Export business is different in many ways from domestic business; especially the risks and complexities associated with exports tend to be higher. Therefore, the decision to enter foreign markets must be based on strong economic factors. Temperamental decision to export is transient in character and is totally unsuitable for export marketing. Success in exporting requires total involvement and determination which can come only out of basic economic necessity as perceived by the corporate unit.
Every firm at some point of time starts as a non-exporter. The point to be studied is what made some of these firms get involved in export business. This might give a clue to the question as to whether a present non-exporter will become an exporter and if so why and when.
The factors which influence a non-exporting firmâ€™s decision to go in for export business can be classified under the following categories:
Firm Characteristics: These characteristics include (a) product characteristics (b) size and growth of the domestic market, (c) optimal scale of production, and (d) potential export markets. If the firm is manufacturing a product which is internationally marketable and the present and future market prospects in the domestic market are not encouraging, the motivation of the firm to get involved in export business will be considerable.
Perceived external Export stimuli: Under these falls the managementâ€™s recognition of the external market conditions. This will include (a) fortuitous order, (b) market opportunity, and (c) governmentâ€™s stimulation/assistance.
Perceived Internal Export Stimuli: These refer to the managementâ€™s expectations about the effects of exports on the firmâ€™s business. This covers (a) the level of capacity utilization, (b) the higher level of profit, and (c) the growth objectives of the firm.
Level of organizational Commitment: The decision makers must agree on the level of export commitment. This is crucial because it will determine whether adequate resources will be made available for embarking on international marketing. Resources will be required for hiring new staff specialized in international marketing, hiring of consultants for carrying out overseas market potential studies.
Motivation to Export: There are some basic economic reasons which influence a company decision regarding export business. These are:
1. Bulk sales: You have the advantage of selling in bulk. Export orders are larger than those from the domestic market.
2. Relative Profitability: The rate of profit to be earned from export business may be higher than the corresponding rate on the domestic sales. Further experience shows that there has been a progressive improvement in the unit value realization of certain export products.
3. Insufficiency of Domestic Demand: The level of domestic demand, either at a point of time or over time, may be insufficient for utilizing the installed capacity in full. Export business offers a suitable mechanism for utilizing the unused capacity. This will reduce costs and improve the overall profitability of the firm. Recession in the domestic market often serves as a stimulus to export ventures. In fact, export of engineering goods from India picked up momentum at the time of recession in the Indian economy during 1967-69 when manufacturing units faced with large inventories and weak order book position, turned to export markets. Developing diversified export markets thus provides a firm with a degree of protection against cynical domestic economic slowdown. But it must be emphasized that there is an inherent danger in looking at exports to merely supplement the domestic business at the time of crisis. Penetrating foreign markets is a difficult job but sustaining them is even more onerous. Therefore, once a decision is taken to enter international markets, every effort will have to be made to retain them. And this can be done only when export marketing operations are recognized as an integral part of the total corporate activity.