Export Promotion Rationale Continued – Part 3

If export assistance and promotion are to be rendered, budgets and efforts should
be expended in the most effective manner. Organizational key determinants of business and export success are size, human and financial resources, technology, service and quality orientation, information system, research capabilities, market insights and connections, and the firm’s ability to manage regulations. The managerial haracteristics that research has most closely linked to export success are education, international exposure, expertise, international orientation, and commitment. These two corporate dimensions, organization and management, are subject to the opportunities and constraints of the international market environment, and will determine the degree of the firm’s export involvement. This involvement in turn will result in export performance, which can be measured in three different ways. Efficiency refers to the relationship between corporate input employed and the resulting outputs achieved. Typically, efficiency is measured through the proxy of export profitability. Effectiveness refers to relative business success when compared to other competitors in the market, and is often measured in terms of market share and export sales growth. Competitive
position addresses the overall strength of a firm arising from its distinct competencies, management style, and resource deployment. Typical indicators here are the overall quality and competence of a firm’s export activities.

Export assistance can aim at the organizational characteristics and capabilities of the firm and try to improve those. It can also work with the managerial characteristics and contribute to their positive change. Export assistance providers must also be deeply involved with the international market environment, both in terms of learning from as well as shaping the environment.

Export assistance will be most effective when it either reduces the risk to the firm or increases its profitability from export operations. For example, providing information on market potential abroad is likely to decrease the risk (both real and perceived) to the firm. Offering low-cost credit is likely to increase profitability. Macro assistance in the foreign market environment can consist of international trade negotiations designed to break down foreign barriers to entry. Micro assistance consists of learning from the foreign market and its customers, and using that knowledge to adjust to that market.

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  4. There are really two types of export assistance. Environmental (this is the domain of the NEI and involves creating awareness, lowering barriers such as credit and tariffs, and fostering a supportive environment) and direct (actually working hand-in-hand with aspiring or current exporters to implement or supplement and rationalize an international business development initiative.

    As the NEI report to the President from 2010 said (paraphrasing) “At the end of the day the government can only help with the environment. Individual companies have to go, find customers, do deals, mfg and ship products (or deliver services.”

    And the facts are clear – those that do are generally healthier. The DoC offers statistics to this effect, and a recent report by McGladrey International Inc. confirms empirically that (http://mcgladrey.com/Manufacturing-Wholesale-Distribution/McGladrey-Manufacturing-Distribution-Monitor-Fall-2011-edition) companies which export actively are stronger. Causation / correlation may be immaterial as the behaviors and expertise which are accumulated through export can certainly strengthen core operations.

    The question is “mindset” – witness the different export averages between the UK & Germany. Members of the same trading blocs the former has moderate export participation (approx 20% by some recent studies) while the latter is near 50% – with the typical mid-sized German company exporting to 16 different markets.

    In the US where our participation is 1% we have bigger mindset hurdles to overcome. And the concerns cited by companies who hesitate to export (the same McGladrey report finds the normal range of “reasons” related to logistics, finance, regulations and risk) are the same issues cited by successful exporters. The lesson is that they are issues, but actual experience is the way to overcome them. Companies that “just do it” develop the awareness to handle them and shed the dread which accompanies ignorance of the realities.

    But no government program (federal or state) can actually walk the journey with them. (The Foreign Commercial Service takes some important steps – GKS, Single Company Promotion and other programs are terrific – but are supporting a plethora of clients and industries. In the end they can spark the tinder but the process of stoking the fire belongs to the exporter – just as the NEI said.) And too often companies who boldly commit to “give it a go” end up stubbing their toes because of inexperience or naivete and withdraw bruised and convinced of the insurmountability of the concerns they harbored. And the natural focus on operational details (again confirmed by the McGladrey report) supplanting strategic analysis during initial forays simply leads to more top level mistakes which feed the cycle.

    The solution is for companies to draw on experienced advisors who can legitimately help to both reduce risk and increase efficiency (profitability) by avoiding mistakes and keeping the focus on key metrics which accelerate the path to sales pipeline and ultimately deals.

    The challenge is that the government by necessity needs to assure companies that the goal of export is feasible. It can’t say in its export promotion “We can get rolling, and help boost you over some hurdles, but you better know what you’re doing.” And therefore companies that do decide to export often find the lack of success attributable to the impossibility of the objective rather than the inadequacy of their preparation.

    Capable export advisors, with broad strategic capability, the perspective of senior management, actual diverse “on the ground” experience and diverse industry and channel model familiarity are a unique asset which can make the difference between success and failure – and one which is rarely discussed or acknowledged.

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