“Five Tips for Getting Started in Exporting”

When the U.S. economy spun into a free fall three years ago, business owners across the country were forced to retool niches to keep their doors open. Many owners also expanded into markets outside the U.S. where consumers weren’t as hard-hit.

For companies like k-Space Associates, there is a different story altogether.

“We just fell into it,” says its co-founder Darryl Barlett. The company hadn’t exported until a Japanese distributor first approached him at a trade show in 1995 when the business was just three years old. It only then occurred to him that a number of foreign tech companies had a need for k-Space’s products.

Even so, the company — with just 21 employees — now ships its products to countries as far flung as Singapore, Austria and China where companies the likes of Sony, Panasonic and Nokia use k-Space’s products to test and monitor the production of semiconductor chips and solar panels. This year, Barlett anticipates that 65 percent of the company’s expected $8 million in sales will hail from overseas.

What’s more, Dexter, Mich.-based company was recently named as the U.S. Small Business Administration’s 2011 Small Business Exporter of the Year. To win this award, k-Space had to compete against fellow exporters in each state and on a regional level based on the combination of factors including increased sales, profits or growth of employment because of exporting. The company also stood out for its creative overseas marketing strategies and its willingness to help other companies get started in exporting.

But don’t think that getting to this point was easy. Even Barlett who says becoming an exporter just, well, kind of happened, faced ample difficulties. Still, with a healthy dose of determination, it can be done.

Here are five tips from Barlett for getting started in exporting:

1. Get connected.

To find buyers overseas, it helps to have a contact in the country you’re targeting. For Barlett, that connection presented itself through a chance encounter with a Japanese distributor who essentially purchased k-Space’s products at a discount and did all of the sales legwork in Japan. Some entrepreneurs set up joint ventures or partnerships with foreign entities that have more experience selling to local buyers. Of course, these types of arrangements can involve a good amount of risk, so do some research on a company before agreeing to work with it.

 

2. Put yourself out there.

To find contacts, you may need to travel. Barlett recommends attending trade shows where foreign buyers and distributors might be in attendance. Each year, k-Space regularly attends about three trade shows, which are held in varying locales such as Japan, South Korea and France.

3. Advertise

Whether it’s through trade magazines that have an international reach or online advertising — it’s important to spread the word about your company, Barlett says. “Fifteen years ago, we wouldn’t have this international exposure and be able to export as much as we do if we weren’t just a finger stroke away,” he says.

4. Watch your cultural Ps and Qs.

Although selling through a foreign distributor can make your job much easier, you may miss out on much of the upside profits , too. So, it often makes the most financial sense to sell to foreign consumers directly. But be prepared to get outside your comfort zone. Beyond the basic language barrier, exporting directly typically involves wading through varying levels of taxes and tariffs, as well as different currencies and banking practices. “Every time you go to a new country, you have to learn about new things,” says Barlett. “And a lot of times, it is a struggle.”

5. Get help.

To make a go of exporting, you’ll either need to devote your attention to making it work or have a staffer focus on it. At k-Space, for instance, Barlett assigned a lead employee with managing the loads of paperwork that’s involved with exporting. For further help with things like classifying products, taxes and tariffs — which differ depending on where you’re shipping — k-Space reached out to a local Small Business Development Center in Detroit.

“Thinking About Doing Business Internationally? Tips for Handling Multiple Currencies”

If you have considered dipping a toe into importing or exporting, you may have balked at keeping up with the fluctuations in value of various currencies. Don’t even try, says Guido Schulz, global head of strategic management at Los Angeles-based AFEX, a foreign-exchange consultancy.

Large international conglomerates have entire “forex” teams dedicated to managing finances across multiple currencies. As a small-business owner, you should not be trying to keep up with the second-by-second changes on your own, says Schulz. But if you don’t take steps to protect yourself, you could lose money, he says.

