To go or not to go into exports:
take a Test
by Arlene Eleanor E. Liberal
Which manufacturer does not dream of eventually selling in international markets? There are a hundred good reasons for exporting. These include:
- expansion of the market. –- meaning the firm will now have buyers in other countries not only in the local market;
- possibility of more profits –- with more buyers, the chances of getting more profits is better;
- reducing dependence on the domestic market – at times when local sales are down, the export market can generate additional sales;
- utilization of excess production capacity –- if the manufacturing capacity is more than what the domestic market can absorb, it is worthwhile to consider going into exports.
- generation of employment –- as your volume of production increases, you will require more and more manpower; thus jobs are created in the community which in turn triggers a chain reaction of economic activities.
- maximization of local resources – local materials, labor and supplies are likely used in producing the products and value is added once these are processed into finished products.
- generation of foreign currency for the firm and the country. If you sell to the US market, you will receive dollars, if you sell to Japan, then you will earn Japanese yens, if you sell to the European market, you earn the Euro. The taxes paid by the exporting firm will go to the coffers of the government which add income to our country
Given these attractive prospects, the next question you will ask yourself is: “Am I export-ready?”
Here is checklist which can help you see for yourself if you are prepared to be an exporter.
| Criteria |
Yes |
No |
Rating |
|
|
|
Maximum Points |
Firm’sRating |
| Market 1) Does the firm have a viable domestic market
2) Does the firm have contacts locally and/or abroad who can facilitate selling in the export market?
3) Do the products have distinctive designs/quality/features /and or uniqueness to make them sellable in the export market?
4) Is the firm a member of relevant industry association?
5)Does the firm have access to government-assisted marketing programs
T
otal |
|
|
1) 8
2) 8
3) 6
4) 4
5) 4
30
|
|
Production
1)Does the firm have the necessary production facilities and capacity in terms of volume for the export market?
- A network of raw material suppliers?
- A network of suppliers of other
critical production inputs
- A pool of sources for manpower/labor force
- Appropriate technology/equipment to be competitive vis –a- vis other domestic and foreign firms
- Available time to produce products for export
Subtotal
2) Do the firm’s production facilities and processes comply with international standards?
Total |
|
|
a) 3
b)3
c)3
d)3
e)3
15
15
30
|
|
Finance
1)Does the firm have its own financial resources to go into exports?
2) Does the firm have access to financing or financial institutions that can finance export activities
Total |
|
|
1)15
2)15
30
|
|
Human Resources
1)Does the management team have the educational background and work experience to manage the firm professionally? |
|
|
10 |
|
Over all total |
|
|
100 |
|
The following will tell you more about the factors considered in this test.
Market Criteria –
Going into exports is similar to joining the Olympics or participating in an international beauty contest. You have to be a winner in the local market first. In other words, before going into exports, you must have already survived and excelled in the domestic competition. Surviving in the domestic market competition is an indication you have already put in place the necessary systems and procedures to be efficient, and the necessary linkages with suppliers and buyers, industry associations and government agencies to be competitive.
It is also important that you are active in the domestic market. In case the products for export are rejected by the foreign buyers, these can be reverted back to and sold in the domestic market. Without a strong domestic selling base, the losses from rejects would devastate you.
For a product to gain acceptance in the export market, it must have a distinctive feature that is in demand abroad. For some products, the foreign buyers provide the sample and specification of the products to be produced. For others, the local producer is required to present to the foreign buyers an array of samples from among which one or more would be selected.
Networking with industry associations and relevant government agencies will help a lot in marketing the products locally and abroad because industry associations hold or participate in trade fairs. The Department of Trade and Industry through the Center for International Trade, Expositions and Missions (CITEM) and the Bureau of Small and Medium Enterprises Development (BSMED), facilitates participation of SMEs in trade fairs by providing some subsidies to participants to reduce the cost of participation. Industry associations and relevant government agencies also conduct training programs and business fora that will help you cope with the competition.
Production Criteria
In general, your production facilities must be able to meet the volume requirement of the export market. Products must be delivered on time for shipment in order to catch up with the season, and it must meet the international standard in production. For example exporters of furniture, baskets, or banana chips, must fill several container vans (40 feet) in one shipment and on a regular basis. Below the specified volume, the shipment cost will increase per unit. To protect the buyers, countries around the world have set up standards of quality for products. For food products, for example, the Food and Drug Administration have specified how much preservative can be tolerated, beyond which the product would be considered a health risk. Wood-based products, on the other hand, must be kiln-dried or are otherwise liable to crack in the cold environment of the American or European markets. Lately, foreign buyers prefer to buy from firms with ISO certification -- ISO 9000 for manufacturing and service firms and ISO 1400 for environment-friendly production system.
Financial Criteria
The firm must have sufficient capital to go into export through its own equity contribution and through loans because exporting entails high investments and expenses. Producing the samples for foreign buyers already require investment. This is especially true for jewelry, handicraft and furniture items, where producers are expected to show dozens of samples before final orders are placed. When the volume order comes, additional funds are needed to produce the products and to ship them. If you decide to put up offices abroad, then there is additional overhead expenses to consider. Clearly, finance is critical when venturing into export.
Management Criteria
Going into export requires a level of professionalism in managing the company. Therefore, a higher level of education or training and experience is desirable to manage the business successfully.
How to score and get points.
If the answer to the question is “Yes” make a check or X mark on the appropriate column then give yourself points using the guideline for maximum points. A “No” answer gets ) points. The higher the total score, the more export-ready you are.
Interpreting your score:
A low score means you might need to shelve your export marketing plans for now until your firm shapes up. However, if you are determined to plunge on, you have to start right NOW to improve your sales performance in the domestic market, production systems, networking with relevant organizations, financial performance and management skills.
In business, persistence counts. The winner is not the one who never fails, but the one who never quits despite setbacks it might face.
(For inquiries, please e-mail info.issi@up.edu.ph.)
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