Participation in global markets presents firms with lots of value prospects (Ber
ID: 373781 • Letter: P
Question
Participation in global markets presents firms with lots of value prospects (Bernard, & Jensen, n.d.). Small companies may want to export their products and services to other countries because of the need to attain market growth. When small firms acquire new foreign markets, they promote the growth of their market which translates into increased profit margins and revenue. The second reason as to why exporting could be seen as a viable option for small companies is the need to overcome high domestic market competition. Exportation provides small companies with the opportunity to find and direct their r products to less competitive markets where they would record maximum sales and profits (Bernard, & Jensen, n.d.). The other reason why small companies may opt for exporting is the need to extend the life cycle of their products and services. This occurs when a particular service or product is nearing obsolescence in the domestic market but has a high demand in the foreign market. Exporting would in this sense help the company shield its goods and services from extinction thus guaranteeing it the earnings of that particular commodity or service. This approach as well promotes faster growth of small companies by exposing it to higher profits (Bernard, & Jensen, n.d.). The export market expands the ability of small businesses to stay in the market for long which fosters their growth.
Small companies are faced with various challenges such as a weak financial muscle which impedes their ability to participate in the export market. One of a significant challenge faced by small companies in the export market is the fluctuating exchange rate. There is a high risk due to fluctuations in foreign exchange rates that could see small companies lose their investment (Kalafsky, 2009). The other challenge faced by the small businesses is that the export market is highly competitive and this requires a higher investment for success t be met. A significant challenge faced is the inability to foster working relationships based on mutual trust with major foreign dealers (Kalafsky, 2009). The above challenges can be overcome through the formation of a responsive company export policy. The small companies should seek to diversify their products so as to increase their domestic market presence and financial capacity which will promote participation in the export market. Small firms should as well consider product differentiation and come up with unique products that can beat the high competition in the export market (Kalafsky, 2009). It would be substantial for small firms to redefine its contractual relationships to take considerations of future changes in exchange rates and to enhance the establishment of global networks based on mutual trust.
REFERENCES
Bernard, A., & Jensen, J. Why Some Firms Export. SSRN Electronic Journal.
Kalafsky, R. (2009). Export challenges and potential strategies. Journal Of Small Business And
Enterprise Development, 16(1), 47-59
Explanation / Answer
Exporting is one of the first ways many companies venture into foreign lands. What are some of the reasons a small company would decide to export goods to another country? What are some of the potential pitfalls that might occur and how could these challenges be overcome?