What are some reasons that firms decide to export their products or services?

No matter how attractive and ‘must have’ your product or service  seems to be, a strictly limiting yourself to your domestic market will have a finite capacity. And once you have reached saturation point, what then?  Because of these limitations wise business owners are looking to go global and exploit the many international trade opportunities – after all, in the global economy; practically every country is a potential customer.

Here are seven reasons for international trade:

1

Reduced dependence on your local market

Your home market may be struggling due to economic pressures, but if you go global, you will have immediate access to a practically unlimited range of customers in areas where there is more money available to spend, and because different cultures have different wants and needs, you can diversify your product range to take advantage of these differences.

2

Increased chances of success

Unless you’ve got your pricing wrong, the higher the volume of products you sell, the more profit you make, and overseas trade is an obvious way to increase sales.  In support of this, UK Trade and Investment (UKTI) claim that companies who go global are 12% more likely to survive and excel than those who choose not to export.

3

Increased efficiency

Benefit from the economies of scale that the export of your goods can bring – go global and profitably use up any excess capacity in your business, smoothing the load and avoiding the seasonal peaks and troughs that are the bane of the production manager’s life.

4

Increased productivity

Statistics from UK Trade and Investment (UKTI) state that companies involved in overseas trade can improve their productivity by 34% – imagine that, over a third more with no increase in plant.

5

Economic advantage

Take advantage of currency fluctuations – export when the value of the pound sterling is low against other currencies, and reap the very real benefits.  Words of warning though; watch out for import tariffs in the country you are exporting to, and keep an eye on the value of sterling.  You don’t want to be caught out by any sudden upsurge in the value of the pound, or you could lose all the profit you have worked so hard to gain.

6

Innovation

Because you are exporting to a wider range of customers, you will also gain a wider range of feedback about your products, and this can lead to real benefits.  In fact, UKTI statistics show that businesses believe that exporting leads to innovation – increases in break-through product development to solve problems and meet the needs of the wider customer base.  53% of businesses they spoke to said that a new product or service has evolved because of their overseas trade.

7

Growth

The holy grail for any business, and something that has been lacking for a long time in our manufacturing industries – more overseas trade = increased growth opportunities, to benefit both your business and our economy as a whole.

Are you ready to boost your international trade in 2021?

Do you want to expand further in 2021 and seize more exciting international opportunities but feel unsure about where to start? Or have you already taken the plunge but found you’re unable to perform well in the new market?

Canada has always been a trading nation. Exports and imports consistently account for about two thirds of the country's GDP. As the liberalization of global commerce continues, more and more Canadian companies are joining the international market every year.

Why would a company that's already doing well within Canada consider becoming an exporter? There are several good reasons to export, including:

• Increased sales. If your domestic sales are good, exporting is a way to expand your market, find foreign niche markets and take advantage of demand around the world.
• Higher profits. If you can cover fixed costs through domestic operations or other types of financing, your export profits can grow very quickly.
• Economies of scale. When you have a larger market base, you can produce on a scale that lets you make the most of your resources.
• Reduced vulnerability. If you diversify into international markets, you avoid depending on a single marketplace and suffering from a domestic downturn.
• New knowledge and experience. The global marketplace abounds with new ideas, approaches and marketing techniques that could also prove successful in Canada.
• Global competitiveness. The experience your company gains internationally will help keep you competitive in Canada and in the global marketplace.
• Domestic competitiveness. If your company succeeds in the global marketplace, it will ensure your resilience to potential foreign competition in Canada.

Exporting has many challenges, but you can surmount them through careful preparation and planning. Among these challenges are:

• Increased costs. You may have to modify packaging or your products or services, and account for short-term costs such as extra travel, production of new marketing materials and additional staff to adapt to markets abroad.
• Level of commitment. It takes time, willingness, effort and resources to establish and maintain yourself in foreign markets.
• Staying in for the long haul. While exporting holds great economic promise for most companies, months or even several years can pass before you see a significant return on your export investment.
• Language and cultural differences. Familiarize yourself with the differences in language, culture and business practices so you don't inadvertently offend your potential customer and lose a sale.
• Paperwork. There's no way around it, both Canadian and foreign governments require a lot of documentation from exporters of products and services.
• Accessibility. You have to be easily available to your foreign clients.
• Competition. You must be sure you're thoroughly familiar with the competition in your target market.

Source: Adapted with permission from the Forum for International Trade Training, (FITT) Going Global.

Finding help

The Canadian Trade Commissioner Service (TCS) provides resources and contact information to help businesses with export counselling, marketing strategy information, market-entry support, export financing and in-market support.

