A Comprehensive Guide to Starting and Operating an Exporting Business

This report provides a comprehensive guide to starting an exporting business, covering the fundamental aspects of international trade. It begins with an introduction to exporting and importing, outlining their benefits and drawbacks, and comparing merchandise and service trade. The guide then delves into methods for accessing international markets, including franchising, licensing, and joint ventures, along with their respective advantages and disadvantages. It explains how businesses, particularly SMEs, can leverage these methods to expand their operations globally. The report also explores how to secure deals in exporting and importing, detailing essential documentation and procedures. The analysis includes a comparison of merchandise and service imports and exports, highlighting their differences. The guide concludes by summarizing the key takeaways, emphasizing the importance of understanding the intricacies of exporting and importing for business growth. This resource, along with other academic materials, is available on Desklib to assist students in their studies.

Exporting is a procedure in which an organisation or a nation sell their products to
foreign countries in order to gain revenue and maintain the balance of economy. This
concept has various benefits which are mentioned as follows:
• Organisations can gain huge market share in international market by exporting
the goods and services.
• Businesses can also earn increased sales revenue and profit by exporting in
countries which has high value of currency.
• Organisations can also compensate for the seasonal demands which they face
while only operating in domestic market.
Apart from above benefits, there are various limitations to export as well which are
mentioned as follows:
• Businesses and the nation has to face financial risk as the economic condition
of the country in which products and services exported is not certain.
• Licensing documentation is also a limitation of the process of exporting which
restricts the company from entering into internal market.
• Small companies have to fulfil various governmental requirements before
exporting their products which involves high cost and time.
INTRODUCTION
Trading overseas is a procedure of exporting and importing the services and goods in
international business environment. The main aim of this brochure guide is to build an
understanding about the ways by which an exporting business can be started. This
brochure guide includes pros and cons of importing and exporting along with their
comparison with merchandise. Methods of taping international markets are also analysed
in their brochure along with their pros and cons.
Advantages and disadvantages of importing and exporting and how to secure a deal
Importing is a procedure of procuring products and services from foreign economy to the
local economy. This concept helps an economy in maintaining the balance of trade and
brining new and exciting products to the economy. There are various advantages to this
procedure which involves:
• Products can be procured at low costs and can sold at higher prices by attaining
high margin of profit.
• Small businesses can procure raw materials and labour at lower costs and can
initiate production which will result in low cost of manufacturing.
• There are various countries which provide the facility of tax concession which
can be used by the small businesses by which they can procure high quality of goods at
lower rates and lower taxation.
• Government of developed countries such as United Kingdom even provides
supports to small companies in order to establish their business by importing goods.
Along with above merits, various demerits to this procedure of import also exists which
are:
• When organisations tend to import goods and services from other nations then the
problem of unemployment increases as the labour of local country will not have
opportunity to produce the goods which are imported.
• Businesses have to pay heavy GST and other forms of taxes on the imported
goods which decrease their profit margin.
How to Start an Exporting Business

Hence, as per the above analysis, there is a vast difference between the merchandise
import and exports, as well as service trading. However, there are necessary
documentations which are required in trading of merchandises.
The concept of Export is broadly classified into two categories which are direct and
indirect exporting which helps in the procedure of exporting merchandise services. Direct
exporting allows to sell products and services to the end user which has benefit of
eliminating any intermediator charge but also has a limitation of lacking skills. On the
other hand, indirect export involves selling the product or service to an intermediator in
their own country. This exporting technique involves low risk and cost but it also limits
the profit margins as it involves intermediator costs.
The above deals of exporting and importing can be secured by attaining appropriate
license from government and fulfilling all the documents required which are letter of
credit, packing list, commercial invoice, terms of payment, customs document etc.
Explanation of differences between merchandise as well as service imports and exports
Merchandise and service imports and exports are necessary for an organisation which is
willing to enter international market. Furthermore, it is necessary to differentiate such
trades in order to get effective insight onto the nature and scope of such imports and
exports.
Hence, in context of the company, the difference between merchandise and service
imports and exports are elaborated below:
BASIS MERCHANDISE
IMPORTS AND EXPORTS
SERVICE IMPORTS AND
EXPORTS
Meaning
It appropriately refers to
exports and imports of
tangible goods, which could be
acquired or sold within
different country. For instance,
Barclays could offer some
product to a client outside
United Kingdom, such as a
new gadget for internet
banking by the company.
In contrast to merchandises,
trading of services are the
intangible exchange. In this
relation, a prominent example
could Barclays paying to the
company for import of the
service, such as a professional
coming to the firm to provide
their service from another
country.
Scope
A rather narrower scope is
shared by this kind of import
and export, as there are not
much appropriate and
tangible products that could
effectively be dealt by the
organisation.
In comparison, service
imports and exports have a
wider scope, as there are
several services, such as
infrastructural development,
professional training,
technological installations and
so forth could appropriately
be traded in exchange for
money.
Cost
The cost incurred in
manufacturing and trading
merchandises is quite high,
as it requires appropriate and
effective acquisition of raw
materials, investment into
development processes as
well as appropriate and
effective trading norms.
This is a rather simple
procedure as a specific service
is being traded within the
same, which cuts up operating
cost of the organisation, as
there are no procedures of
product development.
Moreover, in context of
import and exports, it does not
require majority of formalities
to be fulfilled which are
necessary for merchandise

Methods by which SMEs can tap into international markets
Businesses whether small, medium or large has few ways by which they can operate in
international market and enhance their market share and increase their profit making
ability. Few of these ways are franchising, licensing and joint venture.
Franchising – This is an agreement between two parties where franchiser allows
franchisee to use its brand name and logo and sell goods and services under their name.
This method bounds both the parties in a contract must followed. Franchisee in this
method is bound to maintain the quality of the company as it is important to enhance the
brand equity and image.
Licensing – Similar to franchising, the method of licensing also involves an agreement
between two parties which allows licensee to access the patent and other trade secrets
against which they get royalty value. This agreement does not bound licensee to maintain
any kind of quality of the products.
Joint venture – In this method of tapping into international market requires to
organisations of different regions to agree to work together on a project which can benefit
both the entities. The method is a kind of partnership which is hold for a pre decided time
in order expand the boundaries of the business operations.
Comparison of the methods by which SMEs can tap into international markets along
with their pros and cons
Small and medium enterprises can tap into international markets by using the methods
of licensing, franchising and joint venture.
Franchising Licensing Joint venture
Pros
Affordable method
which does not require
to pour ample funds.
Also, there is a
moderate risk
involved.
Organization can
capture high market
share as they have local
market information.
Also, there is low risk
involved.
Organizations can enjoy
combined expertise and more
resources. Also risk is shared
between two organizations
equally.
Cons
There is a huge threat
of reducing brand
image and equity if the
quality by the
franchisee is not
maintained.
Issue of non payment
of royalty can arise
which will result in
losses.
If a small medium enterprise
adopts the method of Joint
Venture, then they have to face
the issue of rigidity. It is
common to experience unequal
involvement due to which risk
can be increased.
Apart from above differences, all these methods have a similarity which is it allows
small organisations an opportunity to grow and develop into international market.
CONCLUSION
This brochure guides concludes that the process of exporting and importing has its own
benefits and limitations which facilitates businesses to grow and enter into international
markets. There are other various methods for SMEs which can help them entering into
global market including licensing, franchising and joint venture.
REFERENCES
LiPuma, J. A., 2012. Internationalization and the IPO performance of new ventures.
Journal of Business Research. 65(7). pp.914-921.