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 risks.

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.

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

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 include:

  • 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 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 markets.
  • 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.

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 markets?
  • 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:

  1. Identify areas of your business you need to focus on – whether it be improving your technology, or simply identifying your target markets.
  2. Assess your competitive position.
  3. 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.
  4. Set objectives for your business.
  5. Evaluate the various options open to you, evaluate what limitations are likely to restrict you and then prioritize a plan of action.
  6. Create projects, each of which will lead you closer to your goal.
  7. Implement your strategies and monitor performance against your targets.

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 evaluated include:

  • Do you have enough capacity to deal with the increased demands of your target export market, without neglecting your domestic markets?
  • 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 exporting?
  • 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 expertise?
  • What levels of export experience do you have or do you have access to?
  • What are your current strategies for your domestic markets? Will your export strategies conflict with these or compliment them?

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 donors are

  • 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 about Exporting