Import export businesses, also known as international trading, are one of the hottest commercial trends of this decade. While the principle sources of income for these firms are their import-export sale activities, their import-export objectives are not divorced or totally distinct from their domestic objectives. The vision statement of such a firm like every firm has to be outlined from the firm’s current mission statement and business objectives. The mission statement outlines in broad terms what the purpose of the company is, while the company objectives set more specific targets usually for a period of time.
Based on the initial company mission and objectives, the next step is to expand the firm’s mission statement and company objectives to accommodate the fact that it plans to export. This can be done by setting separate export objectives which will expand the current business objectives. An international business focuses on the resources of the globe and objectives of organizations on the global business opportunities and threats, in order to produce, buy, sell or exchange goods/services world-wide. The international focus and reach of its distribution network is a special strategic consideration. The intent is to extent global market reach through stronger capitalization and economies of scale. Export objectives still need to be developed based on what a firm has set for its company in its mission statement and list of objectives consistent with the following parameters:
To achieve higher rate of profits The basic objective of business is to achieve profits. When the domestic markets do not promise a higher rate of profits, business firms search for foreign markets that hold promise for higher rate of profits. Thus, the objective of profit affects and motivates the business to export to expand operations to foreign countries.
Expanding the Production Capacities beyond the Demand of the Domestic Country. Some of the domestic companies expand their production capacities more than the demand for the product in domestic countries. These companies, in such cases, are forced to sell their excess production in foreign developed countries.
Severe Competition in Home Country: The weak companies which cannot meet the competition of the strong companies in the domestic country start entering the markets of the developing countries.
Limited Home Market: When the size of the home market is limited either due to the smaller size of the population or due to lower purchasing power of the people or both, the companies internationalize their operations.
Political Stability vs. Political Instability: Political stability does not simply mean that continuation of the same party in power, but it does mean that continuation of the same policies of the Government for a quite longer period. It is viewed that the USA is a politically stable country; countries like the UK, France, Germany, Italy and Japan are also politically stable. Most of the African countries and some of the Asian countries are politically instable countries. Business firms prefer to enter politically stable countries and are restrained from locating their business operations in politically instable countries. Infact, business firms shift their operations from politically instable countries to politically stable countries.
Availability of Technology and Competent Human Resources: Availability of advance technology and competent human resources in some countries act as pulling factors for business firms from the home country. The developed countries due to these reasons attract companies from the developing world.
High Cost of Transportation: Initially companies enter foreign countries their marketing operations. The home companies in any country enjoy higher profit margins as compared to the foreign firms on account of the cost of transportation of the products. Under such conditions, the foreign companies are inclined to increase their profit margin by locating their manufacturing facilities in foreign countries through the FDI route to satisfy the demand of either one country or a group of neighboring countries.
Nearness to Raw Materials: The source of highly qualitative raw material and bulk raw material is a major factor for attracting the companies from various foreign countries.
Liberalization and Globalization: Most of the countries in the global have liberalized their economies and opened their countries to the rest of the globe. These changes in policies have attracted multinational companies to extend their operations to these countries.
To increase market share: Some of the large-scale business firms would like to enhance their market share in the global market by expanding and intensifying their operations in various foreign countries. Smaller companies expand internationally for survival while the larger companies expand to increase their market share.
A draft of the export objectives of an international trading firm can look as follows:
- To embark on an export drive that will enable the company to establish a presence in atleast two countries in the first year and expand this to ten countries over the coming five years
- To commit 5% of the firm’s production to exports for the first year and to expand this to 20% within five years
- To establish committed partnerships with representatives in the selected target countries that will effectively represent the firm’s products in each of the target area concerned
- To establish an effective and efficient export department that will help to administer the export activities of the firm
- To work towards becoming internationally competitive and to establishing a global brand that will underpin both domestic and international business activities
Export objectives such as these, as an integral part of the vision of an international trading firm, provide a series of measurable targets and focus on committing the firm to its export endeavors. Accordingly, a firm’s export plan is formulated encompassing the marketing strategies and activities that are necessary to achieve these objectives. The firm can export, import, enter into third country transactions, barter or countertrade, or conduct switch trade. The decision is related to those activities that will make the business profitable and fit in with the firm’s overall objectives. Today, more and more companies are making strategic decisions and entering the international game with a well-though-out plan. This plan is developed from gathered intelligence in pursuance of a clearly laid down object. International trade takes time and progress has to be measured against the firm’s vision or long-term objectives.