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EXPORT PROMOTION ORGANISATION

In briefest terms Export is the process of earning profits by selling


products (or services) in foreign markets. It is finding customers a industry can
serve better at competitive price than the suppliers in their own countries.
Intentional marketing is the performance of business activities that direct the flow
of goods and services to consumers or users in more than one nation. It is
different than the domestic marketing as the elements social aspect involved
such as the behavior pattern of consumers, customs, attitudes, values etc, varies
from one nation to another.

In developing countries where there are often severe shortage of capital,


managerial resources and skilled labour, promotion of SSI sector is considered to
be an important approach to economic development. In fact in many of not most
developing countries, small or very small enterprises are the largest employers,
providing a productive : outlet for the entrepreneurial spirit of individuals and
assisting in dispersion of economic activity through out the country. The
economic impact of SSls can be measured by their contribution to out put,
employment, income, export, investment and other economic indicators.

There is general acceptance of the belief that the potential for increased exports
by SSls in developing countries ; is significant, but only a small proportion of SSls
is currently exporting and a vast majority of SSI produces exclusively for the
domestic market. Nevertheless, their contribution to exports is substantial, as
high as 50% of total export (36% approx, in India) in some developing countries.
It appears probable that as the [proportion of exporting SSls rises,
national export would rise dramatically.

Now withstanding the magnitude in terms of value and numbers, the contribution
of SSls in export is still inadequate, when seen as a proportion of total SSI
output. One reason for this could be the attractive size of the home market and,
at the micro level, a lack of sufficient initiative in an SSI to get in to exporting.

Though the SSI sector has it's own inborn strength to expand and export but it
has to ultimately compete in the market with the large or medium scale industrial
giants to survive and grow so, there are few major speed breakers on the path of
growth in front of SSI as compared with large industries, these can be viewed as
below : -

♦ Availability of finance : SSls may be unable to graduate to the 'large'


category because they do not have access to funds needed for expansion.
Financing institutions and banks are generally more cautious in advancing
resources to small units.

♦ Level of innovation : While large units are capable of establishing in-house


research and development facilities for experimenting with new products, new
production techniques and new marketing devices, SSls generally
handicapped in this regard and require outside support. Many SSls have to
operate in environments in which there are very limited foreign business
elements, such as business trips abroad, foreign visitors, or exposure to
foreign products. Consequently they are deprived of opportunities to compare
their products with others and thus Jack an important business stimulant.

♦ Managerial capabilities : Many small units are one-man or family


businesses and tend to centralize decision making in one or two persons. For
them, a decision to go into exports requires modifications in terms of
management, marketing organization, production and finance, The
entrepreneur or manager of the SSI has, therefore, to tackle these internal
issues even before the full range of external problems unfolds when export
markets are explored. On the other hand, llarger units are able to recruit
competent professionals and build up an Organisation, which has self –
propelling momentum, even when circumstances change continually in the
export markets.

♦ Attitude to human resource development : The propensity of small and


medium business to undergo training is notably low, even when training
events are highly responsive to their practical needs. Large businesses have
a better organised approach to human resource development in the interest
of professionalism.

♦ Level of awareness : As compared to large enterprises, most SSls in


developing countries suffer from lack of information about the potential of
export markets. Even selling products to other regions of the home country
may pose for them serious managerial and logistical problems. In addition,
they lack guidance for making a self assessment of their inherent export
capability and advice on how to take the first critical steps to exporting.

♦ Output levels : Inability to expand output significantly and to fill large orders
may discourage buyers from buying SSI products.

On the other hand, SSls can possess many advantages:

♦ Flexibility : The major advantage of SSls is that they tend to be more flexible
and are better in adapting to change than their larger counterparts. A factor
that seems to be common to all successful exporters is that they can adapt
themselves to an opportunity abroad and organize themselves efficiently to
exploit it

♦ Quick Response : Having fewer levels in the organization, the speed of


decision making is faster in SSls and their response to new opportunities is
quicker.
♦ Customization : An SSI can customize its product to the buyer's needs with
greater ease by means of small production runs.

♦ Risk taking : Greater enterprise and risk taking may be possessed by an SSI
owing to high aspirations of its principals to succeed and excel in business.

The purpose of comparing the strengths and weaknesses of SSls and large
units is to shortlist the areas where SSls require support in their attempt to enter
the export field.

It is evident that increase in the numbers of exporting SSls requires:

• Strengthening of management capabilities.

• Training of managers in principles of export marketing.

• Assistance to gain footholds in export markets.

• Assistance in overcoming resource barriers for export expansion.

For entering in to the global market it is essential for an existing SSI to assess
its export potential. Export potential is the ability to take advantage of sales
opportunities abroad. There are both internal and external factors that affect the
export potential of an enterprise.