Consider a wine merchant who buys wines from France and sells to grocers and restaurants in the U.S. If the value of the euro changes dramatically between the time the merchant orders and when he sells, his profits could be wiped out in the currency conversion.

To protect against such losses, entrepreneurs are increasingly planning out their currency strategies. Since the start of the Eurozone-crisis three years ago, AFEX has seen more than a 25 percent increase in the volume of customers looking to lock in currency rates in advance. Small and midsize businesses make up most of its customers.

Especially if you are just getting started dealing with multiple currencies, be sure to work with an institution that specializes in foreign exchange, says Schulz. It’s too much for most business owners to try to handle alone. Banks can help you, and so can many non-bank strategists, like AFEX or International Foreign Exchange.

Consider these tips from Schulz for how to manage your business’s cash flow across multiple currencies:

• Charge customers in the local currency. It may seem like a good idea to charge your overseas clients in U.S. dollars, eliminating the need for any foreign currency swapping. However, by asking your customers and clients to deal with the foreign-exchange negotiations instead of you, your business could be less attractive and competitive, says Schulz.
• Consider locking in an exchange rate in advance. Many small-business owners do not have the cash reserves to withstand a foreign-exchange loss. Schultz recommendst that you look at buying a “forward contract” from a bank or non-bank specialist, locking in your exchange rate for a set period of time. You will pay a commission on the contract, but what you buy is peace of mind. With an exchange rate locked in, you can plan your pricing strategy such that you know you won’t lose money. At AFEX, the commission is less than 1 percent of the transaction price for forward contracts, although prices vary depending on the specific contract, says Schultz.
• Avoid “casino fever.” Entrepreneurs have to wear many hats to run their business, and they may get the idea that they can pad their revenues by “beating the market,” buying one currency and selling another for a profit. “That is actually a very, very dangerous thing,” says Schulz. Playing the market is too risky for a small-business owner and ultimately, a waste of an entrepreneur’s time, he says.

While it should be accompanied by caution and planning, trading with Europe can still be on the table for U.S. businesses. During the sovereign-debt crisis in Europe, speculation grew as to whether Greece, most especially, might exit the Eurozone. “What we have seen is an almost too-big-to-fail scenario,” says Schulz, and indications from European Union leaders that they will do what is necessary to keep the countries operating under a single currency. If any countries were to leave the Eurozone, an exit is expected to be planned and orderly, says Schulz, and business owners should not fear recent debts becoming suddenly null and void.

“India may impose safeguard tax to check Chinese imports: DIPP”

NEW DELHI: India today said it could consider imposing “some kind of safeguard duties’ on Chinese imports to bridge the huge trade gap as it cannot be sustained in the long run.

“This trade deficit (between India and China) is not sustainable in the long run and therefore it is very important to understand for Chinese companies that in the coming years, India will have to put some kind of safeguards whether it is in terms of standards.

“India will do this because (India) can not sustain this (trade deficit) for over a long period,” said Department of Industrial Policy and Promotion (DIPP) Secretary Amitabh Kant.

India’s trade deficit with China stands at about $36 billion with exports totalling only $15 billion against $51 billion imports.

Speaking at the function of industry body PHDCCI Kant said that it was time that Chinese companies should increase invest in India and set up manufacturing bases.

“Chinese companies should actually manufacture the same goods (which they export to India) in India. We welcome Chinese companies. You please invest and manufacture in India. We will welcome telecom equipment, power equipment but kindly manufacture in India.

“Our government wants Chinese companies to make in India and use India as an export base for other places,” he added.

The Secretary said that China is facing problems in export solar equipment to the US as America have imposed anti-dumping duty.

“…please use India as a base for exports…you will face anti-dumping duty on every good in future so the only solution for Chinese companies is to produce in India and export to America,” Kant said.

He asked Chinese companies to find domestic partners and export to regions such as Africa and Latin America.

“India is a very attractive FDI destination,” he said, adding: “we expect that this year, we will get about $50 billion FDI”.

