There are several situations in which exporting may not be the most feasible form of entering a foreign market. If it is cheaper to produce the product abroad then it is more cost-effective to establish a manufacturing facility in the foreign market. This will be a more productive way to serve that market and its surrounding export markets. If the transportation costs of exporting to the foreign market are a high percentage of the manufacturing costs, then exporting won’t be very efficient. Keep in mind that the farther the market is from the home country, the higher the transportation costs and transportation costs can vary a lot depending on the product. If the product needs to be altered to better serve this foreign market, an additional investment might be needed. It may be more efficient to make this investment in the foreign market to save on transportation costs. Also, trade barriers play a huge role in deterring exports to foreign markets. If the market is large enough, it might be worthwhile to invest directly in these countries in order to bypass the trade restrictions. These are several situations in which exporting may not be the appropriate option for pursuing international business, however there are many factors that go into such an important decision.
Written by Carl Phelps, Research Associate for GLOBAL ID
To Learn More About Exporting and Other Options For Expanding Overseas, Visit Our Website: http://www.identifyglobal.com/
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