p. 354 Review Questions 3 AND 9
(3) What are the four caveats exporting SMEs would be well advised to observe when crafting their export strategy? Discuss.
The term export means to ship the goods and services out of the port of a country. An export of a good occurs when there is a change of ownership from a resident to a non-resident. Methods of export include a product or good or information being mailed, hand-delivered, shipped by air, shipped by boat, or even downloaded from an internet site. When a SME considers exporting abroad, there are four caveats that they should observe while crafting their export strategy. The four caveats exporting SMEs would be well advised to observe when crafting their export strategy are: (1) the initial entry should be on a small scale to minimize risk, (2) offer a minimum number of product lines until a foothold has been established, (3) hire and involve locals within your organization at the earliest opportunity, and (4) consider the degree of difficulty in cutting through red tape when crafting the firm’s export strategy.
First, exporting SMEs would be well advised to observe the initial entry should be on a small scale to minimize risk when crafting their export strategy. The locational advantages of a particular market are a combination of market potential and investment risk. As you might expect, the lower risk of export typically results in a lower rate of return on sales than possible though other modes of international business. In other words, the usual return on export sales may not be tremendous, but neither is the risk.
Second, exporting SMEs would be well advised to observe offer a minimum number of product lines until a foothold has been established when crafting their export strategy. When a company begins its operations in other countries, it is important to be safe financially. Entering a country with a “big boom” could damage your business. It is smartest to enter a new market with minimal product lines to minimize the risk associated with getting started in a new country. For example, if Tide detergent was to begin operations in China, they should not enter the market with their entire line of products. Tide has many different types of detergents. If they were to enter a new market with all of these, it would likely be confusing and overwhelming for a new customer to choose between all of the different products. Likely, that customer would rather stick to their current detergents than be faced with a big decision on which new product is right for them.
Third, exporting SMEs would be well advised to observe hire and involve locals within your organization at the earliest opportunity when crafting their export strategy. Exporting allows managers to exercise operation control but does not provide them the option to exercise as much marketing control. An exporter usually resides far from the end consumer and often enlists various intermediaries to manage marketing...