The answer to the question in the title may seem pretty obvious, right? Who is not aware of globalization today? Who can deny benefits of exporting to their companies? Of course, nobody. Every business owner knows those things. However, when we make a reality check, conversely we can see only a small percentage of business people who strategically invest in export capabilities of their companies. This shows us that knowing the answer doesn't always mean understanding it. Knowing without understanding is not enough at all. It is the understanding that can lead us to take action.Below I have listed just a few reasons why export is one of the best possible ways for companies to go.
#1 Staying local and small is just too risky
Some businesses like distribution companies are bound to be local. They strictly operate in geographically defined areas. Most of the businesses also start as local, serving to a region or countrywide. Even born-global companies may prefer to operate locally at the beginning stages. It is a sort of usual route. However, eventually every business is bound to face some risks in geographic locations where they operate. What risks? To name a few, they might be economic instability or recession, fierce competition, political risks, and natural disasters. They are all perfect killers of businesses. They can also kill your business if you don't have an alternative exit to escape and prosper.You should have heard someone say, most probably in a fancy but useless event, that "small is good!" in praise of small business. I don't know if it is the biggest lie ever said, but whatever, it certainly deserves to be in the top list. The truth is that small is not good at all. It doesn't provide any competitive advantage. Small businesses are extremely fragile and always easy targets for the killers mentioned above. Staying small is a big risk to take, especially in such a business environment where global giants and adventurous competitors tend to invade everywhere. Growth solves many problems of small businesses. Growing to international markets is a solution.
#2 A healthy cash flow is life for businesses
Advance payment is one of the most used payment terms in international trade. 30 to 90 days deferred payments are also used mostly under documentary credits or some other ways of payment. These payment terms might be more appealing and secure than ones in some domestic markets. Anyway, you can possibly set terms of payment in your favour especially when you have a good product with a strong demand and a weak competition in the global markets.In short, selling to different countries leads to a healthy cash flow and then financial planning becomes an achievable task.
#3 Gateway to scale economy
Scale economy is a sort of cost advantage stemming from reducing costs per unit by producing or distributing the same type of goods with bigger quantities. It is a competitive advantage that big companies have over smaller ones due to their scale of the operation. Selling to international markets can provide companies with such a cost advantage. Besides, increasing export sales will allow companies to get more of a product within its life cycle. Likewise, the efficiency of investments in R & D, design and marketing will also be higher.
#4 Gain competitive advantages
A competitive advantage is a something you do better than your competitors. Spotting trends, changes and opportunities in the markets, creating brand awareness, avoiding unprofitable and unstable countries, moving successfully tested applications to other markets are just some of the competitive advantages that export can help your company to gain.
#5 Stronger abroad, stronger at home
Exporting further strengthens the company in its domestic market. Companies that export their products to various countries of the world will be preferred primarily in the domestic market. There will a kind of natural expectation in customers' mind that these exporter companies' business culture and product quality are well-established and in a certain standard.In addition, there are many supports and incentives offered by national governments for exporters. While these supports can come with a small bureaucracy to deal with, companies can leverage those incentives for their growth.
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