INTRODUCTION TO GLOBAL TRADE: Why Do We Export ?

INTRODUCTION TO GLOBAL TRADE: Why Do We Export ?

Turkey's exports in 2019 was realized as 142 billion 610 million dollars, dropping by 0.8 percent compared to the previous year.

TIM (Turkey Exporters Assembly) in 2019 on the basis of a maximum export sector has performed according to data from the automotive sector. This sector was followed by ready-to-wear textile, and chemical materials sectors.

According to country groups, in 2016, the European Union ranked first with a share of 45.5 percent, followed by the Middle Eastern countries with a share of 21.1 percent. These were followed by Africa with a share of 8.5 percent and Commonwealth of Independent States countries with a share of 6.6 percent.

We can continue to list these numbers one after another, but what I want to share with you in this article is what we should do first to determine a healthy export strategy. If we cannot determine the right strategy, our export dreams can turn into a nightmare. First of all, let's examine why you are heading to export as a company, and then let's share with you what you need to do. Firms generally tend to export for the following purposes.

• Increasing sales and profits: If the firm is doing well in the domestic market, entering foreign markets will likely increase profitability.

• Getting a share from world markets: The company, which opens to foreign markets, will learn what its competitors do to get a share in foreign markets and their marketing strategies.

• Reducing the dependence on the domestic market: The company will increase its marketing power by opening up to foreign markets and decrease its dependence on customers in the domestic market.

• Stabilizing market fluctuations: By opening up to world markets, the company will get rid of the general and seasonal fluctuations in the domestic market and the pressure created by changing consumer demands.

• Selling excess production capacity: By exporting, the rate of capacity utilization and the duration of production shifts can be increased. Thus, average unit costs will be reduced and economy of scale will be achieved.

• Increasing competitiveness: It increases the competitiveness of the export firm and a country. While the firm will benefit by adapting to new technologies, methods and methods, the country will also benefit from the improvement of the foreign trade balance.

• Creating employment: Exports of goods and services will create new job opportunities and reduce unemployment.

What are the benefits or risks of exporting for the company? The direct benefits of export to companies are as follows:

• It gives you the opportunity to expand your market share, increase your sales and profitability.

• If the capacity is not used fully in the domestic market, it provides the opportunity to increase production and reduce unit costs.

• It decreases the dependence on the domestic market and provides the opportunity to compensate the stagnation in the domestic market.

• By entering foreign markets, it gives the opportunity to spread the competition in the domestic market and to distribute the risk.

• Entering the foreign market by exporting tried and tested products in the domestic market reduces the cost of market research.

• The intense competition in international markets encourages exporters to adapt their products to the needs of the market, thus achieving a development at the level of technological "know-how".

• You reduce the negative impact of seasonal sales fluctuations.

• You provide regular money flow to the firm, sufficient working capital.

• You increase the life span of your products.

• As you introduce your company and your brand to other markets, your competitive power increases in all markets.

Similar risks encountered in the domestic and foreign markets are:

• Sales may be below estimated levels.

• Competition may be more than expected.

• Customers may be slow to pay or not pay at all.

Export-specific risks can be summarized as follows:

• The repatriation of export revenues from the destination country may be restricted or prohibited.

• Fluctuations in exchange rates can reduce profits, eliminate them or even cause losses.

• In the case of non-payment or other disputes regarding the contract, problems may arise in going to the judiciary.

• Instability in the target market, such as war, civil war, or nationalization by a foreign state, can lead to losses.

• The product may not be accepted in foreign markets. It may be difficult to modify the product.

What is involved in a typical export transaction?

The export process has three important stages: Feasibility analysis, foreign market entry planning and implementation. These stages consist of 21 steps. If you do a foreign market research, you can easily pass these steps. Feasibility Analysis

• Analyzing firm performance in the domestic market (in terms of product, corporate, financial, marketing, etc.).

• To examine the capacity status of the firm.

• Considering the demographic, social, political and economic factors of target markets.

• Consulting with foreign trade experts (on marketing, financing, legislation, etc.)

• Choosing target markets.

Planning Entry to the Foreign Market

• To conduct market research on sector basis.

• To evaluate the market research.

• To determine the market entry strategy.

• To ensure compliance with license, standards and certification demands in the target market.

• Gathering necessary information about patents, trademarks and copyrights.

• Setting taxes, customs duties, fees, quotas and other non-tariff barriers.

• Creating a price list.

• Finding funding.

Application

• Determining distribution methods.

• Implementing the marketing plan.

• Choosing representation or sales methods.

• Negotiating the contract of sale.

• To complete production.

• Taking out insurance.

• Packaging and labeling the product.

• Install the product.

Which Questions Should Be Answered Before Deciding on Export?

Exports, the company's resources, financial and human resources, machinery and equipment, etc. Requires significant use. Therefore, it is necessary to make a good evaluation before deciding to export. For this, it is important to seek answers to the following questions. If you've done market research, you have the answer to most of these questions!

Domestic Performance

• Why is the company successful in the domestic market?

• What is the current market share of the product?

• Does the company have a determination and desire to export?

• What is the company's purpose in exporting?

• What level is the export department in the company's hierarchy structure?

• What level of personnel will the company take part in the export process?

• Is there a need to increase the number of employees of the company?

• What are the experiences of the firm (or its employees) in foreign markets and export issues?

• How willing to take part in the export process?

• How willing is the firm to take risks?

Competition

• What makes the firm's products or services competitive in a foreign market?

• What makes the products and services unique?

• What are the overall competitive advantage (technological advances, patents, skills, etc.)?

Target Markets

• Which segments of the market are targeted?

• How much stock will be required to sell products in foreign markets?

• How is the performance of the company's competitors in foreign markets?

• Is the product restricted by customs duties, quotas, and other non-tariff barriers?

• Does the product conflict with the culture, traditions or beliefs of consumers abroad?

• Is the product required to be protected by patent / trademark laws abroad?

• What are the requirements for labeling the product?

• What restrictions are there regarding the environment, to what extent is compliance required?

Marketing of the Product

• How will the product or service be advertised? Which companies, agents or distributors have purchased similar products?

• Who will represent the company while selling to foreign markets?

• Will an agency or distributor be appointed to undertake duties related to the export market?

• Which region will be given to the agency or distributor?

• What actions of the agency or distributor are acceptable?

• Can the potential buyer see a working model or sample of the product?

• Is there a trade fair that will best attract attention on the product or service?

• Will the product or service be sold under the same name in the target market?

Pricing and Commercial Terms

• How will the price be calculated?

• What are the terms of service?

• What are the payment and loan terms?

• What is the warranty period of the product?

• What are the discount conditions?





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