Export Definition, Advantages and Disadvantages

What Exporting means?

Exporting in simple term is the sale and transport of a good or service to another country. It offers businesses the opportunity to build upon domestic success. But exporting is crucial to country's economic health, too. Increased exports mean business growth, and business growth means bigger profits for country's companies—and results in more jobs for country's workers.

Why Trade for Developing Countries? – Part 2

            6.Trade increases choice and lowers prices for consumers by widening the sources of supply of products and services and strengthening competition.

            7.Trade plays a role in quality improvement, labor and the environment standards  through increased competition and the exchange of best practices between  business partners, building capacity in industry and product standards.

            8.Trade contributes to cutting government spending by expanding supply source of products and services and strengthening competition for government procurement.

            9.Trade strengthens relationships between nations by bringing people together in   peaceful and mutually beneficial exchanges and contributes to peace and stability.

            10.Trade creates employment opportunities by strengthening the economic sectors that create stable jobs and generally higher revenue, thus improving livelihoods.

GOOD LUCK

Why Trade for Developing Countries? – Part 1

            1. Trade can contribute to boost development and reduce poverty by generating growth through increased trade and investment opportunities, as well as the expansion of the productive base through the development of the private sector.

             2. Trade strengthens competitiveness by helping developing countries reduce   input costs, acquire finance through investment, increase the added value of their  products and move up the global value chain.

             3. Trade facilitates export diversification allowing developing countries access to  new markets and new materials which open a new production possibility.

             4. Trade encourages innovation by facilitating the exchange of know-how, technology and investment in research and development, including foreign direct investment (FDI).

             5. Trade openness expands business opportunities for local companies by  opening up new markets, removing unnecessary barriers and making it easier for  them to export.

Why Export is Important?

An export process has a lot of advantages, let’s go to identify some of them:

       1. Export is based on comparative advantage where countries mutually gain.

       2. Export strengthens political, social and cultural ties between countries.

       3. Export expands and generates more capital.

Understand Which Your Export Strategy?

Before starting your new export business, you should be familiar with Export Strategy Diagram to identify which strategy you will follow. This diagram excerpt from ITC publications and I will share you the illustration.  

As shown, the diagram is divided into 4-sections, each section from an export strategy resulting from intersection of two elements of export entities:

Also, if we look at the export elements, we can find each product and market elements classified into Existing and New Product and Market respectively.

Existing product means you have already a product exported to a specific market but new product means you have a new product doesn’t exported before. Existing market means you have a market that already you export your product but new market means you have a target market that you didn’t export any product to it before.

Then, from the diagram we can define the 4-export strategies:

Exporting of existing product to existing market will form a strategy called Product and market Penetration which aims to increase your product export share to that market.

Exporting of existing product to a new market will form a strategy of Market Diversification whereas exporting of new product to an existing market will form a Product Diversification strategy.

Exporting a new product to a new market will get a strategy of Product and market Diversification.

So, any exporter cannot plan his/her export enterprise from outside the boundaries of the above diagram.