Exporting and Importing - Essay Example

Name………………………………………………………………xxxxxx Tutor………………………………………………………………. xxxxxx Institution………………………………………………………….xxxxxx Title……………………………………………… Export Market Selection Course……………………………………………………………….xxxxxx @ 2010 Introduction Globalization has led to an integrated global economy thus exportation and importation form an integral part in it. Exportation entails selling of goods and services which are produced in the country to another one. On the other hand, importing entails purchasing goods or services from another country. Procedures for imports and exports There are strict regulations that are put in place to govern imports and exports requirement. These regulations are what we call as export and import procedures. The following are some of the procedures that are to be followed by businesses who wish to carry out exportations and importation businesses: Some regulations or governments require that businessmen who have decided to export or import products to develop a plan. The plan covers the type of product to be dealt with, timeframe, target markets, custom duties and the marketing strategies involved. Customs requirement- you find out that for both the exporters and importers, it is vital for them to go to the customs department to get information in relation to exports and imports. For instance, for imports or exports, the customs can provide information such as clearance requirements, the import permits, intellectual property issues and the prohibited goods. The customs provides information regarding the costs incurred for imports such as the clearance fees, customs duty and taxes. After developing a plan, the interested parties should then obtain a permit from the customs to license their businesses. Foreign country market analysis The columns A and B below represent the exporting country and importing countries respectively. A B China United kingdom (U.K) South Korea Brazil Australia India Vietnam Singapore Saudi Arabia Ghana The exporting company XYZ limited which is based in china deals with manufactured products and textiles. The company is considering exporting its products to the countries stated above and the most suitable ones. Therefore, it is important for it to carry out a market analysis before carrying out the exportation. Market analysis aims to increase a company’s market share, revenues and profits. The analysis touches on market requirements, trends and strategies There are different ways in which XYZ limited can carry out the market analysis such as conducting a customer survey. But because the market is wide the company can use a marketing analysis tool/software. The software is designed to assist the stakeholders in the exporting sector understand policies and trends in the international markets. The tool consists of the trade, product, market access, trade competitiveness and market access map. For market analysis purposes, there are several procedures that are to be followed. The steps are shown below: 1) Assessing of alternative markets The company will consider the market potential, levels of competition, legal and political factors and the socio-cultural factors. To assess the market potential factors such as the gross domestic product (GDP), population, per capita income and public infrastructure. The GDP measures the purchasing power of the population by taking into consideration the living standards and the rates of the countries. On the other hand, per capita income measures the income per person taking into consideration the population number. In most cases, countries, which have a strong per capita income, have a less population and a strong economy. To assess the competitive environment the firm considers the number and sizes of firms already existing in the competing markets, market share, pricing and distribution strategies and their strengths and weaknesses. The contemplating firm has to understand the hosts’ country’s trade policies and the political environment. The socio-cultural factors are difficult to quantify and they are associated with a lot of uncertainties. Therefore, they should be greatly. The table below shows the Gross domestic product (GDP) for the countries XYZ limited is considering to export its products to: The table below shows the per capita income listings by the IMF for the countries that XYZ limited is considering to export its products to. The table below shows the Gross domestic product (GDP) for the countries XYZ limited is considering to export its products to: IMF listings   2009   Country per capita income     Singapore 50,180 Hong Kong 42,653 united kingdom 34,388 India 3,015 Australia 38,663 South Korea 27,938 Saudi Arabia 23,272 brazil 10,499 Vietnam 2,942 Ghana 1,558 The table below shows the population of the countries: 2010 listings     Country per capita income % of world population       Singapore 5,076,700 0.07% Hong Kong 7,061,200 0.10% united kingdom 62,008,048 0.90% India 1,191,220,000 17.30% Australia 22,552,000 0.33% South Korea 49,773,145 0.72% Saudi Arabia 27,136,977 0.39% brazil 190,732,694 2.77% Vietnam 85,846,997 1.25% Ghana 23,150,923 0.35% Public infrastructure may either be tangible or intangible. Tangible infrastructure includes education, health and transport. The intangible public infrastructure includes the tax, legal, regulatory and planning systems. The countries which have a strong public infrastructure are the United Kingdom (U.K), Australia, Hong Kong, Singapore and Saudi Arabia. 2) Cost-benefit and risk analysis The company should consider the cost of entering the foreign market and the opportunity cost that arises by the delay of entering another market. The benefits involve profits, revenues, access to new technology and competitive advantage. The benefits should always outweigh the costs, if they do not, and then consider alternative markets. The company should consider risks facing the exporters and how they can be mitigated. Risks facing exporters, importers, and their mitigation strategies The exports and importers usually face some risks such as the competition, political risk, foreign exchange risk and lack of product acceptability. The foreign exchange risk is caused by the market’s volatility and unpredictability as a result of forces such as inflation. These effects cause the currency to rise and fall with time. On the other hand, the political risk is caused by the political climate of a country being unstable. Instability of a country may be caused by terrorism, genocides or post election violence. The risk of product acceptability may be caused if the businessmen fail to carry out a market research regarding the customer’s requirements. These risks can however be prevented by establishing mitigating strategies. Political risk can be mitigated by carrying on businesses with countries which are politically stable. Competition is sometimes healthy though it is very important to create a competitive advantage for your product. Therefore, to fight competition the businessmen should have competitive strategies such as product differentiation, branding, niche focus and cost leadership. The risk of product acceptability can be mitigated by carrying out market research regarding the customer’s requirements before exporting or importing products. Finally, the foreign exchange risk can be prevented by planning ahead using forecasted cash flows and observing trends. The risk can also be mitigated through hedging. The reason why these mitigating factors for foreign exchange risk are put in place is because the risk exposure is broken down into three. That is transaction, translation and economic elements. In simple terms is covers the accounting (translation) and the cash flows (transaction and economic) aspects. 