not available domestically: Overseas suppliers may provide access to products that aren’t readily available from a domestic supplier.
✔ More product variety: A foreign supplier may offer a greater variety because it has lower carrying costs (lower warehousing and storage costs) and can keep a more extensive product line in stock.
✔ Better-quality products: In some instances, the perception of many buyers is that foreign products are of a higher quality.
✔ The ability to overcome domestic shortages: Having alternative sources of supply is important in case domestic suppliers can’t satisfy your requirements (for example, because of labor or equipment problems).
✔ Less dependency on a limited domestic supplier base: At times, the number of domestic suppliers for a particular good may be limited. Sourcing from overseas can not only give you better prices but also serve as a backup and put you in a better situation when negotiating with your domestic supplier.
✔ Currency exchange rates fluctuate. What may work in your favor today because of the exchange rate may not work in your favor next year. Remember: Importers benefit from a strong U.S. dollar, which makes foreign products cheaper in the U.S. market.
✔ Trade barriers in the form of tariffs may make importing difficult or impossible.
✔ Goods can arrive late or damaged.
✔ Negotiations can fail or be delayed because of language and cultural barriers.
What if you haven’t yet started a business and you’re interested in import/export? You stand to gain all the benefits that an existing business gains by going global. And you don’t have to be a huge business to make a go of importing or exporting; according to the U.S. Department of Commerce, big companies make up about 4 percent of U.S. exporters, which means that 96 percent of exporters are small or mid-size companies.
Still, starting a new business – any new business – is a challenge. Throw in the complexities of international trade, and you’re in for an even bigger challenge. If you’re up for the challenge, here’s what you need:
✔ Knowledge: In addition to finding out what it takes to start a business, you need to be up on everything from documentation and shipping to communications and government regulations. I cover all these issues in this book, but you’ll also want to check out books like Small Business For Dummies, 4th Edition, by Eric Tyson and Jim Schell, and Business Plans Kit For Dummies, 4th Edition, by Steven D. Peterson, Peter E. Jaret, and Barbara Findlay Schenck (Wiley).
✔ Enthusiasm: You need to be an enthusiastic salesperson, someone who likes to spend time tracking things like invoices and shipping receipts. You need to get excited at the thought of seeing where new ideas and products will take you. And you need to enjoy working with people from different cultures. Your enthusiasm will carry you through some of the challenges along the way, so the more enthusiasm you have, the better.
✔ Consideration: Establishing a solid relationship with your supplier or buyer is important in any business, but it’s even more important in the import/export business. Cultural differences play a huge part in buying or selling and in establishing ongoing relationships. The hard sell that’s effective in the U.S. may not produce the same results in foreign markets.
✔ Commitment: You won’t be successful in any venture unless you’re personally committed to its success. As with most businesses, you’ll encounter peaks and valleys, good times and bad. People who are successful in the import/export business are willing to work their way through the valleys.
Determining Your Place in the Food Chain: Import, Export, or Both?
You know you’re ready for international trade, but do you know whether you want to import or export? The answer that’s right for you depends, in large part, on why you want to go global in the first place.
Importing makes sense when
✔ The value of the U.S. dollar is strong – the stronger the dollar, the cheaper purchasing goods overseas is.
✔ You’re faced with increased competition, and the only way to remain competitive is to source goods at lower costs for suppliers overseas.
✔ You want to identify new products or expand your existing product line.
✔ You can’t access products or technologies from domestic suppliers.
✔ Another country can produce a product more efficiently because of available resources.
✔ You’re a good negotiator and enjoy selling.
Exporting makes sense when
✔ The value of the dollar is weak – the weaker the dollar, the cheaper your U.S. – manufactured products are.
✔ You want to increase sales and profits. Rising income levels in many developing countries are creating opportunities for more people to purchase goods.
✔ You want to serve a market that has nonexistent or limited production facilities.
✔ Before your business invests in a production facility overseas, you want to test whether the foreign market accepts your product.
✔ You want to use your excess production capacity to lower per-unit fixed costs.
✔ You want to extend your product’s life cycle by exporting to markets that are currently not being served.
✔ You enjoy selling and dealing with people from other countries and cultures.
Being both an importer and an exporter makes sense when
✔ Countries have negotiated preferential trading arrangements.
✔ You want to remain price-competitive at home. Many businesses import labor-intensive components produced in foreign countries or export components for assembly in countries where labor is less expensive and then import the finished product.
✔ You enjoy buying and selling, dealing with people from different cultures, and traveling.
✔ You’re comfortable dealing with the numerous uncontrollable environmental forces involved in importing and exporting. (See Chapter 1 for details on these factors.)
Deciding Whether to Become a Distributor or an Agent
After you’ve decided to get into the import/export business, you have to decide how you want to set up your business. You have two options:
✔ Be a distributor (an intermediary who purchases and takes title to the goods). For example, you purchase sweaters from a manufacturer in Japan and import them into the U.S. If you’re a distributor, you take title to the sweaters, store them, and then look for customers, eventually selling them to Macy’s, Bloomingdale’s, Nordstrom, and so on.
✔
