Exporting is crucial to America’s economic health. Increased exports mean business growth, and business growth means bigger profits for U.S. companies — all of which ultimately results in more jobs for American workers. Yet only a small percentage of potential exporters take advantage of these opportunities. It is critical for more U.S. businesses to think globally.

Your decision to read this publication shows you are interested in exporting. You may have already discovered that your company is competing internationally because foreign-owned companies are competing with you in your “domestic” markets. The division between domestic and international markets is becoming increasingly blurred. In a world of 6.1 billion people, global communication networks, next-day airfreight deliveries worldwide and CNN, it no longer makes sense to limit your company’s sales to the local or even the national market. Your business cannot ignore these international realities if you intend to maintain your market share and keep pace with your competitors.

Making the decision to export requires careful assessment of the advantages and disadvantages of expanding into new markets. Once the decision is made to export, an international marketing plan is essential. This chapter presents the advantages and disadvantages of exporting, and offers a method to evaluate your company’s readiness to export. The remaining chapters in this publication guide you through the steps necessary to master the “trade game.”

Advantages and Disadvantages of Exporting

Consider some of the specific advantages of exporting. Exporting can help your business:

1. Enhance domestic competitiveness
2. Increase sales and profits
3. Gain global market share
4. Reduce dependence on existing markets
5. Exploit corporate technology and know-how
6. Extend the sales potential of existing products
7. Stabilize seasonal market fluctuations
8. Enhance potential for corporate expansion
9. Sell excess production capacity
10. Gain information about foreign competition

In comparison, there are certain disadvantages to exporting. Your business may be required to:

1. Develop new promotional material
2. Subordinate short-term profits to long-term gains
3. Incur added administrative costs
4. Allocate personnel for travel
5. Wait longer for payments
6. Modify your product or packaging
7. Apply for additional financing
8. Obtain special export licenses

These disadvantages may justify a decision to forego direct exporting at the present time, although your company may be able to pursue exporting through an intermediary. If your company’s financial situation is weak, attempting to sell into foreign markets may be ill-timed. The decision to export needs to be based on careful analysis and sound planning.

The Need for an International Marketing Plan

Behind most export success stories is a plan. Whether formally written or sketched out informally at a meeting with your management team, an international marketing plan is an essential tool to properly evaluate all the factors that would affect your company’s ability to go international.

An international marketing plan should define your company’s:

1. Readiness to export
2. Export pricing strategy
3. Reason for exporting
4. Potential export markets and customers
5. Methods of foreign market entry
6. Exporting costs and projected revenues
7. Export financing alternatives
8. Legal requirements
9. Transportation method
10. Overseas partnership and foreign investment capabilities
11. Corporate commitment to the exporting process

Creating an international marketing plan helps to define your company’s present status, internal goals and commitment, and it is also required if you plan to seek export financing assistance. Preparing the plan in advance of making export loan requests from your bank will save time and money. Completing and analyzing an international marketing plan helps you anticipate future goals, assemble facts, identify constraints and create an action statement. The plan also should set forth specific objectives, an implementation timetable and milestones to gauge your success.

The International Marketing Plan Workbook

The purpose of the International Marketing Plan Workbook is to prepare your business to enter the international marketplace. Ask yourself: Should I expand my company through exporting? Do I have any products or services I can export? This workbook will lead you step by step through the process of exporting your product to an international market.

The workbook is divided into sections. Each section should be completed before you start the next. After you have completed the entire workbook, you will be ready to develop an international marketing plan to export your product. The remaining chapters of this Guide will assist you in determining where and how to find the resources to begin exporting successfully.

Planning

Why complete this workbook and write a plan? Six reasons it will be worth your time and effort are:

1. Careful completion of this workbook will help evaluate your level of commitment to exporting.
2. The completed workbook can help you assess your products’ potential for the global market.
3. The workbook gives you a tool to help you better manage your international business operations successfully.
4. The completed workbook will help you communicate your business ideas to people outside your company. It is an excellent starting point for developing an international financing proposal.
5. Businesses are managed more successfully when operating from a business plan.
6. A plan forces the business to stay focused on primary objectives and provides a measuring tool of results as each step is achieved.

Can I hire someone to do this for me?

No! Nobody will do your thinking or make decisions for you. This is your business. If the marketing plan is to be useful, it must reflect your ideas and efforts.

Why is planning so important?

