Export can be defined as selling goods made in one country, to another
country. Many business owners consider the field of export only for
large businesses. This may well have been true in the past, but with
globalization and with government support for the development of small
and medium enterprises, more and more opportunities are opening up for
the smaller business in the international arena.
The international market offers exciting opportunities to the small
business in terms of growth potential, but it also has its fair share of
The risks of exporting may be business - related, financial or political
issues. Business requirements and regulations will vary from country to
country, and as a small business owner, you need to be aware that a
formula that leads to a successful business in your home country, may
not necessarily succeed when replicated in an international market.
Financial risk includes Exchange Rate Fluctuations and Debtors Control
in a foreign market.
Political risks include civil wars, changes in governments and/ or
policies, that may make the market financially less viable to you. The
advantages of entering export markets includes increased market size and
long term market position. If you get it right, the opportunity for good
returns on investment is likely.
FACTORS TO CONSIDER
In previous modules, we investigated the impact of the external
environment on the performance of a business, and we discussed how
important it is for an entrepreneur to be constantly studying the
environment for opportunities and threats to his / her business.
This becomes even more important if the business is intending to export,
as these factors will not be as familiar to the exporter, and the costs
of monitoring them as closely, are very high.
The major factors impacting on an export business include:
- Socio / Cultural factors
- Economic factors
- Political factors
- Foreign Exchange Factors
- Technological factors
- Legal factors
BARRIERS TO EXPORTING
Exporting is a very complex process and many small businesses shy
away from it for this very reason.
Some of the reasons for small businesses avoiding the export arena
- Export markets are a particular challenge to organizations that
have limited financial resources.
- Small businesses often cannot afford the time and / or the
expertise that is required to research the start-up requirements and
procedures of a foreign market.
- Language barriers and the expense of translating brochures,
catalogues and other promotional material is high.
- The products being offered might need to be modified to meet the
standards of the foreign country.
- Export markets are competitive, and because of this, pricing and
the credit terms required to create market share, may make the
process less profitable.
THE BENEFITS OF EXPORTING
The economy of a country will benefit from increased export
activity, because the result of export is an increase in foreign money
coming into the country.
As economies become more and more global, the need for, in particular,
manufacturing businesses to export, becomes more important, as all
companies are now competing against international competition, even on
their own doorstep. Despite the perceived pitfalls of exporting, it
remains an attractive growth option for small businesses, particularly
due to the levels of support that are currently available.
Some of the benefits of export to the small business include:
- Increased markets for the sale of their goods, with the
potential of making more profit.
- Increased sales for manufacturing companies, results in benefits
from the so-called ‘economies of scale’.
- International markets offer companies exposure to more diverse
- Sometimes local markets have seasonal fluctuations. When
companies export to international markets, as well as domestic
markets, the effect of this seasonality is much less.
- Every product has a life cycle. When a product is reaching the
end of its life cycle in one market, international markets may well
offer new opportunities for the company to continue to manufacture
and market the product.
- Untapped markets.
- The local business can learn a lot from the international arena.
- Companies that compete successfully in overseas markets will
improve their status in their domestic market as well.
PLANNING TO EXPORT
Proper planning is critical before you embark on any form of
exporting. Research has shown that companies that export, are more
successful than companies that don’t, so any decision to export is
usually a good one. However, you need to know what you are doing and you
need to carefully research the markets you are targeting, as well as the
resources that are available to you.
As with a business plan, your export plan needs to cover certain key
things. These include:
- Which countries are you targeting for export and why?
- How are you going to market your products in your selected
- What products are you going to offer your targeted market and
how are you going to get it there?
- What changes need to be made to your operational activities, in
order to be able to provide enough products and after sales service
to your target market?
- How much money do you need to budget to be able to export your
goods and services?
- What are the time frames you need to work towards in order to
meet your export plans?
- Who needs to do what and by when?
Export Guide developed for small and medium export enterprises,
lists seven stages critical in the export planning process:
- Identify areas of your business you need to focus on – whether
it be improving your technology, or simply identifying your target
- Assess your competitive position.
- Identify the niche areas of the market you have identified and
what your unique offering will be in that market, in order to gain a
sustainable competitive advantage.
- Set objectives for your business.
- Evaluate the various options open to you, evaluate what
limitations are likely to restrict you and then prioritize a plan of
- Create projects, each of which will lead you closer to your
- Implement your strategies and monitor performance against your
ARE YOU READY TO EXPORT?
The challenges of exporting require that as a business, you need to
first evaluate very carefully whether your business is ready to start
exporting or not.
Key issues about your internal organizational capacity that need to be
- Do you have enough capacity to deal with the increased demands
of your target export market, without neglecting your domestic
- Do you have the management expertise and the time available to
spend on the export effort?
- Are you in a position financially to commit resources to
- Do you have the technical know how to export or do you need to
invest in training first?
- Can your marketing expertise in the local market be transferred
to an overseas market or will this require additional expense and
- What levels of export experience do you have or do you have
- What are your current strategies for your domestic markets? Will
your export strategies conflict with these or compliment them?
RESOURCES AND SUPPORT AVAILABLE
Assisting small and medium businesses to export their goods and
services is a key focus of government support strategies. Exporting
brings about economic growth.
SME Department of the Ministry of Industry, Trade and Marketing has been
established to coordinate government and private facilities aiming to
promote micro, small and medium enterprises to become exporters.
Among the facilities initiated by the Government in cooperation with
- SME Competitive Funds Facility (SCF) and Access program.
- The Tanzania Chamber of Commerce, Industry and Agriculture
(TCCIA) has also been promoting the accessibility of SMEs in local
and foreign market.
- The Board of External Trade (BET) promotes all exporters
irrespective of their categories.
Any organization wanting to enter the export arena is advised to
contact TCCIA as part of their initial research into the feasibility of
entering the export arena.
Useful websites include:
* Buy the SME Toolkit for more details