He said although China is setting up two industrial parks – Maharashtra and Gujarat – but there is need to increase investment.

“Between April 2000 and July 2014, China have invested only $411 million. This is only 0.18 per cent of India’s total FDI which it has received so far. The Chinese figure is very low. Lower than Botswana and Rwanda. FDI from China in India is insignificant and extremely poor. This is shocking,” he added.

Assuring full support and hand holding to Chinese companies, the secretary said the Chinese companies should look at sectors such as automobile, power, telecom, infrastructure and devel opment of smart cities and industrial corridors”.

“China and India — the two elephants — when they dance together, the whole world will shake. America will shake, Europe will shake. And if you dance alone, then the world will not shake. Join hands with India to ensure that Chinese companies entered the world in partnership with India,” Kant said.

He said India’s average foreign direct investment in the last three years was about USD 39 billion and the country is now focusing on manufacturing growth and infrastructure development.

“India plans committee to ease customs norms for boosting international trade”- Latest in News

NEW DELHI: Two months after it blocked an international agreement on easing trade regulations, India has initiated measures to reform customs procedures and cut red tape to speed up international trade.

The government has decided to set up a national committee on trade facilitation, which will suggest and implement measurers to ensure seamless movement of cargo by addressing constraints like high transaction costs and poor infrastructure.

“The national committee on trade facilitation will be put in place soon, which will have representation from 7-8 departments. It will look after all aspects of trade facilitation,” a senior commerce department official told ET on condition of anonymity. “India is not against trade facilitation. We are expeditiously working towards it.”

India had on July 31 vetoed the trade facilitation agreement at the World Trade Organisation (WTO), which sought to speed up global trade by reforming customs procedures, arguing that there should be a parallel deal on food security. Delhi, however, maintained that it was fully committed to trade facilitation.

The trade facilitation goal requires harmony between departments like customs, shipping & ports, road transport & highways, and the Directorate General of Foreign Trade ( DGFT). It is important to get each of them on board, said the official quoted above.

The WTO trade facilitation pact, signed in December 2013, contains legally binding provisions to standardise customs rules in all 159 member-countries for faster and more efficient movement of cross-border cargo.

“WTO deal or no deal, we are carrying out trade facilitation and customs reforms. It will cut transaction cost for exporters,” said the official. “We are anyway working towards ratifying the WTO TFA. We need to make legal amendments in two to three places. We are prepared,” he added. During his US visit, Prime Minister Narendra Modi had told President Barack Obama that trade facilitation was important for India and it expected the US’ support in addressing India’s concerns over public stockholding for food security.

Finance minister Arun Jaitley had made several announcements in the budget, allocating significant funds towards trade facilitation.

It included extension of 24×7 customs clearance facilities to many more ports, airports and sea ports.

“FDI flows and the need for a local presence”

Rapid-growth markets, and China in particular, will represent the fastest-growing source of final demand over the coming decade.

This will provide additional impetus for firms to locate production in the destination region so they can be responsive.

This suggests that Foreign Direct Investment (FDI) is likely to be increasingly directed to emerging markets over the coming decade, and that regional supply chains will grow in importance as a result.

More than 67% of companies surveyed as part of Ernst & Young’s Driving improved supply chain results noted that their supply chain is increasingly being developed to service their company’s growth in emerging markets. Despite declining transport costs, distance between markets can still pose a barrier.

Grupo Modelo case study: getting enough containers to Asia

For example, José Parés, Sales and Marketing Vice President of Grupo Modelo, whose export and import brands include Corona, Bud, Carlsberg and Tsingtao beer, noted that with the slowdown in consumption growth in the US, the flow of containers from Asia has declined.

This has presented Grupo Modelo with a challenge in getting enough containers to ship their products to Asia. In response, Grupo Modelo has recently opened a distribution centre in Shanghai to enable it to reach consumers in Asia more effectively.

