international markets for your products or services. Without proper
guidance and assistance, however, this process can be time consuming and
costly -- particularly for a small business.
The U.S. federal government, state governments, trade associations,
exporters' associations and foreign governments offer low-cost and easily
accessible resources to simplify and speed your foreign market research.
This chapter describes those resources and how to use them.
FEDERAL GOVERNMENT RESOURCES
Many government programs and staff are dedicated to helping you, the
small business owner, assess whether your product or service is ready to
compete in a foreign market.
The U.S. Small Business Administration
Many new-to-export small firms have found the counseling services
provided by the SBA's Service Corps of Retired Executives (SCORE)
particularly helpful. Through your local SBA District office, you can gain
access to more than 850 SCORE volunteers with experience in international
trade.
"Our SCORE counselor is really like a big brother to us and our
company," says Jim Hadzicki, Vice-President of San Diego-based Revolution
Kites, a recreational kite manufacturer. Exports now account for 24
percent of their sales in just three years. "I recently went on a trip to
Tokyo to line up a distributorship. Our SCORE counselor helped me list our
objectives, what I was to do and ask about and even told me what gift I
should take to the Japanese representative," says Hadzicki.
Two other SBA-sponsored programs are available to small businesses
needing management and export advice: Small Business Development Centers
and Small Business Institutes affiliated with colleges and universities
throughout the United States:
Small Business Development Centers (SBDCs) offer counseling, training
and research assistance on all aspects of small business management.
The Small Business Institute (SBI) program provides small business
owners with intensive management counselling from qualified business
students who are supervised by faculty. SBIs provide advice on a wide
range of management challenges facing small businesses -- including finding
the best foreign markets for particular products or services.
The U.S. Department of Commerce
The U.S. Department of Commerce's (DOC) International Trade
Administration (ITA) is a valuable source of advice and information. In
ITA offices throughout the country international trade specialists can help
you locate the best foreign markets for your products. Oklahoma exporter
OK-1 Manufacturing Co. has found the foreign market research available
through the ITA extremely useful:
"The Oklahoma District ITA office prepared a market research study to
determine whether we should export our fitness accessory items to Japan,"
says Sherry Teigen, OK-1 Manufacturing Co. export manager. Today, the
company exports to Japan in addition to 20 other countries. Since it began
exporting, the company staff has grown by 75 and Sherry's husband, OK-1's
President, Roger Teigen, won the 1991 SBA Exporter of the Year award.
District Export Councils (DECs) are another useful ITA-sponsored
resource. The 51 District Export Councils located around the United States
are comprised of 1,800 executives with experience in international trade
who volunteer to help small businesses export. Council members come from
banks, manufacturing companies, law offices, trade associations, state and
local agencies and educational institutions. They draw upon their
experience to encourage, educate, counsel and guide potential, new and
seasoned exporters in their individual marketing needs.
The United States and Foreign Commercial Service (US&FCS) helps U.S.
firms compete more effectively in the global marketplace with trade
specialists in 69 United States cities and 70 countries worldwide. US&FCS
offices provide information on foreign markets, agent/distributor location
services, trade leads and counseling on business opportunities, trade
barriers and prospects abroad.
The United States Department of Agriculture
If you have an agricultural product, you should investigate the U.S.
Department of Agriculture's (USDA) Foreign Agricultural Service (FAS).
With posts in 80 embassies and consulates worldwide, the FAS can obtain
specific overseas market information for your product. The FAS also
maintains sector specialists in the United States to monitor foreign
markets for specific U.S. agricultural products.
Most state commerce and economic development offices have
international trade specialists to assist you. Many states have trade
offices in overseas markets. Dial Tool and Manufacturing of Franklin Park,
Illinois, found the Illinois State office in Hong Kong very helpful:
After visiting the Illinois State office in Hong Kong, Dial Tool and
Manufacturing President Steve Pagliuzza reports that he was able to sign on
sales reps for his company's metal stamping equipment: "My state office in
Hong Kong gave me several names of potential reps. We eventually signed
them on and are now successfully exporting to Asia, in addition to Europe,
Canada and Mexico. In four years, 15-20 percent of our sales now come from
exporting."
Port Authorities are a wealth of export information. Although
traditionally associated with transportation services, many port
authorities around the country have expanded their services to provide
export training programs and foreign-marketing research assistance. For
example, the New York-New Jersey Port Authority provides extensive services
to exporters including XPORT, a full-service export trading company.
