October 2012

 October 2012

Going Global: The Importance of Exporting in Utah

By Jim Herrin, Utah SBDC Network

International Trade used to be a very difficult business proposition for small companies.  With a lack of assistance, pre-internet communication and information access, some small businesses likely assumed selling overseas was only for major multi-national corporations.   With the advent of the internet, fingertip access to vast amounts of information, nearly instantaneous overseas communication, efficient shipping methods and export financing programs, it is sometimes an easier prospect for small business to sell in foreign markets before or instead of selling in the U.S.  In fact, not exporting is a distinct disadvantage in terms of increased risk from market non-diversification as well as the high opportunity costs.   Furthermore, all small businesses whose product could potentially have an overseas market should have an exporting plan/strategy in their business plan in order to demonstrate and pursue wealth maximization.

Importance of Exporting to Utah’s Economy

Exporting is becoming a greater component of Utah’s economy, representing about 12% of gross state product in 2010, up from just over 4% in 2000.  On a per capita basis, Utah is one of the top 5 exporting states in the U.S., exporting nearly $14 billion in 2010.  Furthermore, nearly 66,000 jobs are supported by exports (“Utah’s economy driven by exports”, Jasen Lee, KSL.com. 9/24/2011).

 

As a state, Utah has become more sophisticated in making available resources to assist small businesses enter and expand in foreign markets.  These resources are primarily available through federal and state government agencies, as well as non-profit organizations.  

One such resource is the Utah Small Business Development Center ( SBDC) Network, which has several Business Advisor who are certified to provide global business assistance to Utah companies, including assistance with developing their global strategy and determining specific markets to target.  Furthermore, because The Utah SBDC Network is the broadest small business assistance network in Utah, servicing the entire state, The Network can provide valuable two-way facilitation between Utah small business and the export assistance providers.  

Why Export?

Although business may feel comfortable and satisfied with selling domestically, they may be missing out on opportunities that could maximize future cash flows and mitigate risk.  Here are a few reasons companies choose to export:

Ø  Increase sales and profits.  Every market has a finite number of consumers of a company’s product.  Exporting opens the doors to new consumers.  Sometimes a product’s life can be extended by selling to countries that may not have adopted the lasted technology or similar products due to cost. 

Ø  Gain market share.  The U.S. is the largest, most open and advanced market in the world. This also means the U.S. attracts the most competition, and the most sophisticated companies with extensive resources to gobble up as much market share as possible.  In some countries, large, sophisticated companies may determine the market size does not justify their focus. Additionally, the marketplace of some countries may not be developed to the point of being saturated and may still provide substantial opportunity for new entrants. 

Ø  Mitigate market fluctuations.  It is a well-known and critical investment strategy to diversify one’s investments.  This also goes for market diversification.  Many countries have differing economic fluctuations and trends which affect buying power, pricing, exchange rates, etc.  By selling a product in numerous countries, exposure to these risks in any one country can be ameliorated. 

Ø  Use excess capacity.  Idle resources are expensive for a company and represent substantial opportunity costs.  The preferred way to reduce excess capacity is to increase unit sales.  In a highly competitive market, this is very difficult to do.  Entering new markets, however, can be an excellent way to take advantage of excess capacity and to turn it into a value-creating assets. 

Ø  Enhance competitiveness.  Lessons learned through exposure to foreign markets can help a company’s product offering become more accepted by consumers.  This is because exporters need to be sensitive to each country’s culture and consumer idiosyncrasies.  One size does not fit all when it comes to selling a product to different countries.  GM found this out when it tried to sell its Chevy Nova to Mexico with very little success.  A little pre-entry research would have informed them that “No va” in Spanish means “does not go”.  A costly mistake with a simple solution.

 There is Much Support Available. 

The advantage about going international with products and services is that there are many public and private resources available to “hold a company’s hand” through the process.  This includes federal and state agencies, non-profit organizations, companies that facilitate the export of products, such as banks, freight forwarders, etc.

 

UTAH SBDC NETWORK

US & FOREIGN COMMERCIAL SERVICE, UTAH EXPORT ASSISTANCE CENTER

UTAH GOED INTERNATIONAL OFFICE/ WORLD TRADE CENTER

US SBA OFFICE OF INTERNATIONAL TRADE

Website

www.utahexporting.organd www.utahsbdc.org

http://export.gov/utah/

http://business.utah.gov/international-trade/International/ andwww.wtcutah.com

http://www.sba.gov/about-offices-content/1/2889

Education Materials

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Counseling/ Training

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Seminars

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Trade Leads

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Match-making

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Referrals

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Back-ground Checks

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Trade Shows

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Trade Missions

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Foreign Promotion

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Export Financing

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