Risks in creating a local presence

• Market entry costs commonly underestimated –Creating a local presence with these rapid-growth markets is not without its risks. More than one-third of the companies surveyed for EY’s The Master CFO Series: What lies beneath? underestimated the costs associated with market entry, particularly when looking beyond the BRIC countries into less familiar territories.
• Time over-runs –Time over-runs were an even bigger problem, with 43% of respondents saying that the investment took more time than they had anticipated.
• Corruption –Serious corruption problems can also represent risks in many developing economies. For example, Russia’s and Venezuela’s prospects for FDI and growth are hampered by the high perceived levels of corruption. They are ranked within the bottom fifth of countries (those with the highest levels of corruption) according to Transparency International’s Corruption Perceptions Index. Companies should examine the scale of such problems and consider controls and procedures to manage such risks before entering destination countries.

Countries making improvements to business environment

At the same time, many rapid-growth economies are making significant improvements to the operating environment for businesses.

According to the World Bank’s annual Doing Business report, China and India are among the top 40 most improved economies, in terms of creating a favorable regulatory environment for trading and entrepreneurship, since 2005. And one-third of the top 30 most improved economies are from Sub-Saharan Africa.

Source: http://www.ey.com/GL/en/Issues/Business-environment/Trading-places–FDI-flows-and-the-need-for-a-local-presence

“Changes in geography, supply, sectors”

By 2020:

• World trade in goods will total around US$35t, two and a half times its value in 2010. At the same time, world trade in services will double to around US$6t.
• China’s exports to Europe, at over US$1t, will be almost twice as large as US exports to Europe.
• Intra-regional European trade will be worth over US$7t, still significantly higher than intra-regional Asian trade of US$5t, despite rapid-growth in Asia.
• Europe’s exports to Africa and the Middle East will be around 50% larger than its exports to the US.

Europe will be the most important market for Sub-Saharan Africa’s exports, accounting for a quarter of all its trade, although still at a relatively small value of US$108b. By 2020, the total flow of services trade from Europe to Asia Pacific (excluding Japan) will be larger than to North America.

 Changes in geography

• Rapid-growth markets will become an even more dominant force in global trade over the coming decade, with the Asia-Pacific region set to experience the fastest growth in global trade to 2020. Nearly half our Asia-based respondents to our survey expect to export more than 60% of their output in five years’ time, compared with fewer than a fifth of companies in the Americas.
• Trade will also be increasingly focused around Asia, the Middle East and Africa, suggesting that the key geographical location for companies will change. Indeed, Europe’s exports to Africa and the Middle East by 2020 are forecast to be almost twice as large as Europe’s exports to the US. Companies will need to gain footholds in rapid growth markets at an early stage, while they still have the opportunities to establish a significant market presence and gain market share.
• Other rapid-growth economies outside of Asia are set to expand rapidly, but those countries with a heavy reliance on commodities within Latin America, Sub-Saharan Africa and Middle East North Africa (MENA) will experience a slight decline in their share of global trade over this decade.
• China’s dominance in low-end manufactured goods will increasingly come under pressure from lower-cost countries such as Bangladesh, Vietnam and parts of Africa. There is a risk China could lose its competitive edge more quickly if wages rise faster than productivity.

 

Changes in final destination

• Strong income growth in rapid-growth markets means that final demand — as opposed to production-location decisions — will increasingly drive trade patterns between these  The fastest-growing trade route will be between India and China, with Indian exports of goods to China growing at an average annual rate of almost 22% through to 2020, while flows in the opposite direction expand by 18.5% per year. We expect China and India alone to account for almost one-fifth of global trade flows by 2020.
• Even as Asia becomes more competitive, a growing share of the region’s exports will be destined for other Asian countries. The growth of intra-regional trade among Asia’s new economic superpowers will lead to a renewed concentration of global demand, which will be an important consideration for exporters when making strategic plans for the coming decade.
• A tremendous amount of trade across borders reflects trade within and between companies, rather than flows to final consumers. Over one-third of the companies in our survey exported finished goods across borders within their own organization and the majority also produced goods for companies in other countries as part of the global supply chain.
• As economies in sub-Saharan Africa and the Middle East and North Africa (MENA) region develop and open up to trade, we will see increased inflows of intermediate goods that will be assembled and re-exported. Richer economies in the region, particularly the oil-exporting economies of the Middle East, will also represent increasingly important sources of final demand for manufactured products.

