The “law of profit” governs each and everyone of us and a corporation or a company is no exception. The real reason why the company decides to export would be plainly and generally because of profit they are expecting from such action. To be more specific, one profit I am expecting, and also my motivator, is the profit of minimizing cost per unit.
Softdrinks for example, the raw materials needed can be more expensive than their price some point in time. Labors, maintenance, and research increase the cost to produce one unit. By producing more then selling more, my company can minimize the cost but unfortunately, the current demand in our local market is somewhat limited wherein the current overproduced products will remain as a surplus and the problem with high cost of production remains.
This is where selling to international market takes place. By selling the surplus to a potential international market, our company will not just minimize the cost per unit but also maximize the equipments efficiency since most of softdrink factory equipments and machineries were all designed for 24/7 work and also extends product’s lifecycle giving it a new life cycle to the international market.
Note that the potential on an international market has many factors such as lack of production facilites of a firm, local productions does not produce the firm’s complete product mix, extensive target market, minimal security and economic risks, etc. Another profit that serves as motivator for our company to export is to acquire more knowledge and information regarding new markteting strategies, foreign competitors and foreign markets with the minimum expenditure in the company’s part.
Multinational corporations’ reason for exporting often falls for this category. Intensive market competition is their next thing after minimizing cost per unit and making additional sales. Company such as ours are planning to dominate the international market and put the other competitors behind our back. These can be done by exporting. We can test a marketing strategy to a certain international market and if it seems unprofitable for a certain time, our company can just back off on our satellite office and thus, the cost of fall is minimal.
Foreign markets and competitors can be effectively asses in terms of their capability by actually meeting them and not just purely relying on past data. For the importing scenario, the reason I am considering would be the demand of the said product to my company, quality of their product, supply and spatial availability of their product, and of course the price of their product. These factors would be weighed accordingly and with respect to other local and international counterpart to aid our company in decision making.