What are the Pros and Cons of Exporting?

Exporting can open many doors for your business. That being said, venturing into the world of exporting is not without its challenges. From navigating complex regulations to managing logistical hurdles, businesses must weigh up the pros and cons of exporting. This topic is particularly important for businesses looking to expand internationally, increase profitability, improve their risk diversification strategy, build greater brand awareness, and compete on the world stage. In this article, we will highlight the advantages and disadvantages of exporting and discuss how you can plan your market entry strategy to maximise opportunities while effectively managing risks.

What are the benefits of exporting?

Exporting can lead to increased sales growth, higher profits, and diversified income streams. Access to global markets not only allows you to sell to more customers, but it also reduces your dependency on any single market, which is crucial, especially if the domestic economy weakens or the market for your product or service becomes saturated.

For some businesses, exporting enhances their domestic sales by providing markets for products that may have limited appeal or are considered by-products domestically. For example, China represents a significant export market for Australian meat exporters due to their preference for offal cuts, such as tail, skirt, and kidney, which are often challenging to sell domestically. Without these markets, many meat businesses would struggle to balance the carcass. This means they would have a build-up of less favourable cuts which, if they weren’t able to sell, would have significant effects on their profitability.

Exporting can have a substantial effect on a business's bottom line. Selling to international customers enables businesses to leverage greater economies of scale reducing per-unit costs. This results in better margins and increased competitiveness for exporting businesses. Beyond sales and profit, an important advantage for businesses who travel with their product or service overseas is increased exposure to innovative ideas and technologies in other parts of the world. Those leading the way in your industry may not always be from home soil and therefore gaining insights from your foreign competitors can help you improve your product or service and gain a competitive advantage at home.

The Disadvantages of Exporting

While the opportunities of exporting are real, so too are the challenges. The first step is understanding the risks because, unless you know they exist, they are very difficult to manage. The disadvantages of exporting include long and complex payment terms, currency exchange risk, political and global risks, high transportation charges, and increased operational complexity. This complexity will bring a heavier administrative load, compounded by the need to comply with export regulations.

On top of these extra costs, you may also need to consider additional costs to modify your product or service for the markets you wish to enter. More often than not, your offering will require adjustments to meet different market dynamics and customer preferences. Coca-Cola has many different looks depending on where it is purchased across the world. Featured below is a special release bottle from 2019 that was designed in honour of the Japanese New Year. Coca-Cola customises the make and design of its bottles, using different materials, labels, and packaging sizes to cater to the unique tastes and preferences of each market, ensuring that every product aligns with local culture and consumer expectations.

Your new customers will behave differently from your current ones, and understanding and adapting to this as quickly as possible will save you a lot of time and money in the long run. Whilst you manage the new challenges and complexities that exporting will throw at you, the challenge becomes not just overcoming these problems but also finding the time to focus on driving your domestic business simultaneously.

Key Considerations

To capitalise on the opportunities and manage the risks of exporting, keep the following key considerations in mind: 

• Thoroughly research and understand your target market is important. This includes the target market’s regulations, cultural nuances, and competitive landscape.
• Build strong relationships with local partners, including distributors, agents, and suppliers, to navigate the complexities of international trade.
• Invest in market entry support, including legal and financial advice, to ensure compliance and mitigate risks.
• Continuously monitor and adapt your export strategy based on market feedback and changing global dynamics to remain competitive and maximise growth potential.

Exporting can transform your business, but it also comes with challenges that require careful planning and risk management. By understanding both the benefits and the risks, you can strategically position your business for international success. 

How Palaudin Consulting Can Help Your Business

We see many businesses struggle to balance their domestic operations with building knowledge of a new trade arena which is why we for over 20 years have been developing systems, training and coaching tools, aimed at helping you and 100’s of businesses build successful export strategies. If you are unsure where to begin or need help developing a sound path to market strategy, contact us today or visit our website for more information.