The planning process forces you to look at your future business operations and anticipate what will happen. This process better prepares you for the future and makes you more knowledgeable about your business. Planning is vital for marketing your product in an international marketplace and at home.

Any firm considering entering into international business transactions must understand that doing business internationally is not a simple task. It is stimulating and potentially profitable in the long-term but requires much preparation and research prior to the first transaction.

Entry into the international market may take as long as two years of cash outflow to generate profit. In considering products or services for the international market, a business needs to be:

1. Successful in its present domestic operation
2. Willing to commit resources of time, people and capital to the export program
3. Aware of and sensitive to the cultural differences in doing business in other countries

Approach your export operations in the same way you would your domestic operations — using sound business fundamentals. Developing an international marketing plan helps you assess your present market situation, business goals and commitment, which will increase your opportunities for success.

A marketing plan is a process, not a product. Planning is a continuous process. Your marketing plan must be revised on a continual basis as your knowledge increases about international markets. You will be surprised how much easier it is to update a marketing plan after the first one is written. Plus, after a revision or two, you will know more about your international business market opportunities.

Goal Setting

Identifying business goals can be an exciting and often challenging process. It is, however, an important step in planning your entry into the international marketplace. The following exercise is an additional step to help clarify your short- and long-term business goals.

Step 1: Define long-term goals.

1. What are your long-term goals for this business in the next 5 years? Examples: increase export sales by ___% annually or ___% market share or ___% profitability or return on assets.
2. How will the international market help you reach your long-term goals?

Step 2: Define short-term goals.

1. For your international business, what are your first year goals? Examples: select a sales/distribution outlet in the export markets chosen; develop relationships with agents/distributors; participate in trade shows or trade missions in chosen market(s).
2. What are your two-year goals for your international business products/services? Example: modify product for metric definition; expand international opportunities from initial penetration of a market to other similar markets.

Step 3: Develop an action plan with a timeline to reach your short-term goals.

Identifying Products with Export Potential

List the products or services your company sells. Then, write the reason you believe it has export potential and why it will be successful in the international marketplace. The reasons should be based on your current knowledge rather than research. Based on reasons for export success, select one or more products you believe might have the best prospects for exporting.

Step 1: Select the most exportable products to be offered internationally.

To identify products with export potential, you need to consider products that are successfully sold in the domestic market. The product should fill a targeted need for the purchaser in export markets according to price, value to customer/country and market demand. What are the major products your business sells? What product(s) do you feel have the best potential for international trade?

Step 2: Evaluate the product(s) to be offered internationally.

What makes your product(s) attractive for an overseas market? Why do you believe international buyers will purchase your company’s products?

Determining Your Company’s Export Readiness

Brainstorm a list of pros and cons for expanding your market internationally. Based on your current assumptions about your company and products, and any market knowledge, determine your probability of success in the international market.

Step 1: Why is your business successful in the domestic market?

Give specific reasons. What is your company’s annual growth rate?

Step 2: What are the competitive advantages of your products or business over other domestic and international businesses?

Step 3: What is your level of commitment and that of your company’s top management to expanding into international markets?

How much preparation time, planning and resources are you willing to commit to implementing an export program?

Industry Analysis

Step 1: Determine your industry’s growth for the next three years.

Talk to people in the same business or industry, research industry-specific magazines, attend trade fairs and seminars; use the National Trade Data Bank (NTDB) (www.stat-usa.gov).

Step 2: Research how competitive your industry is in global markets.

Utilize the NTDB; obtain import/export statistics from the Bureau of the Census, contact the U.S. Small Business Administration (SBA), the U.S. Export Assistance Center (EAC) (www.sba.gov/oit/export/useac.html) or the U.S. Department of Commerce (DOC) district office in your area.

Step 3: Determine your industry’s future growth rate in the international market.

Contact a U.S. EAC, Small Business Development Center (SBDC) or DOC country or industry desk in Washington, D.C.

Step 4: Research federal or state government market studies that have been conducted on your industry’s potential international markets.

Use the resources identified above.

Step 5: Find export data available on your industry.

Contact your SBA district office, the SBDC or Service Core of Retired Executives (SCORE) representative (www.score.org), or a U.S. Export Assistance Center.

Developing Your Export Marketing Plan

(Read chapters 2 and 3 of this guide before completing this section).

Step 1: Select the best countries to market your product.

Since the number of country markets to be considered by a company is very large, it is neither possible nor advisable to research them all. Your firm’s time and money are spent most efficiently by using a sequential screening process.

