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Keys to building a successful export business.

Today, the world is one international market. To survive in it, U.S. manufacturers must start selling their products to foreign companies.

Setting up a successful export operation requires time and work. But by following certain steps, manufacturers can build up an international trading capability that will serve their companies well in the coming years.

Selecting Products

In deciding what products it should export, a company must deal with many criteria. Basically, they all can be reduced to four questions:

* What products will sell?

* What products are available in the foreign marketplace?

* Is it practical?

* Will it be profitable?

Answering these questions provides you with critical information you need for making export decisions. These questions also point out many elements that are beyond your control, such as high transportation costs, import restrictions and insolvency that make it impossible to sell overseas. Competition also may be so intense that prices cannot cover the cost of production export costs.

Working with Suppliers

When U.S. manufacturers decide to enter foreign markets, they need to evaluate their relationship with suppliers. Exporting can alter the business relationship with suppliers because of differing standards for raw materials in the foreign marketplace, lead time for delivery of goods and credit terms.

Among other considerations, your supplier should be a well-managed, reliable firm with experience in exporting. Its management should want to handle your firm's export business. Otherwise, it won't be willing to modify products or help manufacturers promote the products.

In addition, financially sound suppliers are an advantage because they can assist with marketing and promotion, and quote payment terms that are at least equal to industry standards.

Reaching Foreign Customers

U.S. firms exporting to foreign markets can do so directly with their own agents or use a middleman, who buys goods from the exporter and sells them overseas.

Middlemen options include: export management companies that manage export sales of manufacturers; export trading firms that buy and sell products anywhere; foreign firms and governmental offices that purchase U.S. products; and American corporations that buy U.S. goods and ship to foreign affiliates.

Manufacturers who would rather deal directly with foreign customers must identify potential sales representatives and markets overseas. Overseas product inquiries are the best place to look for representatives. Working with international representatives is similar to working with your domestic sales staff.

Pricing and Promotion

In setting prices, exporters are affected by numerous factors in addition to the criteria involved with domestic business. If exporters are trying to build volume or excess capacity, they may sell at a price that merely covers costs.

If the product is new or unique, exporters may price it high to maximize return. Eventually, technology will catch up and the exporter will be forced to lower prices as competition increases.

In addition, U.S. manufacturers must factor in other costs, including middlemen, warehousing and physical distribution costs. Duties and government regulations vary, and many countries set maximum prices on basic necessities or minimum prices to protect domestic producers. Some also prohibit price increases to control inflation. Such regulations limit a U.S. exporter's freedom to set prices.

International promotions differ quite a bit from U.S. methods. Personal selling and public relations aren't always an option because of the lack of qualified resources. Trade fairs are effective because they're held in nearly all countries and are an important means of learning about a market, getting consumer reactions to a product, finding distributors and booking orders. Advertising exists in every country, but varies according to language, customs, media availability and legislation.

Payment and Finance

For international trading, there are six basic methods of payment from which to choose.

Cash in advance--The importer sends the exporter a check, transfers money through banking channels or actually hands over the currency.

Letter of credit--The importer's bank writes the exporter detailing the amount, date and conditions of payment.

Bill of exchange--The exporter initiates a document through its bank asking the importer to pay a certain amount of money for goods that have been or are about to be shipped.

Open account--The exporter sends a bill and the importer pays by check or through banking channels.

Consignment--If and when the importing firm sells the products, it remits the process to the exporter, subtracting the selling commission and expenses.

Counter trade--These techniques include exchanging one commodity for another, involving three or more parties to a transaction, or allowing importers to pay for the exported equipment with goods produced with that equipment.

Other areas to consider are transportation and insurance. Selling is no value if the goods can't be delivered safely and within acceptable time and cost limits. Exporting firms are responsible for packing and marking the goods; transporting, insuring and storing them; and handling all documentation, freight forwarding and customs brokerage.
COPYRIGHT 1992 American Foundry Society, Inc.
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1992, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

Article Details
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Author:Zink, Williams
Publication:Modern Casting
Date:May 1, 1992
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