Advantages and Disadvantages of Exporting

It also requires more of an investment and commitment by the international company which creates a higher risk. There is also the down side of having difficulty managing local resources.

* Labor outsourcing is a good strategy to decrease the labor cost. But it associates with many issues. Once outsourcing is done, the MNC cannot just stay behind. The MNC should carefully supervise on the working conditions, safety, wages, working hours, gender discrimination and human rights violations. If any of these factors going wrong and leads to sweatshop conditions, it directly affect on the reputation of the MNC. If once the name or the brand is blacklisted, it is very hard to repair the damage. Therefore, the risk of outsourcing is high.

Exporting, licensing, and using trading companies are preferred modes of international market entry for firms with a(n) ____ structure.

1. Why is outsourcing such an attractive way for firms to tap into foreign markets? What are the risks of foreign outsourcing?

The foreign partner can also become a competitor by selling its production in places where the parental company is already in.

If the outsourcing company will not do the proper testing then may be the product quality will decrease.

Exporting has become a very important business strategy nowadays. In order for firms to expand to the international market, and also to maintain and grow their share of market in whatever industry they are in, depending on their goals and objectives, any company must at least explore this possibility. A few and important advantages might come into place, in that they can extend their sales potential of their existing products, increasing margins through a larger customer base. Also, these small to large businesses can consolidate by gaining global share of market, they can reduce their dependence on their existing markets,

Ownership advantages could be intangible assets like technology and information, managerial, marketing and entrepreneurial skills, organisational systems, access to intermediate or final goods markets, a production process, patent and blueprint. The ownership advantage includes some firm specific valuable market power or cost advantage on the firm sufficient to outweigh the disadvantages of doing business abroad. They are closely related to the technological and innovative capabilities and the economic development levels of source countries.

Outsourcing is a method used by many corporations in which their products are manufactured in foreign countries often for cheaper labor.This method method of productions has it’s pros and cons.

Implement extensive research to predict possibility of economical, cultural or financial complications in the outsourcing country. Make economical/political stability one of the factors in the evaluation process as well as tariffs, customs, and insurance.

Direct exporting is more expensive than indirect exporting. The entry cost & ongoing cost are high for direct exporting. In direct exporting a company have greater chances to build up good relationship. Direct exporting is used by many famous companies in toady’s competitive world as a source of entering new international market. SAMSUNG is also one of the companies who uses direct exporting as a source of Marketing Strategy. Direct exporting is cheaper as compared to other ways of market entering strategy and biggest benefit of direct exporting is it helps in acquiring the information of local market. Potential conflicts with distributors is one of the biggest disadvantage which a company can face in Direct

Due to internationalization these companies have been able to spread their risk. Therefore, if one market is not performing they can rely on the other (diversification)

3. The challenges involved in exporting are the same of any other international operation; there are commercial risks, political risks, cultural risks and currency risks. In order to be prepared to face these risks the company would indeed need to invest and create an export team, hiring and training employees in international operations. The team will require skills in areas such as product development, logistics, finance, currency management, foreign languages and cross-cultural skills.

• Exporting requires significantly lower level of investment than other modes of international expansion, such as FDI. 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.

For any company going out for the foreign market is because of any one out of globalization, reducing tariff all over the world, to increase the market share, saturation of the local market, for getting the economies of scale of production, to use their excess capacity and use the resources where it is available at law cost.