Your first step in this process is to select the most commercially attractive countries for your product. Preliminary screening involves defining the physical, political, economic and cultural environment. Research the NTDB for DOC Country Commercial Guides for each country in which there is a Foreign Commercial Service presence. In addition, the NTDB has Department of State country reports and the Central Intelligence Agency world report.

Using the categories below, select 3 countries you think have the best market potential for your product.

1. Review the market factors below for each country.
2. Research data/information for each country.
3. Rate each factor on a scale of 1-5 with 5 being the best.
4. Select a target market country based on your ratings.

Demographic/Physical Environment (Country/Rating)

• Population size, growth, density
• Urban and rural distribution
• Climate and weather variations
• Shipping distance
• Product-significant demographics
• Physical distribution and communication network
• Natural resources

Political Environment (Country/Rating)

• System of government
• Political stability and continuity
• Ideological orientation
• Government involvement in business
• Attitudes toward foreign business

Competitive Environment (Country/Rating)

• Other competitive offerings
• Uniqueness of your product/service
• Pricing of competitive products
• National economic and developmental priorities

Economic Environment (Country/Rating)

• Overall level of development
• Economic growth: GNP, industrial sector
• Role of foreign trade in the economy
• Currency: inflation rate, availability, controls,
• stability of exchange rate
• Balance of payments
• Per capita income and distribution
• Disposable income and expenditure patterns

Social/Cultural Environment (Country/Rating)

• Literacy rate, educational level
• Existence of middle class
• Similarities/differences in relation to home market
• Language and other cultural considerations

Market Access (Country/Rating)

• Limitations on trade: high tariff levels, quotas
• Documentation and import regulations
• Local standards and practices
• Patents and trademark protection
• Preferential treaties
• Legal considerations for investment, taxation, repatriation, employment, code of laws

Product Potential (Country/Rating)

• Customer needs and desires
• Local production, imports, consumption
• Exposure to and acceptance of product
• Availability of linking products
• Industry-specific key indicators of demand
• Attitudes toward products of foreign origin
• Competitive offerings

Local Distribution and Production (Country/Rating)

• Availability of intermediaries
• Regional and local transportation facilities
• Availability of manpower
• Conditions for local manufacture

Indicators of population, income levels and consumption patterns should be considered. In addition, statistics on local production trends, along with imports and exports of the product category, are helpful for assessing industry market potential. Often, an industry will have a few key indicators or measures that will help determine the industry strength and demand within an international market. A manufacturer of medical equipment, for example, may use the number of hospital beds, the number of surgeries and public expenditures for health care as indicators to assess the potential for its products. At this point, ask yourself what the projected growth rates for the three countries selected over the next 3-5 years will be.

Step 2: Determine projected sales levels.

Much of this information can be obtained from a trade association for your particular industry. What is your present U.S. market percentage? What are the projected sales for similar products in your chosen international markets for the coming year? What sales volume will you project for your products in these international markets for the coming year? What is the projected growth in these international markets over the next five years?

Step 3: Identify customers within your chosen markets.

What companies, agents or distributors have purchased similar products? What companies, agents or distributors have made recent requests for information on similar products? What companies, agents or distributors would most likely be prospective customers for your export products?

Step 4: Determine method of exporting.

How do other U.S. firms sell in the markets you have chosen? Will you sell direct to the customer? Who will represent your firm? Who will service the customers’ needs?

Step 5: Building a distributor or agent relationship.

Plan to travel to the country in question as many times as is necessary to build a successful relationship. Will you appoint an agent or distributor to handle your export market? Consider legal advice from the Export Legal Assistance Network (ELAN) (www.fita.org/elan). A free initial consultation is available by request through an SBA District Office, SBDC, SCORE or U.S. Export Assistance Center. At this point, there are a number of questions that must be answered. For example:

1. What facilities does the agent or distributor need to service the market?
2. What type of client should your agent or distributor be familiar with in order to sell your product?
3. What territory should the agent or distributor cover?
4. What financial strength should the agent or distributor have?
5. What other competitive or non-competitive lines are acceptable or not acceptable for the agent or distributor to carry?
6. How many sales representatives does the agent or distributor need and how often will they cover the territory?
7. Will you use an export management company to do your marketing and distribution for you? If yes, have you developed an acceptable sales and marketing plan with realistic goals you agree to?

Marketing Your Product or Service

Given the market potential for your products in international markets, how is your product or service distinguished from others? Is it more or less competitive?

