The advantage of exporting
Your company’s reasons for considering exporting are very compelling; here are a few key advantages of exporting:
Increase sales and profits. Selling goods and services to markets the company has never had before drives sales and increases revenue. In the long run, the additional overseas sales will boost overall profitability once export development costs are covered.
Enhance domestic competitiveness. Most companies are already competitive in the domestic market before entering the international stage. Being competitive in the domestic market helps companies acquire some strategies that will help them in the international arena.
Gain global market share. By going international, companies will participate in the global market and take a share of the huge international market.
diversification. Selling to multiple markets allows companies to diversify their business and spread risk. The company will not be bound by changes in the domestic market or the business cycle of a particular country.
Lower unit cost. Capturing additional foreign markets often expands production to meet foreign demand. Increasing production often reduces unit costs and leads to greater utilization of existing capacity.
Compensate for seasonal demand. A company whose product or service is only used in a particular season in the country may be able to sell its product or service in foreign markets in different seasons.
Create potential for company expansion. Companies involved in the export business usually have to have a presence or a representative office in the foreign market. This may require additional staff, leading to expansion.
Sell excess capacity. Companies that overproduce for any reason may be able to sell their products in foreign markets without being forced to give deep discounts or even dispose of their excess production.
Gain new knowledge and experience. Going international can generate valuable ideas and information about new technologies, new marketing techniques and foreign competitors. The proceeds can help the company’s domestic and foreign operations.
Extend the product life cycle. Many products go through different cycles, i.e. introduction, growth, maturity and decline phases, i.e. the end of their utility in a particular market. Once a product reaches its final stage, i.e. matures in a given market, the same product can be introduced into different markets where the product has never been marketed.
Disadvantages of exporting
“”This all sounds great,”” you might be thinking, “”but easier said than done.”” You’re right — exporting isn’t an easy, quick way for businesses looking for long-term, sustainable success solution. But for those committed to growing into successful exporters that are internationally competitive, these disadvantages pale in comparison to the opportunities offered by international trade.
Here are some common downsides of exits I’ve heard of, and the myths surrounding them.
Exporting is risky.
It’s true – it’s certainly a risk! International trade is more complicated than sticking to the domestic market; however, the same is true on the other hand. When you don’t try to export, you limit your company to 5% of your addressable market because it’s too difficult or too risky.
And in some markets, such as Canada, the risks are nearly identical to those of selling in the US. Every international market is different, and if exporters make use of available resources, perceived risk can be reduced or eliminated.
Tax considerations when exporting
Depending on whether you sell to other European Union (EU) countries or export your goods outside the EU, you will have different VAT responsibilities.
If you sell goods to other countries in the EU, you must keep records and submit details of those sales on your VAT return. If you have high sales to EU countries, you must complete the Intrastat Supplementary Declaration.
If you sell products to countries outside the EU, you must keep documents that can serve as export certificates. These must be determined:
exporter
customer
Goods and their value
export destination
Mode of transportation and route.
In both cases, VAT on most goods you export is zero-rated. You should check with HM Revenue and Customs (HMRC).