 

Changes in supply

• Lower trade barriers along with advances in global transportation and communications technology make it increasingly viable for different stages of production to take place in separate locations. This allows companies to seek out the lowest-cost provider for components, regardless of location.
• Survey respondents indicated that they were comfortable using suppliers from multiple markets rather than focusing on one region for their suppliers. They are also indicated that relationships and trust are the most important factor enabling success in international trade.
• While companies will increasingly seek single suppliers to service multiple markets worldwide, there are also challenges to such specialization, including those highlighted by the recent supply disruption associated with the Tohoku earthquake. Setting up local production to serve final consumers in rapid-growth markets will also be an important step, particularly as demand grows in markets with high trade barriers, such as Africa.

 

Changes in sectors

• The machinery and transport equipment sector — which includes consumer electric products such as computers, televisions and washing machines, as well as industrial goods – will make the largest contribution to trade over the next ten years. This reflects both the strong growth in demand for consumption and investment goods expected from the rapid-growth markets and the potential to fragment the supply chain as companies increasingly produce components in different locations.

There is enormous potential for Western companies to benefit from growth in banking, insurance and other financial services. By 2020, the total flow of services from Europe to Asia Pacific (excluding Japan) will be larger than to North America. One of the major drivers of this expansion will be the growth of trade in financial services.

Source: http://www.ey.com/GL/en/Issues/Business-environment/Trading-places–Changes-in-geography–supply–sectors

“Global trade growth to become more concentrated”

Machinery and transport equipment, followed by other manufactures such as textiles, lumber and rubber, will account for the largest shares of global exports.

Indeed, these dominant sectors will account for close to 54% of merchandise trade by 2020.

What proportion of your output is exported now and what do you expect to export in five years’ time?

Explores these shifting trends from another perspective, by comparing the sectoral contributions to the growth in world exports over the periods 2000–10 and 2010–20.

Sectoral contribution to increase in global trade

A similar pattern emerges: over the next 10 years, the sectoral contributions to trade are forecast to become increasingly concentrated, with machinery and transport equipment, and other manufactured goods, making larger contributions than during the preceding decade — together, they are forecast to account for 57% of the overall rise in global trade during 2010–20.

The rapid expansion of these sectors can partly be attributed to the forecast increase in final demand for consumer goods from the growing middle class in the emerging markets.

These sectors will also benefit from the continuing fragmentation of the supply chain, as they offer more opportunities for outsourcing of production.

By contrast, the share of the oil and gas sector in global exports is set to drop back significantly, which mainly reflects the more subdued long-term outlook for commodity prices.

“New patterns of trade emerge”

No longer just a trend, globalization is now the dominant business environment and we are seeing new patterns of trade clearly emerge.

Today, there is a net redistribution of wealth away from the rapid-growth economies — a process accelerated by the financial downturn and the economic recession that it has caused. Companies from those rapid-growth markets are now challenging the giants of the Fortune and Forbes lists.

We are witnessing a surge of investment from west to east, some of it speculative but much of it the result of by individual businesses decisions.

Focusing on west to east misses the important east to east and growing east to west dimension. And centering on flows to India and China misses the far greater increase that is happening within regional blocs closer to home.

World exports

Although global trade collapsed during the financial crisis, it has since bounced back strongly, led by trade among emerging markets.

But what remains unclear is whether the key trends of the past ten years can be expected to extend into the coming decade, or whether the global financial crisis has changed the dynamic of the global economy, resulting in new patterns of international trade.

