Countries rely on exports to generate wealth, to assist in the creation of jobs and the earning of foreign exchange.
The Caribbean is no exception and increasingly we are shifting from reliance on the production of goods to 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, communications infrastructure in the target market and travel to and from the market.
Like any business decision, exporting comes with risks – as does standing still. You need to manage those risks and get your export strategy right first time. Systematically working through the steps outlined here and developing an export plan before you launch overseas will help you avoid classical stumbling blocks before you start burning cash and possibly missing opportunities or sustaining reputational damage.
It will enable you to be confident that you that you are entering your new market well prepared and well resourced, with the best possible chances of success.
Benefits of Exporting
Companies must recognize that exporting can be more complicated, risky and expensive than selling in the domestic market. So why do companies export?
- Increased sales: Exporting is a way to expand your market and take advantage of demand in foreign markets.
- You may also find foreign niche markets where your product is rare or unique.
- Higher profits: if you can cover fixed costs through domestic operations – your export profits can grow quickly
- Diversified markets: if you diversify into regional/international markets you avoid depending on a single marketplace
- Global competitiveness: foreign companies are entering the Barbados market and Barbadian companies are going foreign. The experience your company gains internationally/regionally will help keep your company and country competitive in the global marketplace. And of course if your product can compete with the best the world has to offer this helps you to succeed at home and ensures your resilience when faced with foreign competition in your respective market.
Of course there will be challenges to your business in accessing the foreign market. Some of these include:
- Increased Cost: Your business will encounter increased costs in your exporting venture such as extra travel, production of new marketing materials, hiring additional staff and costs associated with the modification of products or packaging to adapt to the markets abroad.
- Paperwork: Companies will also have to get use to increased paperwork because of documentation requirements from foreign countries
- Cultural differences: To ensure that you do not lose sales from potential customers by inadvertently offended them you should ensure that you are familiar with the differences in language, cultural and business practices in your target market.
- Market knowledge: Ensure that you are familiar with your competition in the foreign market ensure that you are easily accessible to your foreign clients.
- Commitment: It takes time, willingness and efforts and resources to establish and maintain you in foreign markets. Companies must be committed to staying for the long haul to realize significant return on your investments.
You need to engage in self-evaluation exercise to determine your export goals and the necessary investments you require to achieve these goals. Major evaluation areas are:
- Motivational: You must be honest and ask yourself questions. Why does my company wish to export? Do I have clear and achievable export objectives?
- Organizational: Is my company sufficiently organised to commit to sustainable exports? Do I Have the human resources? Do I understand the financial risks? Do I have the financial resources?
- Market Considerations: Does my business have what it takes to succeed in regional/international markets? Do I have the correct market-entry method?
- Product Considerations: Is my product viable in my target market? Are modifications required? Does it meet any technical or regulatory requirements? Can it be easily modified to satisfy the demands of foreign customers? If you are exporting services what is unique or special about them? Is my service world class? Do I need to modify the service to allow for differences in language, culture and business environments?
- How will the service be delivered: in person, with a local partner or electronically?
You may wish to target markets where trade agreements exist:
- CARICOM can be regarded as an extension of the local market. CARICOM provides access to a population of 15 million consumers including Haiti. Under the revised Treaty of Chaguaramas there is free movement of goods and services. However, under Article 164 of the Treaty duties can still be applied to MDC exports to the LDCs, namely: aerated beverages, beer, malt, candles, curry powder, pasta, poultry, pig & cattle feed, wooden furniture, solar water heaters, industrial gases, wheat flour.
- The Free Trade Agreement (FTA) between CARICOM and Dominican Republic was signed in 1998. The FTA with the Dominican Republic gives CARICOM exporters access to a market of around eight million consumers, a market larger than the entire CARICOM market (Haiti excluded). Trade in services is however still to be negotiated.
- CARICOM/Cuba Trade & Economic Cooperation Agreement signed in 2000. Cuba has a population of 11.4 million. However there is difficulty in this market with long periods of credit (120 days), problems with payment & foreign exchange.
- CARICOM/Costa Rica Free Trade Agreement signed in 2004. Costa Rica has a population of 4.1 million and is also part of Central America Free Trade Agreement (CAFTA) with the USA. Local companies should consider joint ventures, production sharing etc with Costa Rica to take advantage of the opportunities in the US market given our respective sizes, production sharing and natural resources in Central America and the Caribbean. But remember, (small) successful companies concentrate on one foreign market at a time, moving on to the next only after succeeding in the previous one. Remember also to treat all markets differently. Do not assume that because you are successful in one, you will be successful in another. There are cultural differences you need to respect.