Find other resources on the subject of exporting at the Canada Business Network.

Exporting goods versus exporting services

Exporting goods and exporting services present quite different challenges. The former must deal with packaging, customs and physical delivery, for example, while the latter confronts issues such as work permits, credential validation, language and travel to and from the market. When exporting goods it is also important to remember that there is often a service component that should be anticipated (installation, training, service, warranty, etc.).

1.2 Are you ready?

An export-ready business is one that has the capacity, resources and management to deliver a marketable product or service on a global scale at a competitive price. The trick is to determine whether this is true of your company—and if it isn't, how to make it happen.

Your first step is to think about the resources and knowledge your business already has. Consider the following as a starting point:

Your expectations. Do you have:

• clear and achievable export objectives?
• a realistic idea of what exporting entails and the timelines for results?
• an openness to new ways of doing business?
• an understanding of what is required to succeed in the international marketplace?

Human resource requirements. Do you have:

• the capacity to handle the extra demand associated with exporting?
• senior management committed to exporting?
• efficient ways of responding quickly to customer inquiries?
• personnel with culturally sensitive marketing skills?
• ways of dealing with language barriers?
• a local contact or “go to” person?

Financial and legal resources. Can you:

• obtain enough capital or lines of credit to produce the product or service for new orders?
• find ways to reduce the financial risks of international trade?
• find people to advise you on the legal and tax implications of exporting?
• deal effectively with different monetary systems and ensure protection of your intellectual property?

Competitiveness. Do you have:

• a product or service that is potentially viable in your target market?
• resources to do market research on the exportability of your product or service?
• proven and sophisticated market-entry methods?

Export myth: My company is too small to be successful at exporting

To succeed in international markets, you don't have to be a big firm. Tens of thousands of Canadian small and medium-sized companies (SMEs)—those with foreign sales of between $30,000 and $5 million—are currently exporting and are doing very well.

1.3 Evaluating your export potential

Can your product or service find a worthwhile market outside Canada?

Answering this question is crucial. If there's no demand for what you're offering, it would be unwise to proceed.

When analyzing the export potential of your products/goods or services, you may want to account for the following considerations:

Customer profiles

• Who already uses your product or service?
• Is your product or service in broad, general use or limited to a particular group?
• Is your product or service popular with a certain age group?
• Are there other significant demographic patterns to its use?
• What climatic or geographic factors affect the use of your product or service?

Product modifications

• Are modifications required to make your product appeal to foreign customers?
• What is the shelf life of your product? Will this be reduced by time in transit?
• Can the packaging be easily modified to satisfy the demands of foreign customers?
• Is special documentation required? For example, does your product have to meet any technical or regulatory requirements?

Transportation

• How easily can your product be transported?
• Would transportation costs make competitive pricing a problem?
• How efficiently does the target market process incoming shipments?
• Are specialized containers or packaging materials required?

Local representation

• Do you require a local marketer/salesperson or other local representation?
• Do products require professional assembly or other technical skills?
• Is after-sales service needed? If so, is it available locally or do you have to provide it? Do you have the resources to do this?

Exporting services

• If you're exporting services, what is unique or special about them?
• Are your services considered to be world-class?
• Do you need to modify your services to allow for differences in language, culture and business environment?
• How do you plan to deliver your services: in person, with a local partner or by electronic means such as the Internet?

Capacity

• Will you be able to serve both your existing domestic customers and new foreign clients?
• If your domestic demand increases, will you still be able to look after your export customers and vice versa?

1.4 International business and science, technology and innovation

Historically, Canada's leading exports have been natural resources and commodities. But in a global marketplace, diversifying our exports into the area of science, technology and innovation (ST&I) is essential to maintain a robust and adaptable economy. The Government of Canada has built formal ST&I relationships and partnerships with both established and emerging innovation networks around the world. International partnerships are an essential catalyst for ST&I, as these collaborations often accelerate the pace of discovery and result in improved commercialization.

Partnerships include research and development (R&D) and the transfer of ST&I to the global market. An outward-looking approach to development will ensure that our exporters have access to leading-edge research and will ultimately lead to a higher standard of living for all Canadians.

Canada’s domestic market for many advanced technologies is relatively small. The aerospace sector, for example, can't support the full-fledged commercialization of a service or product domestically. Finding an international market or supplying companies in Global Value Chains can, therefore, be essential to an ST&I company's survival.

If your company falls into this category, you will almost inevitably have to internationalize. Remember that "internationalizing" can mean R&D collaboration with an overseas company, forming an international partnership or investing in a foreign business that complements your own.

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