Advantages and Disadvantages of Exporting

1614 Words Apr 18th, 2013 7 Pages
Introduction

Companies willing to enter a new market with their products or services have many options and one of them is exporting. I divided exporting into two sub-groups by comparing financial involvement of a company and taking into account their strengths and weaknesses. Then I compared exporting with other market entry strategies, so I could gain further insight to advantages and disadvantages of exporting. In the conclusion I outline which types of exporting fit SME’s and which fit MNE’s.

Low cost exporting (“AT THE GATE” SELLING, EXPORT HOUSES, PIGGYBACKING, AGENTS, DISTRIBUTORS, FRANCHISES)

Advantages

Low cost exporting requires only a small direct investment, if any. It usually carries low risks of financial loss and
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IN COMPARISON WITH OTHER MARKET ENTRY STRATEGIES
(FOREIGN MANUFACTURING, LICENSING, ASSEMBLY, ACQUISITIONS JOINT VENTURES, ALLIANCES, HOLDINGS)

Advantages

In comparison with the other types of market entry, fully owned or with partner, exporting companies are avoiding the risk of huge financial loss of investment.
Products manufactured in foreign country may be produced with defects and can harm the brand even in the domestic market. Intellectual property may be stolen and may create a strong competitor. Staff in an outsourced company may be less educated and have lower skill what can harm the overall quality of the product. Innovation in technology may not be easily introduced, which provides competitors with an advantage. Additional investment may be necessary to ensure the involvement of domestic management. Company’s managers sent to exported country may not be familiar with the mentality of local population and products may not be easily adjusted to local market. Cooperation with partners can sometimes lead to disagreement, which may cause delays and failures in business. Labour costs, production costs and services can be more expensive, than in domestic country (e.g. moving manufacture from developing to developed countries) (Stock J.R., Lambert D.M., 1983).
By exporting, companies are able to avoid many of these problems.

Disadvantages

If a company decides to export, it loses advantages of other types of market entries.
Fast expiring products may be