3) Potentiality of entry or expansion The firm should consider factors such as the geographical location of the foreign country, internationalization advantages and the firm’s available resources. There are some countries which are geographically well located such as the United Kingdom, Hong Kong, Brazil and Australia. The location makes accessibility of products into the market easier. The internalization advantages include the benefits that the company is going to get such as the advantages of the economies of scale and other advantages associated with the international trade. The firm should consider if it has enough resources such as finances, manpower and materials so as to sustain the export business. Apart from the procedures above, we should examine China’s top export markets which are; the European Union countries, United States and Hong Kong and South Korea. This aspect will help in determining which markets are suitable also. Considering the market analysis and china’s top export markets, Xyz Company should rank the foreign markets as follows: A B China United kingdom (U.K) South Korea Singapore Australia Brazil Saudi Arabia India Vietnam Ghana Therefore, the suitable markets are the U.K, South Korea, Singapore, Australia, Saudi Arabia and Brazil in that order. These are the countries, which are economically and politically strong, and in addition, their markets have the potential to expand currently and in future. You find out that these countries have a moderate population, a relatively high GDP and per capita income, which are a good choice. The population need not be large (India) so as to increase sales and revenues. The reason why Vietnam and Ghana are unsuitable countries for export purposes is because they have a very low population, low GDP and per capita income, politically unstable and their economic growth and development is still very young. Therefore, their market potential is not justifiable and cannot be relied upon. Exporting in such countries will lead to costs outweighing the benefits. Export strategies The suitable markets that Xyz Company should consider exporting its products have been identified. Though, the company should set up some strategies to ensure that the export business is successful and sustainable. Some of the strategies that we have looked into were market analysis and an export plan which is one of the procedures for companies which wish to export products. Therefore, it would be vital to look into other strategies which follow. To begin with, the company should ensure sustainable commitment in its export business by injecting more resources. Commitment also entails ascertainment of the strengths, weaknesses, opportunities and threats of your own firm. Strengths may include strong brand names, good reputation, customer loyalty, cost advantages and patent rights. While weaknesses may compose of poor brand names, bad reputation, lack of patent rights and a high cost structure. Opportunities may include high demand for products, new technology removal of international trade barriers and loosening of laws and legislations. Threats may include the five forces of Michael Porter, shift in customer’s preferences and tightening of trade barriers. A marketing formula has to be set using the marketing mix which incorporates the 4 p’s; price, product, place and promotion. Price is the amount to be paid by a customer for a given product. It’s influenced by factors such as the competition, forces of demand and supply, customers perceived value of the product, cost of production and income of the customer. The forces of demand and supply have the following effects. When a product is on a high demand, the prices go high and vice versa. On the other hand, when the supply of a product is high, the market prices go down and vice versa. The relationship of the quantity supplied and that demanded is an inverse one compared to that of a quantity demanded which is a linear one. The factor on customers perceived value on a product works this way. If a customer perceives a product to be expensive, then the seller will set a high price for that particular product and vice versa. Finally, if the market is faced by a stiff completion you find that each competitor wants to sell. This causes the prices to fall since consumers will buy the cheapest. Place is the location where the product can be purchased. It may be a physical place or a virtual place such as the internet. Virtual place came into existence as a result of e-commerce. Product includes a tangible or intangible object that is to be presented to consumers for sale. When it comes to the product, there are specific decisions to be made such as the quality, brand name, functionality, styling and packaging. Promotion is an art of selling by making the consumers aware of the existence of a product or service. It includes personal selling, advertising public relations and sales promotions. A successful marketing mix can be developed through an adequate market research and trying the different elements. Another export strategy is for the company to review, revise and monitor its marketing strategies from time to time. This allows flexibility because changes in the customer’s needs, tastes and preferences may occurs in a timely basis. The basic marketing formula is a just a beginning more has to be done apart from setting the marketing plans. Finally, the firm can strategies its exports by forming strategic alliances with companies in the foreign markets which offer a complimentary product. This offers effective market access and sell of products in a less time than expected. Work cited Gerald Albaum and Edwin Duerr (2008). International marketing and export management. Financial times prentice hall. Gary Armstrong, micheal harker and Philip kotler (2009). Marketing: an introduction. Financial times prentice hall. Jon Groucutt, peter Leadley and Patrick Fortsyth (2004). Marketing: essential principles, new realities. Kogan publishers. Karl Moore and Niketh Pareek (2006). Marketing: the Basics. Tylor and francis publishers. Thomas Johnson and Donna Bade (2010). Export/ Import procedures and Documentation. AMACOM. Yann Aubin and Arnaud Idiart (2007). Export control law and regulations handbook. Wolters kluwer international. China’s website. http://www.starmass.com/china_review/imports_exports/china_top_export_market.htm Marcy Ferrington (2006). Currecies and Globalization. Nova publishers. Maurice levi (2005). International finance. Routledge publishers. The world factbook, central intelligence agency. GDP- per capita income. Accessed 14th may 2010. http://en.wikipedia.org/wiki/List_of_countries_by_GDP_%28PPP%29_per_capita The world factbook, central intelligence agency. GDP. Accessed 14th may 2010. http://en.wikipedia.org/wiki/List_of_countries_by_GDP_%28PPP%29 World bank (2003). World Bank development indicators. World Bank publications. Read More