makes
better use of resources.
A formal arrangement between two or more companies to
work towards on a particular business or project with
formation of a new and separate entity.
A group of possible customers who are similar in their needs,
age, education, etc.
One of the principal risks which firm incur during international
business is that their partner does not totally or only partially
carry out his obligations, while they themselves keep their side
of the engagement.
The maximum possible output that can be generated by a
production plant in a unit of time (usually a year). Available
production capacity should be evaluated before making
decision on exporting, to determine whether; current
production capacity sufficient to sell in new markets and the
current capacity is expandable to meet market demand and
cost.
A formal arrangement between organizations or countries to
work together for a common objective. Unlike in a joint
venture, firms in a strategic alliance do not form a new entity
to further their aims but collaborate while remaining apart and
distinct.
A wholly or partially owned company that is part of a large
corporation and controlled by it.
Degree to which business enterprises, various operations and
activities are sensitive to be harmed by ambiguous conditions
in the external environment and international markets.

13

SUPPORTING MATERIALS AND LINKS

Strategies for Growth: Exporting Opportunities
Does your product have potential in an overseas market? Small businesses can compete with
larger companies in the global marketplace. Plan for the extra effort it takes to bring your
product to foreign markets.
http://www.youtube.com/watch?v=YyW4pvYYjV4
How to Craft a Winning Market Entry Strategy: Intro
http://www.youtube.com/watch?v=iDNpNP4IUKk
Going Global Internationalization Strategies: A presentation on overview of some
frameworks for organizations interested in internationalization.
http://www.slideshare.net/eteigland/going-globalinternationalization-strategies-335767

14