1. What are your product’s advantages?
2. What are your product’s disadvantages?
3. What are competitive products’ advantages?
4. What are competitive products’ disadvantages?
5. What needs does your product fill in a foreign market?
6. What competitive products are sold abroad and to whom?

How complex is your product? What skills or special training are required to:

1. Install your product?
2. Use your product?
3. Maintain your product?
4. Service your product?

What options and accessories are available?

1. Has an aftermarket been developed for your product?
2. What other equipment does the buyer need to use your product?
3. What complementary goods does your product require?

If your product is an industrial good:

1. What firms are likely to use it?
2. What is the useful life of your product?
3. Is use or life affected by climate? If so, how?
4. Will geography affect product purchase. For example, will transportation problems exist?
5. Will the product be restricted abroad by tariffs, quotas or non-tariff barriers?

If the product is a consumer good:

1. Who will consume it? How frequently will the product be bought?
2. Is consumption affected by climate?
3. Is consumption affected by geography?
4. Will the product be restricted abroad by tariffs, quotas or non-tariff barriers?
5. Does your product conflict with traditions, habits or beliefs of customers abroad?

Support Functions

To achieve efficient sales offerings to buyers in the targeted markets, you should address several concerns regarding products, literature and customer relations.

Step 1: Identify product concerns.

Can the potential buyer see a functioning model or sample of your product that is substantially the same? What product labeling requirements must be met? (Metric measurements, AC or DC electrical, voltage, etc.) Keep in mind that the European Community requires three languages on all new packaging and Mexico requires labels in Spanish under the North American Free Trade Agreement. When and how can product conversion requirements be obtained? Can product be delivered on time as ordered? This is especially important since letters of credit are unforgiving when it comes to delivery promise dates.

Step 2: Identify literature concerns.

If required, can you produce product literature in a language other than English? Do you need a product literature translator to handle the technical language? What special concerns should be addressed in sales literature to ensure quality and informative representation of your product? Keep in mind that translations should reflect the linguistic nuances of the country where the literature will be used.

Step 3: Identify customer relations concerns.

What is delivery time and method of shipment? What are payment terms? What are the warranty terms? Will inspection/acceptance be required? Who will service the product when needed? How will you communicate with your customer (through a local agent, fax, e-mail)? Are you prepared to give the same order and delivery preference to your international customers that you give to your domestic customers?

Marketing Strategy

In international sales, the chosen “terms of sale” are very important. Where should you make the product available: at your plant, at the port of departure, landed at the port of importation or delivered free and clear to the customer’s door? The answer to this question involves determining what the market requires and how much risk you are willing to take.

Pricing strategy depends on “terms of sale” and also considers the value-added services of bringing the product to the international market.

Step 1: Define international pricing strategy.

How do you calculate the price for each product? What factors have you considered in setting prices? Which products are very sensitive to price changes? How important is pricing in your overall marketing strategy? What are your discount policies? What terms of sales are most appropriate for your export product?

Step 2: Define promotional strategy.

What advertising materials will you use? What trade shows or trade missions will you participate in, if any? What time of year and how often will representatives travel to foreign customer markets?

Step 3: Define customer services.

What special customer services do you offer? What types of payment options do you offer? How do you handle merchandise that customers return?

Sales Forecast

Forecasting sales of your product is the starting point for your financial projections. The sales forecast is extremely useful, so it is important you use realistic estimates. Remember that sales forecasts show the expected time the sale is made. Actual cash flow will be affected by delivery date and payment terms.

Step 1: Identify the units-sold for markets 1, 2 and 3 for each year.

Step 2: Identify the sales price per unit for products sold in markets 1, 2 and 3.

Step 3: Calculate the total sales for each of the different markets

Step 4: Calculate the sales (all markets) for each year.

Step 5: Calculate the five-year total sales for each market.

Cost of Goods Sold

The cost of goods sold internationally will differ from cost of goods sold domestically if significant product alterations are required. These changes will affect costs in terms of material, and direct and indirect labor costs.

To ascertain the costs associated with the different terms of sale, it will be necessary to consult an international freight forwarder. For example, a typical term of sale offered by a U.S. exporter is cost, insurance and freight (CIF) to the port of destination. Your price can include all the costs to move the product to the port of destination and other costs necessary to complete the export transaction. However, many of these costs are incurred by the exporter. For example, you can price your product Ex Works and let your customer worry about getting the product to their destination from your factory or warehouse. However, most exporters arrange many of the details (transportation, insurance, etc.) for their customers. These costs should be identified separately on the invoice and passed through with little or no markup.

