The export business can be a profitable one if planned properly. However, there are certain challenges in starting your export business, especially in the beginning. In this article, we will explain the key challenges as well as the benefits of exporting.

What is Exporting?

Exporting is where a business exports products or services to overseas countries, to expand into new markets and get better gross margins compared to their home country. Sometimes exports are crucial to further grow the business and also diversify one’s revenue.

The Challenges of Exporting

There are specific challenges and difficulties in doing any kind of business. Following are some challenges you might face as you start your exporting business:

1.Finding the Potential Buyers

Exporting to foreign markets requires prior planning and analysis. For instance, it is not easy to find global buyers easily for your products since you might not have any references in such markets. Also, you will have to create a strategy wherein cultural difference doesn’t come in the way of impacting your business. While finding the right buyer isn’t a cake-walk, we might be able to help you with our product Trademo Intel,  a global trade data intelligence platform. You can use Trademo Intel to find reliable and emerging buyers for your product categories and create a list of potential buyers.

2.Finding the Right Product for a Specific Market

Finding the right product for a specific market is not easy. One needs to do proper research about the new market, other businesses that offer similar products, and take note of the pros and cons consumers have been pointing out regarding them. It is not necessary that a product that is successful in one market will be the same in the other one. Therefore it is essential to carefully choose the product you want to sell and the markets you venture into.

Read here: How to Choose the Right Product to Export

3.The Import/Export Duties & Tariffs

There are export duties levied on certain products by the government. Apart from export duties, there are also import tariffs that impact the exports. An import tariff is a tariff that a country imposes on one unit of import. Therefore, it will increase the total costs for the customers who are going to buy/import your product. If your target country increases the import tariffs, then it might affect the viability of your customers to buy your products.

4. The Quality Standards

In addition to the import/export tariffs, the requirement of meeting foreign quality standards can be a big challenge for exporting. For instance, there are strict regulations when it comes to the export of food and beverage products, which many businesses fail to meet for new markets. For instance, when it comes to spices, standards set by ASTA (American Spice Trade Association) is what is expected in many parts of the world. However, there’s also the FAQ (Fair Average Quality) standard that is also accepted in other parts. Apart from meeting the quality standards, you also need to pay attention to branding, labeling, and packaging as agreed between you and the buyer.

5. The Currency Exchange Rate

The exchange rate is the value of one currency for the purpose of conversion to another. For international payments, people often use strong currencies like USD. If the value of a foreign currency increases against the local currency, then export activities are encouraged. Conversely, if the value of a foreign currency decreases, it inhibits the development of export activities. For instance, the value of Yuan depreciated against USD because of the US-China trade war. This, however, helped businesses to import cheaper products from China to US, despite hugs tariffs being implemented by the US government.

6. Pricing Strategy

The pricing is based on the price offered by your competitors. Many exporters are not really active in researching the market to create the right pricing strategy that impacts their competitiveness in global markets.

7. Compliance and Documentation

The complex set of compliances is one of the biggest challenges for exporters today. The compliance process is many times cumbersome and lacks clarity. Further, sometimes the attitude of relevant authorities is not supportive making running an export business costly and difficult.

The Advantages of Exporting  

Benefits and advantages of exporting outweigh all the challenges:

1. All you Need is a Good Product

Exporting is a business that can be started by anyone with a good idea and product. You don’t need to have a college degree or come from a business school to start your export business. All you need is the right product at a competitive price. Your product should be of good quality and be able to meet the needs of your customers. Most importantly, the world is more open and connected than ever before.

2. Limitless market (the main advantage of exporting)

You can sell your product in almost all countries in the world today i.e. the market is limitless. Selling your products in your native country can limit your market size to that of the local market. However, exporting products abroad gives you unlimited opportunities to showcase your talent and earn big. Selling your products globally can allow you to quintuple your revenues. While it was not possible to sell your products to almost all countries in the world just a few decades earlier, today it is!

3. Foreign Markets Can Offer Higher Prices

The prices for your products on the foreign market can be significantly higher, than in the local markets because of the cost arbitrage between the two countries. Of course, this also depends on the markets you venture into and your product categories. This is quite often the main reason why businesses look start exporting globally.

4. Govt Benefits for Exporters

Exporting goods or services abroad is one of the key activities, which brings foreign currency into your country and helps create foreign currency reserves. That’s why the governments give many incentives and benefits to exporters. Government provides rebates in service tax, VAT (value added tax) to exporters for instance, in India, the government recently announced that there will be cash incentives for export of products under 38 categories. Also, banking institutions give special loans to exporters with a robust business plan. The more you export, the more benefits you gain!

5. Payments Received Faster than in Local Market

Sometimes, in the local markets, if the competition is really high, then the businesses get their payments after 2-3 months of goods being sold. But while exporting abroad, one might expect the payment even before goods being exported. Of course, this all depends on the payment terms and negotiation with the buyer.

Conclusion

Starting an exporting business has its own challenges and advantages. These challenges and obstacles can, however, be overcome by proper planning. The advantages of exporting to foreign markets and the business opportunities it brings along obviously outweigh the challenges. The global markets will present you with unlimited opportunities, which you generally don’t get if you are doing business locally. To know more about global trade and its trends,

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