♦ External Factors : Although much of the export initiative lies with the
individual SSI, the importance of environmental circumstances in which it
operates can not be denied. These circumstances tend either to facilitate or
hinder export initiation and success of SSI.

♦ Comparative advantages : The inherent strengths of your country will shape


your export opportunities. The particular resources, location, climate, and the
cost structure of the economy, among other things, will set the stage for
individual SSls to exploit their own competitive advantages.

♦ Government policy : The public sector makes up an important part of the


export infrastructure in your country. It also plays a significant role in aiding
export efforts. Governments may encourage exporting through a variety of tax
policies, financing schemes, providing information, and incentive
programmes. They may also hinder exporting through bureaucratic red tape,
restrictions on imports, foreign travel, advertising abroad, etc, and other
means.

♦ Exchange Rates : The relationship between your currency and that of your
export customer 'floats', i.e., changes continually. As your currency weakens,
it gives you a competitive edge in export markets. As it strengthens, you may
lose competitiveness.

♦ Export opportunities : Exporting succeeds when there is a good fit between


your product and your market. That means when you are able to respond to
an export opportunity with exactly the product benefits the export
customer wants. Opportunities for marketing your products always develop in
specific export markets. It is up to the SSI to capitalize on them.

Internal assessment of readiness to export :

A considerable amount of research and applied work suggests that an


individual enterprise's export potential can be summed in two independent
dimensions:

1. Organizational readiness to export (ORE) : A number of factors, internal


to the organization, determine how well equipped it is to engage in export
transactions. These generally relate to the resources of the enterprise,
commitment of its senior management / principals to exporting, and its
motivations for going international.

2. Product readiness to export (PRE) : Independent of organizational


readiness to export, an enterprise must be able to offer products tailored to
its customers abroad. The ability of an enterprise to meet export customers
needs in a competitive and effective manner reflects its Product Readiness to
Export (PRE).

Measuring organizational readiness :

Specific factors, which make up Organizational Readiness to Export (ORE) are


as follows :

1. Manufacturing capacity : There should be plant and equipment sufficient to


supply the home market plus additional capacity to meet demand from
abroad.

2. Management and organitation: Exporting requires additional management


time, especially in the early stages of market development. If the existing
management structure is already thinly stretched to handle domestic
business, it will be difficult to take on the new commitments resulting from
exporting. Similarly, the existing organization may not be suitable for handling
export sales.

3. Financial resources: Marketing abroad requires additional working capital,


and capital for market investigations, promotion, product adaptation, and so
on. It would be unwise to begin exporting if the company's financial base is
barely sufficient to handle domestic business.

4. Technical know-how : An enterprise that has the technical manpower


capable of product development and adaptation is likely to have a greater
export potential than one without such capabilities.

5. Marketing know-how: Although marketing expertise gained in the home


market is not always directly applicable abroad, we find that enterprises with
substantial home market experience are better in adapting to the
requirements of export business. In a way, successful marketing at home
prepares the enterprise for successful export marketing.

6. Export experience : An enterprise's export performance to date and the


lessons learned from past successes or failures have a bearing on its export
potential.

7. Management's goals and priorities: Management's current plans for its


domestic business, e.g., investments, new product launches, expansion of
salesforce, etc., have a direct relationship to its export potential. These
require resources and management effort, which may limit the enterprise's
ability to develop its export business.
Measuring product readiness
Product advantages carry over to the export market as well. If the SSls
products are successful in the domestic market, competitively priced, up-to-date
in-design arid engineering, appealing to the selected customer segment,
marketing opportunities abroad are likely.

Opportunities
Comparative Export
Exchange in specific
Advantage of Promotion
Rate Export
your country Policy of your
market

EXTERNA Export
L TO Potential of
INTERNAL
SSIs
TO

Individual SSIs own readiness


to exports determined by
organisational and Product
strengths
To assess the SSls Product Readiness to Export (PRE), it must look at its
products critically, and identity their inherent strengths and weaknesses. Besides,
it must do the same analysis in the context of the target export markets.

Thus the task of taking decision to enter in to global marketing can be


conceptualized as certain vital steps. First of all the commitment to go for
international business. Once this basic decision has been accepted as the
organisation motto next is to carry out the SHOT analysis. The analysis consists
of evaluating the strength, weakness, opportunities and threats of a company
against the perspective internal, external and international parameters. The
result of this analysis will help in reaching a conclusion with regard to (i) which
market to enter (ii) which particular segment (iii) how to enter and (iv) how to
market. Once the decision has been taken on these, the company will be in a
position to set the targets in terms of market penetration, sales volume or
product awareness relative to specified time horizons. Then next step would be
to develop organisational system to carry out the international marketing
functions and to make adequate resources available to make the functioning
effective. The next step involves the carrying out of the actual job international
marketing. And, the final step is to review, identify the mistakes, if any, modify
the system, if required, and set targets for the succeeding period.