A typical cost work sheet will include some of the following factors. These costs are in addition to the material and labor used in the manufacture of your product:

• Export packing
• Forwarding
• Container loading
• Export documentation
• Inland freight
• Consular legalization
• Truck/rail unloading
• bank documentation
• Wharfage
• Dispatch
• Handling
• Bank collection fees
• Terminal charges
• Cargo insurance
• Ocean freight
• Bunker surcharge
• Demurrage
• Courier mail
• Telex
• Import duties
• Tariffs

To complete this section, you will need to use data from sales forecasts. Certain costs related to your terms of sale may also have to be considered. For example, include cost of capital if you are extending payment terms.

Step 1: Identify the units-sold for markets 1, 2 and 3 for each year.

Step 2: Identify the cost per unit for products sold in each of the three markets.

Step 3: Calculate the total cost for each of the products (units sold times cost per unit).

Step 4: Calculate the cost of goods sold — all products for each year.

Step 5: Calculate the five-year cost of goods for each market.

International Marketing Expenses

To determine marketing costs for your export products, you should include costs that apply only to international marketing efforts. For example, costs for domestic advertising that do not pertain to the international market should not be included. Examples of most typical expense categories for an export business are listed below. Some of these expenses will be first-year start-up expenses; others will occur annually.

Step 1: Review the following expenses that are likely to be incurred by your international business:

Legal fees, accounting fees, promotional material, travel, communication, equipment/fax/PC modem, advertising allowances and promotional expenses (e.g., trade shows, etc.). If there are other expense categories not listed, identify them as “other expenses.”

Step 2: Estimate your cost for each expense category.

Step 3: Estimate any domestic marketing expense included that is not applicable to international sales.

Subtract these from the international expenses.

Step 4: Calculate the total for your international overhead expenses:

Total expenses less domestic expenses (if any) = total international marketing expenses.

Projected Income Statement — Year 1 to 5, All Markets

You are now ready to assemble the data for your projected income statement. This statement will calculate your net profit or net loss (before income taxes) for each year.

Step 1: Identify the sales for each year.

Step 2: Identify the cost of goods sold for each year.

Step 3: Calculate the gross margin for each year (sales minus cost of goods sold).

Step 4: Calculate the operating expenses specifically associated with the international marketing program for each year.

Step 5: Allocate the international division’s portion of the firm’s overall domestic operating expenses:

This would include international’s portion of lighting, office floor space, secretarial pool, etc.

Break-Even Analysis

The break-even is the level of sales at which your total sales exactly cover your total costs, which includes non-recurrent fixed costs and variable costs. This level of sales is called the break-even point (BEP) sales level. In other words, at the BEP sales level, you will not make a profit. If you sell more than the BEP sales level, you will make a net profit. If you sell less than the BEP sales level, you will have a net loss.

To calculate the break-even point, costs must be identified as being either fixed or variable. Fixed expenses are those that the business will incur regardless of its sales volume — they are incurred even when a business has no sales — and include expenses such as rent, office salaries and depreciation. Variable expenses change directly and proportionately with a company’s sales and include such expenses as cost of goods sold, sales commissions, etc. Some expenses are semi-variable in that they vary somewhat with sales activity but are not directly proportionate to sales. Semi-variable expenses include utilities, advertising and administrative salaries. Semi-variable expenses ideally should be broken down into their fixed and variable components for an accurate break-even analysis. Once a company’s expenses have been identified as either fixed or variable, the following formula is used to determine its break-even point:

Break-Even Point: Total Fixed Expenses – Total Variable Expenses = Sales Volume

Note: In addition to a break-even analysis, it is highly recommended that a profit and loss analysis be generated for the first few actual international transactions. Since there are a great number of variables relating to costs of goods, real transactions are required to establish actual profitability and minimize the risk of losses.

Timetable

You will need to work on your timetable periodically as you progress in the workbook. The purpose is to ensure that key tasks and objectives are identified and completed to ensure accomplishment of your stated goals.

Step 1: Identify key activities.

Review other portions of your marketing plan to compile a list of tasks that are vital to the successful operation of your business. Be sure to include travel to your chosen market as applicable.

Step 2: Assign responsibility for each activity.

For each identified activity, assign primary responsibility for the completion of that activity to one person.

Step 3: Determine scheduled start date.

