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.

Export Promotion Rationale Continued – Part 2

In each one of these stages, firms have different concerns. For example, at the
awareness level, firms worry mainly about information on foreign markets and
customers. At the interest stage, firms become concerned about the mechanics of
exporting such as packaging or shipping. During the export tryout, communication,
supply chain management, and the sales effort become key considerations. At
evaluation time, regulations and financing take on greater importance. In the
adaptation stage, service delivery and control are major issues.

As a firm moves through these stages, unusual things can happen to both risk and
profit. Management’s perception of risk exposure grows. During domestic
expansion, the firm has become more familiar with the market, and has seen its
risk decline. During international expansion, the firm encounters new factors such as currency exchange rates,, greater distances, new modes of transportation, new government regulations, new legal and financial systems, new languages, and cultural diversity. As a result, the firm’s actual risk increases. At the same time, due to the investment needs of the exporting effort, in areas such as information acquisition, market research, and trade financing, the immediate profit performance may deteriorate. Even though eventually international market familiarity and diversification effects will reduce the risk and increase profitability, in the short and medium term, managers may face an unusual and perhaps unacceptable situation: rising risk accompanied by decreasing profitability. In light of this reality, and not knowing whether there will be a pot of gold at the end of the rainbow, many executives either
do not initiate export activities or discontinue them. Therefore, a temporary gap in the working of market forces exists. Government export assistance can help firms over this rough patch to the point where profits increase and risk heads downward. Bridging this short-term market gap, which lasts typically for 2 to 3 years, is the key role of export assistance, and the major justification for public sector involvement.

Planning Your Global Success

Global strategy planning starts with a multi-functional team led by the executive with the most experience in global or regional markets. Team members should include managers from marketing, production, finance, distribution, and procurement. Their first task involves working to understand the success factors that are common to the company’s various markets. Identify the profitability and competitive drivers by analyzing the structure of the global industry. Add the common features of customer requirements and choice factors. Avoid planning global strategy on a country-by-country basis  – it can result in spotty performance. Success tends to come from a portfolio-based planning process that focuses simultaneously across a broad range of markets to help balance risks, resource requirements, competitive economies of scale, and profitability.

Every company gets a reality check when it examines its resources for global expansion. While industrial giants with deep pockets might be able to establish a presence wherever they want, others with shallow pockets will have fewer options. And money is not the only issue – a survey of multinational corporations revealed that people with certain types of knowledge or skills were particularly difficult to find. The shortage is even worse when looking for people with cross-cultural experience to run regional operations.

Minimizing Terrorism’s Impact

International terrorism is the systematic use or threat of violence across borders to attain a political goal while conveying a political message. One of the most recent high-profile examples is the 2008 attack in Mumbai, India, by 10 Islamic militants who killed nearly 200 people in more than a dozen locations, including two luxury hotels and a Jewish center. Continue reading