Why go International?
No business can afford to be left behind! The Global Export Imperative: Exports are Critical to the Success of the U.S. Economy Exports, in the 1990's, have grown at twice the rate of the overall U.S. economy. During this decade, exports have accounted for about 40% of the growth in the merchandise sector of the U.S. economy and for 58% of the growth in the service sector.
Exporting will continue to become more and more integral to U.S. economic growth, as well as the success of individual companies. Inactivity or poor performance in the global marketplace will loom as a serious threat to the continued economic viability of many small and medium-sized enterprises (SMEs). Non-exporters will increasingly face superior competition from SMEs that have seized international opportunities and become larger and stronger.
Exporting will increase the competitiveness of U.S. companies. Exposure to the technological and managerial innovations of foreign competitors, as well as the demands of overseas consumers, force U.S. firms to address internal weaknesses. Firms grow stronger and better able to accommodate evolutionary developments within their particular industries.
Exports expand the overall market for a given product thereby allowing a company to distribute production costs over a larger consumer
base, which increases returns on investment. If a company has excess productive capacity as well as relatively fixed capital costs, they can create an economy of scale and boost profits.
Diversification of customer base through exporting has an additional benefit of expanding the product life cycle. As a product becomes mature in the domestic U.S. market, companies can extend the marketability of that good by seizing international export opportunities. Exporting allows a company to capitalize on the economy of scale in production as well as extending the natural product life cycle. The growing revenue stream is preserved.
U.S. companies may also increase profits by extending the life span of aging technologies through exports. Increasingly obsolete manufacturing technologies can be transferred abroad via licensing agreements with the recipient country.
The year 1998 bears witness to a period in the cyclical global economy, which is an important indicator that the international business environment is very non-linear. The investment crises and recession in Asia, and also to a certain extent, in Latin America, warns that strong economies are vulnerable to the recurring downturns in the global economy.
Market diversification through exporting provides a cushion against business cycles, which often differ from country to country. The greater the level of diversification, the more easily a U.S. company can ride out and endure the periodic market slumps. Domestic Market Saturation The U.S. economy is so productive that companies eventually face static or diminishing market shares. The best solution for a company facing a saturated market with low future
growth potential is to find new overseas markets.
Recent research demonstrates that since 1970, manufactured goods have become less important to the overall U.S. economy1. In 1970, U.S. consumers spent 46% of their outlays on manufactured goods and 54% on services. By 1991, consumers spent only 40.7% on goods and 59.3% on services. U.S. consumers spend less on goods because the price of goods relative to services has fallen by nearly 23%. Goods become cheaper because improvements in productivity have grown much faster in the manufacturing sector than in the service sector of the U.S. economy. Manufacturing has become more efficient which is reflected in the lowering of prices to consumers. As manufacturing enterprise face increasing difficulties due to these types of changes in the U.S. marketplace, exporting will increase market size and ultimately boost profits.
How Businesses Successfully Compete in the Global Market
Complete information is a key commodity. The international marketplace is a vast unknown landscape for most SMEs. Successful exporting requires a sophisticated research capability to illuminate this complex landscape. Most SMEs lack in-house research capability and cannot afford to have key management personnel diverted from domestic business responsibilities in order to develop an export strategy.