 

A model of future international trade patterns for the next 10 years

Working with Oxford Economics, we have sought to model the future patterns of international trade for the next 10 years.

The report includes:

• Changes in geography, supply, sectors
• The brightest prospects
• FDI flows and the need for a local presence
• Global trade growth to become more concentrated

World trade has recovered strongly following the global financial crisis. But rather than a return to business as usual, we are now seeing new patterns of international trade emerge.

Businesses will need to adjust their strategies to reflect the changing patterns of world trade that are developing and are poised to intensify over the next decade.

Source: http://www.ey.com/GL/en/Issues/Business-environment/Trading-places–New-patterns-of-international-trade

Where are economic prospects brightest?

Business leaders seeking to channel their investments toward the most prosperous markets should heed the clear message from our interviews with senior executives that Asia is increasingly seen as the region that will dominate world trade by 2020.
2020 vision: regional patterns of trade

Asia is a must, specifically China and India

The chief economist for a large European-based global manufacturer noted that an increased number of their key management meetings were now held in Asia as a signal of its importance — being in “Asia is a must if you want to survive,” he contended.

Our survey results also suggest that the Asia Pacific region will continue to be an extremely competitive export platform, with nearly half of Asia-based companies expecting to export more than 60% of their output in five years’ time compared with fewer than a fifth of companies in the Americas.

A key result is that India and China will drive the continued rise of the rapid-growth markets and, together, these economies will become more important to global trade than the US and Eurozone.

The emergence of new economic superpowers will lead to a resurgence in the concentration of global demand and will be an important consideration for exporters when making strategic plans for the coming decade.

Source: http://www.ey.com/GL/en/Issues/Business-environment/Trading-places–Where-are-economic-prospects-brightest-

“Commerce Ministry to evaluate imports regularly”

NEW DELHI: Worried over high trade deficit, the Commerce Ministry has put in place a mechanism for periodic and regular appraisal of imports.

Commerce Secretary Rajeev Kher said there are several areas where imports need to be appraised.

“We are trying and seeing how we can encourage industry to manufacture those products. We required to reduce our dependence on imports. “In order to do that, there is an institutional mechanism which we have put in place in the Department of Commerce for a periodic and regular import appraisal and in consultation with relevant departments to take policy measures to try and help the trade deficit not to go beyond a manageable limits,” he said.

Exports growth slipped to 7.33 per cent in July after witnessing a double-digit expansion in the previous two months, pushing up the trade deficit to one-year high of USD 12.22 billion.

In 2012-13, the country’s trade deficit touched an all time high of USD 190 billion.

Meanwhile an official statement said while the global environment still remains challenging, policy action in India has been repositioned so as to better tackle the negative impact of external shocks.

As per the current rankings, India is the 19th largest exporter (with a share of 1.7 per cent) and 12th largest importer (with a share of 2.5 per cent) of merchandise trade in the world.

In commercial services, India is the sixth largest exporter (with a share of 3.3 per cent) and seventh largest importer (with a share of 2.9 per cent).

The government will orgainse an international trade fair on services in April 2015. India?s share in world trade (merchandise and services) has increased from 1.77 per cent in 2008 to 2.27 per cent in 2013. “Our goal is to raise this to 3.5 per cent by 2018-19,” it said.

It said that focused action and reforms to increase exports of business, professional, tourism, health care and logistic services, R&D, consulting, printing and publishing, telecom, construction, educational, entertainment services

“Attempt greater liberalisation of services in the WTO,” it added.

To boost project exports, it said that focus will be on regions like Africa, West Asia, CIS countries, ASEAN and Cambodia, Laos, Myanmar and Vietnam.

Further it said the export diversification policy pursued by the government needs to be accelerated by expanding both the range of products and number of countries.

“Indian exports should move up the value chain. Export of branded goods needs to be encouraged by promoting individual brands. Manufacturing exports require strong brand promotion,” it said.