The government may be convinced that export expansion is in the national interest, but it has to convince businessmen like Mr. Trader that it is in their interest as well – they are the ones who must do the exporting. This may be especially difficult if businessmen have been protected in the home market.
Here are some reasons why exporting makes sense from the businessman’s point of view:
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Exporting offers a firm numerous advantages but unfortunately, many firms have not seized the incredible opportunities that exist in the worldwide market place.
The massive restructuring of political boundaries, the opening and globalisation of new consumer markets, the increasing market orientation of the States of the former Soviet Union, and the Uruguay Round Agreements have generated unprecedented export opportunities.
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Ours is a global economy, influenced by the worldwide access to manufacturing technology which has created competitive manufacturers who are able to produce cheaper, faster and better.
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Many developing countries have become serious rivals to developed economies because of their links to global communication systems and the explosion of their television, print and electronic access to information. There has been a more opportune time for Indian firms to capitalise on these market shifts and to export for the reasons listed here.
Reasons
1. Increase sales and profits:
If the firm is performing well domestically, expansion into foreign markets is likely to improve its profitability.
2. Gain global market share:
By exporting, the firm will learn from its competitors, their strategies and what they have done to gain a share in the foreign markets.
3. Reduce dependence on existing domestic markets:
By expanding into foreign markets, the firm will increase its marketing base and reduce its dependence on local customers.
4. Acquire stability in the face of domestic market fluctuations:
By tapping global markets, firms are no longer held captive to economic changes, varying consumer demand and seasonal fluctuations in the domestic economy.
5 .Make use of excess production capacity:
Exporting could increase the utilisation of production capacity and the length of production runs, thereby reducing average unit costs and raising the economies of scale.
6. Enhance competitiveness:
Exporting enhances a firm’s and a country’s competitive advantage. While the firm will benefit from exposure to new technologies, methods and processes, the country will benefit from an improved balance of trade. India’s share in the world trade is currently only 0% and is expected to rise to 1% by the turn of the century.
7. Create domestic jobs:
In 1996/97, Indian exports of goods and services from small-scale industry alone supported a total of 158.91 lakh jobs it the country.
8. Find excellent no-cost or low-cost experts in export:
For many firms, the decision not to export is based on fear of the unknown. Trade promotion organisations throughout the country have been established to assist companies that are strong domestically but have not contemplated venturing into export markets. These organisations help businesses in every step of the export process.
9. More stability:
In single markets, demand for many products is very seasonal, for reasons of climate (example: umbrellas), religion (example: gifts) or economics (people may only be able to afford some things once a year).
Sales to export markets will often fill in the seasonal ‘troughs’ in demand, so that factories can be kept busy all the year and cash flow problems can be eased.
10. Lower unit costs:
Businessmen often believe that exports will be unprofitable because they will have to be sold at lower prices. This is not always the case, but even if it is so, the higher volume will often mean lower cost per unit of production – yielding overall greater profits.
11. New ideas:
If a company is exposed to new ideas from other markets, and its products have to compete in world markets, the experience will improve every aspect of the company’s operations.
12. Access to foreign exchange:
In many countries, only those companies that export are allowed foreign exchange to buy imported machinery, and they are given preference in the allocation of license to import raw materials.
It is important to note that many of the risks of exporting are similar to those faced in the domestic market.