PRIVATE SECTOR RESOURCES
In addition to government-supported resources, private sector
organizations can also provide invaluable assistance.
Exporters' Associations
World Trade Centers, import-export clubs and organizations such as the
American Association of Exporters and Importers and the Small Business
Exporter's Association can aid in your foreign market research.
Trade Associations
The National Federation of International Trade Associations lists over
150 organizations in the U.S. to help new-to-export small businesses enter
international markets. Many of these associations maintain libraries,
databanks and established relationships with foreign governments to assist
in your exporting efforts.
More than 5,000 trade and professional associations currently operate
in the United States; many actively promote international trade activities
for their members.
The Telecommunications Industry Association is just one association
which leads frequent overseas trade missions and monitors the pulse of
foreign market conditions around the globe. Whatever your product or
service, a trade association probably exists that can help you obtain
information on domestic and foreign markets.
Chambers of Commerce, particularly state chambers, or chambers located
in major industrial areas, often employ international trade specialists who
gather information on markets abroad.
HOW TO GATHER FOREIGN MARKET RESEARCH
Now that you know where to begin your research, you should next
identify the most profitable foreign markets for your products or services.
You will need to:
. classify your product;
. find countries with the largest and fastest growing markets for
your product;
. determine which foreign markets will be the most penetrable;
. define and narrow those export markets you intend to pursue;
. talk to U.S. customers doing business internationally;
. research export efforts of U.S. competitors.
Classifying your product
The Standard Industrial Classification (SIC) code is the system by
which the United States government classifies its goods and services.
Knowing the proper code for your product or service can be useful in
collecting and analyzing data available in the United States.
Data originating from outside the United States -- or information
available from international organizations -- are organized under the
Standard International Trade Classification (SITC) system, which may assign
a different code to your product or service.
Another method of classifying products for export is the Harmonized
System (HS). Knowing the HS classification number, the SIC and the SITC
codes for your product is essential to obtaining domestic and international
trade and tariff information. DOC and USDA trade specialists can assist in
identifying the codes for your products. The United States Bureau of the
Census (USBC) can help identify the HS number for your product.
Finding countries with the largest and fastest growing markets for your
product
At this stage of your research, you should consider where your
domestic competitors are exporting. Trade associations can often provide
data on where companies in a particular industry sector are exporting their
products. The three largest markets for U.S. products are Canada, Japan
and Mexico. Yet these countries may not be the largest markets for your
product.
Three key United States government databases can identify those
countries which represent significant export potential for your product:
SBA's Automated Trade Locator Assistance System (SBAtlas), Foreign Trade
Report FT925 and the U.S. Department of Commerce's National Trade Data Bank
(NTDB).
SBA's Automated Trade Locator Assistance System (SBAtlas) is offered
only by the U.S. Small Business Administration and provides current market
information to SBA clients on world markets suitable for their products and
services. This valuable research tool supplies small business exporters
with information about where their products are being bought and sold and
which countries offer the largest markets. The Country Reports detail
products imported and exported by various foreign nations. Data are
supplied by the DOC's USBC and member nations of the United Nations. This
information can be obtained through a SCORE counselor at the SBA District
and Regional Offices and at SBDCs and SBIs. This service is free to
requesting small businesses.
Foreign Trade Report FT925 gives a monthly country-specific breakdown
of imports and exports by SITC number. Available by subscription from the
Government Printing Office, the FT925 can also be obtained through DOC ITA
offices.
The National Trade Data Bank (NTDB) contains more than 100,000 U.S.
government documents on export promotion and international economic
information. With the NTDB, you can conduct databank searches on country
and product information. NTDB can be purchased by subscription and used
with a CD-ROM reader, or can be used at Federal libraries throughout the
United States. DOC ITA offices will also conduct specific NTDB searches to
meet your foreign market research needs.
Once you learn which are the largest markets for your products,
determine which are the fastest growing markets. Find out what demographic
patterns and cultural considerations will affect your market penetration.
Several publications provide geographic and demographic statistical
information pertinent to your product: The World Factbook, produced by the
Central Intelligence Agency; World Population, published by DOC's USBC; The
World Bank Atlas, available from the World Bank; and the International
Trade Statistics Yearbook of the United Nations. Volume Two of this U.N.
publication (available at many libraries) lists international demand for
commodities over a five-year period.
DETERMINING THE MOST PENETRABLE MARKETS
Once you have defined and narrowed a few prospective foreign markets
for your product, you will need to examine them in detail. At this stage
you should ask the following questions:
. how does the quality of your product or service compare with that
of goods already available in your target foreign markets?