For each activity, determine the date when work will begin. You should consider how the activity fits into your overall plan as well as the availability of the person responsible.

Step 4: Determine scheduled finish date.

For each activity, determine when the activity must be completed.

International Marketing Plan Summary

Step 1: Verify completion of previous pages.

You should have finished all the other sections in the workbook before continuing any further. You are now ready to summarize the workbook into an exporting plan for your company.

Step 2: Identify your international marketing plan audience.

What type of person are you intending to satisfy with this plan? A banker? The company’s chief executive officer? The summary should briefly address all the major issues that are important to this person. You may want to have several different summaries, depending on who will read the marketing plan.

Step 3: Write a one-page summary.

You will now need to write no more than a page summarizing all the previous work you have completed in this workbook. Determine which sections are going to be most interesting to your reader. Write one to three sentences that summarize each of the important sections. Keep in mind that this page will probably be the first read by this person. It is extremely important the summary be brief yet contain the information most important to the reader. This section should make the reader want to read the rest of your plan. Summarize the sections in the order that they appear in the workbook.

Preparing an Export Price Quotation

Setting proper export prices is crucial to a successful international sales program; prices must be high enough to generate a reasonable profit, yet low enough to be competitive in overseas markets. Basic pricing criteria — costs, market demand and competition — are the same for domestic and foreign sales. However, a thorough analysis of all cost factors going into producing goods for export, plus operating expenses, result in prices that are different from domestic ones (remember freight costs, insurance, etc., are pass-through costs identified separately and include little or no markup).

“Marginal cost” pricing is an aggressive marketing strategy often used in international marketing. The theory behind “marginal cost” concludes that if the domestic operation is making a profit, the non-recurrent annual fixed costs are being met. Therefore, only variable costs and profit margin should be used to establish the selling price for goods that will be sold in the international market. This strategy is used for domestic pricing as well. This results in a lower price for international goods yet maintains the profit margin. The risk of this strategy becomes apparent when the domestic operation becomes unprofitable and cannot cover the fixed costs, as each incremental sale could result in a larger loss for the company. This is a complex issue that can yield substantial benefits to a company with manageable risks. Some effort should be made by management to understand this pricing strategy.

Cost Factors

In calculating an export price, be sure to take into account all the cost factors for which you, the exporter, are liable.

1. Calculate direct materials and labor costs involved in producing the goods for export.
2. Calculate your factory overhead costs, prorating the amount of overhead chargeable to your proposed export order.
3. Deduct any charges not attributable to the export operation, especially if export sales represent only a small part of total sales.
4. Allow yourself a realistic price margin for unforeseen production costs, operating expenses, unavoidable risks and simple mistakes that are common in any new undertaking.
5. Also allow yourself a realistic profit or mark-up.
6. Be sure operating expenses are covered by your gross margin. Some of these expenses directly tied to your export shipments may include:

• Travel expenses
• Taxes*
• Catalogs, slide shows, video presentations
• Rent*
• Promotional material
• Insurance*
• Export advertising
• Interest*
• Commissions
• Provision for bad debts
• Transportation expenses (usually pass-through costs)
• Market research
• Packing materials
• Credit checks
• Legal expenses*
• Translation costs
• Office supplies*
• Product modification
• Patent and trademark fees*
• Consultant fees
• Communications*
• Freight forwarder fees (usually pass-through costs)

*These items will typically represent the expenses of the total operation, so be sure to prorate these to reflect only the operating expenses associated with your export operation.

Other Factors To Consider

Market Demand

As in the domestic market, product demand is the key to setting prices in a foreign market. What will the market bear for a specific product or service? What will the estimated consumer price for your product be in each foreign market? If your prices seem out of line, try some simple product modifications to reduce the selling price, such as simplification of technology or alteration of product size to conform to local market norms. Also keep in mind that currency valuations alter the cost of goods. A good pricing strategy should accommodate fluctuations in currency, although your company should quote prices in dollars to avoid the risks of currency devaluations.

Competition

As in the domestic market, few exporters are free to set prices without carefully evaluating their competitors’ pricing policies. The situation is further complicated by the need to evaluate the competition’s prices in each foreign market an exporter intends to enter. In a foreign market that is serviced by many competitors, an exporter may have little choice but to match the going price or even go below it to establish a market share. If, however, the exporter’s product or service is new to a particular foreign market, it may be possible to set a higher price than normally charged domestically.

This chapter appeared in the book Breaking Into the Trade Game. 2004.