Growing your  client base to the United States is an exciting and potentially lucrative opportunity, but with increased growth comes increased risk.

Some of the issues faced by exporters:

• Transporting and delivering goods
• Currency fluctuations
• Language barriers
• Different business regulations
• Political and economic instability in dealing with unknown customers
• Debt defaults

This should not deter Malaysian businesses from capitalising on the US marketplace as long as these risks are managed and minimised.

The first step in risk mitigation is to get to know your target market and customers. Exporters can access general information on political, legal and regulatory conditions from local trade facilitation companies.

In addition, these companies can introduce you to potential business partners and local professional services so you can explore the competitive market before making any commitment to that country.

Types of Risk as per follows:

• Business Credit Risk
• Bank Risk
• Country Risk
• Supplier Risk
• Business Risk

To better manage your export risk, please contact us at Wexpot. (www.wexpot.com)

A young Chinese couple were interviewed about their lives. Both worked in an electronics factory in Shanghai yet their home did not possess a single item that their manufacturing plant made. They saved half their income and their dream was to live in a quieter area and buy a car! The realistic and affordable aspirations of the Chinese have resulted in minimal internal demand, although that is changing.

Perhaps China has become an economic powerhouse because most of their manufacturing output is exported.  In 2007, the Chinese exported more than they imported to create a trade surplus of $315,700,000.00. In contrast the US imported more than they exported to create a trade deficit of $818,000,000,000. The UK was next, with a deficit of $175,400,000,000.

Adam Smith believed that the natural progression was “the greater part of capital of every growing society is first directed to agriculture, afterwards to manufacturers and last of all to foreign commerce. He goes on to say that for most nations the steady movement from agriculture to manufacturing improves a nation’s economic opulence, but eventually the improvements made in manufacturing filter back to agriculture. Perhaps the importance of land management, cultivation and food production, so often brushed aside in the name of progress, becomes glaringly obvious as Mother Nature extracts her revenge.

In the past China has thought little about deforestation to make way for its people and industry. In 2002 China embarked on a $2.4 billion regeneration programme in unprecedented effort to reverse the damage caused by their industrialisation. Wholesale logging has resulted in expanding deserts, chronic droughts and deadly flooding, which China hopes to stop by replanting 170,000 square miles – an area the size of California – over a ten-year programme.

1. Determines the availability of resources
2. Determines the objectives and business direction pertaining to export
3. Provides clear and focus guide on how to enter export markets
4. Minimises risk as company will be able to calculate any possible financial risks involves
5. Prioritises and segments export markets according to their ease of entry.

SWOT Analysis

It is important to have a export marketing plan which must be followed up by a SWOT analysis approach. The SWOT analysis must include the key internal (Strenghts and Weaknesses) and external factors (Opportunities and Threats) that are important in preparing the export marketing plan.

Strenghts

• Strong Company Resources
• High Product Potentials
• Well Coordinated
• 4Ps and 4Cs (Price, Place , Product, Promotion)/ (Customers’ Cost, Customers’ Convenience, Customers’ Choice, Communication)

Weaknesses

• Product quality – Low product potential quality
• Market accessability – Difficult market assessability
• Low A&P Budget – No advertising and promotional

Opportunities

• Requirements
• Wide spectrum
• Search Engine

Threats

• Cheap goods – Competitor are selling cheap goods
• Dumping – Competitors are dumping their goods overseas
• Certifications – High certification standards and requirements
• Technology – Technology disadvantage against other country such as India, China and Japan.
• GSP

Competitor’s Comparative Analysis

• Analysis on competitor’s strategies and activities both local and foreign in the target market

Know Your Market Needs

• Technology
• Packaging
• Labelling
• Branding Strategies theat suits their requirements
• Establishing linkages and networking with industry players

Positioning Your Products and Services

• Understanding the viability of your products/services in target export market
• Positioning your products in relation to your competitors
• Prepare market contingency plans to meet targeted export market demands, if needed.
• Segmentation of price according to competitor’s price, local demands and perception.
• Identifying suitable promotion tools in accordance with market needs.