. is your price competitive in the markets you are considering?
. who are your major customers?
Answering these questions may seem overwhelming at first, but many
resources are available to help you select which foreign markets are most
conducive to selling your product.
The DOC's ITA can link you with specific foreign markets. ITA offices
are part of the US&FCS and communicate directly with FCS officers working
in United States Embassies worldwide.
FCS staff and in-country market research firms produce in-depth
reports on selected products and industries that can answer many of your
questions regarding foreign market penetration.
One small business exporter who regularly uses foreign market
information obtained through the DOC's US&FCS is Fabri-Quilt Inc. of North
Kansas City, Missouri.
According to Fabri-Quilt President Lionel Kunst, "When I decide to
enter a foreign market, the Commerce Department ITA office in Missouri
sends information on my company to the Foreign Commercial Service Officer
in the country where I want to export. They send me back information on
that particular country and even make appointments for me when I decide to
visit the market myself." Of the product line Fabri-Quilt exports, 25
percent of their sales can be attributed to exporting.
You can also order a comparison shopping service report through ITA
district offices. The report is a low-cost way to conduct research without
having to leave the United States.
SBA's and DOC's Export Legal Assistance Network (ELAN) provides new
exporters with answers to their initial legal questions. Local attorneys
volunteer, on a one-time basis, to counsel small businesses to address
their export-related legal questions. These attorneys can address
questions pertaining to contract negotiations, licensing, credit
collections procedures and documentation. There is no charge for this
one-time service, available through SBA or DOC district offices.
Trade Opportunities Program (TOPs) of the DOC can furnish U.S. small
businesses with trade leads from foreign companies that want to buy or
represent their products or services. These trade leads are available in
both electronic or printed form from the DOC. Participating companies must
pay a modest fee to gain access to this service.
Other important issues about the target foreign markets you should
explore are:
. political risk considerations,
. the cultural environment, and
. whether any product modifications, such as packaging or
labelling, will make the product more "exportable."
One U.S. poultry producer discovered it had to modify its product to
make it more palatable to Japanese consumers:
Atlanta-based Gold Kist Inc. found that, to be successful in Japan,
they needed to cut and package their chicken parts to meet Japanese
consumer preferences. That change required substantial modification in
Gold Kist's operations. The alteration paid off: Gold Kist's Don Sands
reports, "In 1988, we shipped 5.3 million pounds of poultry to Japan, 9
million in 1989 and 12 million in 1990."
Identifying market-specific issues is easily accomplished by
contacting foreign government representatives in the United States.
Commercial posts of foreign governments located within embassies and
consulates can assist you in obtaining specific market and product
information.
American Chambers of Commerce (AmChams) abroad can also be an
invaluable resource. As affiliates of the United States Chamber of
Commerce, 61 AmChams, located in 55 countries, collect and disseminate
extensive information on foreign markets. While membership fees are
usually required, the small investment can be worth it for the information
received.
Another fundamental question to ask country-specific experts is what
market barriers, such as tariffs or import restrictions (sometimes referred
to as non-tariff barriers), exist for your product? Specialists at U.S.
Trade Representative (USTR) should be consulted on trade barriers.
Tariffs are taxes imposed on imported goods. In many cases, tariffs
raise the price of imported goods to the level of domestic goods. Often
tariffs become barriers to imported products because the amount of tax
imposed makes it impossible for exporters to profitably sell their products
in foreign markets.
Non-tariff barriers are laws or regulations that a country enacts to
protect domestic industries against foreign competition. Such non-tariff
barriers may include subsidies for domestic goods, import quotas or
regulations on import quality.
To determine the rate of duty, you will need to identify the
Harmonized Tariff section which corresponds to the product you wish to
export. Each country has its own schedule of duty rates corresponding to
the section of the Harmonized System of Tariff Nomenclature, I-XXII.
DEFINING WHICH MARKETS TO PURSUE
Once you know the largest, fastest growing and most penetrable markets
for your product or service, you must then define your export strategy.
Do not choose too many markets. For most small businesses, three
foreign markets will be more than enough, initially. You may want to test
one market and then move on to secondary markets as your "exportise"
develops. Focusing on regional, geographic clusters of countries can also
be more cost effective than choosing markets scattered around the globe.
After you have identified the best export markets, your next step will
be to determine the best way to distribute your product abroad. Chapter 3,
"Market Entry," discusses distribution methods.
Source : foreign-trade.com
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