Who Can Help

At Wexpot we can asssist you to optimise your efforts in achieving your export targets. You can contact us at 012-2911340 or email cj.hor@wexpot.com

• In May, exports declined 29.7% on an annualised basis while imports dipped 27.8% and the trade surplus stood at RM 10 bil.
• While selelct economic data from the group of G3 economies of the United States, Europeun Union and Japan showed that while a recovery was underway in some parts of the developed countries, the process still has a long way to go.
• Data showed the US economy shrank 1% in the second quarter although the pace of contraction was much slower than the previous quarters.
• Consumer confidence as measured by the US based Conference Board index showed a second  consecutive decline.
• Over in Japan, manufacturers increased production for a fourth month in June but the jobless rate rose to a six year high in the same month, affecting retail sales, which fell for decline in June.
• Japan’s labour minisstry also reported that wages in June fell 7.1% from a year earlier.
• In the euro-zone, consumer prices dropped 0.6% in July from a year ago while unemployment in the region increased by 3.17 million in the year to June.
• In the United States, initial jobless claims jumped 30,000 to 554,000 for the week ended July 18.
• While CLSA China purchasing manager’s index rose to 52.8 in July compared with 51.8 in June, economist in Malaysia believe that any recovery in exports will only be gradual since demand in G3 countries, which accounted for more than 60% of global demand, is still shaky.

For effective trade tool visit www.wexpot.com

The first quarter of the next century in East asia will see a contest for influence between Japan and China, fought on the battle-ground of economic growth. Eventually China will emerge as the dominant power: the size of its population and land area will ensure that. But this will only have started to become clear by 2020, for China has too many political hurdles over which it must jump for its economic progress to be easy or smooth. For the next century to become “Asia’s century”, in the way that the way that the nineeteenth was Europe’s and the twentieth has been North America’s, these two countries will have to form a relationship which enables both them and the newly industrialized nations of the region to prosper. In purely economic terms, as discussed earlier, the two giants should be natural powers. Both may be ancient cultures, with a vigorous and hardworking population, the other a relatively young growing one; one is a close ally of the world’s only superpower, the other is viewed with grave suspicion by the democratic world. Potentially both are very useful to each other, yet because of historic suspicious between the Chinese and Japanese, it will be extremely difficult for them to manage their relationship, however much it might seem in their mutual self-interest to do so.

MOODY’S Economy.com has mapped the geographic spread of the worst global downturn since the Depression. All of North America is in recession now. In Europe only Norway, Slovenia and Slovakia have avoided a similar fate, although Moody’s reckons these countries are on the brink of a downturn. Emerging Asia looks cheerier, although the small export-led economies of Singapore and Hong Kong are shrinking, as are Malaysia and Thailand. Even the BRICs are looking a bit diminished, with downturns in both Brazil and Russia. At least India and China are growing (the latter at a pace that is causing worries about overheating). Data for Africa are spotty but the continent’s biggest economy, South Africa, is in recession. The IMF expects global GDP to shrink by 1.4% this year, with rich countries’ economies contracting by around 3.8%.

• The narrow product range of East Asian Exports. (Japan for example, is really a successful exporter in only two main areas, consumer electronics and motor vehicles)
• Heavy dependence on the North American markets
• Weak infrastructure
• Dependence on imported raw materials, including energy
• Failure of the education system to generate original research
• Failure to develop service exports

Industries – What’s Hot, What’s Not

Hot

• Hospitality, Food Service & Tourism
• Personal services
• Professional & Business Services

Neutral

• Chemical and Plastics
• Consumer Goods
• Education and Training
• Food and Beverage
• Furniture and woodbase manufacturing
• Healthcare, Pharmaceutical and Biotechnology
• Oil and Gas, Mining & Energy
• Telecommunications & ICT
• Transportation & Logistics

Cold

• Automotive
• Construction, Property Development & Building Materials
• Electrical & Electronics
• Industrial & Commercial Products
• Retail
• Trading & Wholesaling

Why Export?

• To diversify markets and reduce risk
• To expand sources of revenue
• To enhance competitiveness through product improvement and economies of scale.

Are You Ready?

Before venturing into export markets, companies should consider:

Production Resources

• Secured sufficient raw materials
• Able to expand production capacity
• Multi skills and multi-lingual work force
• Able and manage original equipment manufacturer (OEM) production and/or Original Brand Manufacturer (OBM)
• Ability to cater for export demand
• Adequate supply of raw materials

Financial Resources

Internal

• Sufficient cash flow to sustain the export business (at least 3 months)
• Strong financial standing
• Strong financial support from banks and financial institutions

External

• Access to government financial incentives
• Commercial banks
• Deal effectively with different monetary systems

Human Resources

• Availibility of local staff
• Knowledgeable and experiences export staff
• Dependence on foreign staff
• Requiremnet of foreign expert/skilled workers

Marketing Resources

• Sufficient marketing collaterals that meet international standards
• Able to sell direct to buyers/importers either through personal contacts or appointed agents
• Work with buying houses, procurement agents and representative offices
• Knowledge in market entry requirements and market needs

Legal Resources

• Comply with international legal requirements
• Protection on intellectual Property Rights
• Understanding of Free Trade Agreements (FTA)