Exporting of Illinois goods and services garners more attention than importing products, components and services. Both are important to small companies and both are to be reckoned with, regardless of general opinion. World trade and commerce impact our economies, businesses and lives; and this economy is the new normal. During my service on the Illinois General Assembly's Trade Policy Task Force, downstate companies conveyed perspectives and information that focused on two drivers of decision making. The appointment afforded me the opportunity to listen and learn from a variety of firms and I am grateful for that. Opinions stated are strictly my own and are not intended to reflect the work of the task force.
DECISION DRIVER 1: TIME DEMAND
Sales to other markets are all about the precious value of time. Successful companies generate return on investments (ROI) and must manage growth along with many, many other things. Export requires a long term commitment and is compared against other uses of time and resources. Savvy business owners look at this puzzle right along with all other opportunities, making decisions about where to invest. It is about impact, return and opportunity cost[i] since time and other resources are limited.
Businesses may desire to export, understanding that diversity in general is a good thing. Wishes do not always fit with pragmatic capabilities, however. Export is not to be taken lightly. It is a significant business strategy, complete with the attending demand upon valued and limited resources. Besides the attractiveness of market diversification, other factors consistently place foreign trade on the list of possible growth strategies that firms consider:
Access to large markets
Access to developing markets
Competition and competitive strategies
Foreign exchange rates
Hedging[ii] against domestic markets
Added points about time constraints fall into the general categories of where to start and how to sustain initiatives. Third party resources help in these categories once they are found and relationships built. Since export strategies take time to develop, by the time that strategy becomes essential, it's too late to start.
DECISION DRIVER 2: PROFIT PURSUIT
While time is certainly a factor with importing goods, components and services, I found the primary attraction to be the "siren song[iii]" of significant cost savings. Ancient mythology is now replaced with "buyer beware" as the firms I talked with underscored their risk of cash-in-advance, fraud, inferior quality, excess inventory, transit snags and more. Owners felt compelled to consider imports in order to get lower costs, despite the need for greater vigilance, inspection, documentation, complexities and other time users. The drive to lower costs is a demanding task master! Third party service providers mitigate problems, but risk and cost remains with the importing company.
Small business ownership involves risk and it makes sense to me that owners take on the intriguing challenge of significant savings with "strings attached" (new suppliers = challenges to overcome) in the hope of pocketing some of the savings. Often competitors force this upon a business. Most articles approach trade details from the getting-ready-to-export view but remain informative to buyers as well.[iv]
After serving on the Trade Policy Task Force, I've come away with a new appreciation for the myriad of choices and factors that must be managed by the business owner. Developing global trading partners is a challenge and opportunity that will be approached differently by each company. Education and government services are helpful according to my contacts, but must remain flexible. Services and training that produce time-saving, cost effective results will be valued by the firms that I encountered.
[i] Opportunity Cost: "is thevalue(not a benefit) of a choice, relative to an alternative. When an option is chosen from twomutually exclusivealternatives, the opportunity cost is the "cost" incurred bynotenjoying the benefit associated with the alternative choice.TheNew Oxford American Dictionarydefines it as "the loss of potential gain from other alternatives when one alternative is chosen." Opportunity cost is a key concept ineconomics, and has been described as expressing "the basic relationship betweenscarcityandchoice."The notion of opportunity cost plays a crucial part in attempts to ensure that scarce resources are used efficiently.Opportunity costs are not restricted tomonetaryor financial costs: thereal costofoutput forgone, lost time, pleasure or any other benefit that providesutilityshould also be considered an opportunity cost." Source: Wikipedia
[ii] Hedging: "an investment made to limit loss." Source: Wikipedia
[iii] Siren Song: InGreek mythology, theSirens(Greeksingular:ΣειρήνSeirēn; Greek plural:ΣειρῆνεςSeirēnes) were dangerous creatures, who lured nearby sailors with their enchanting music and singing voices to shipwreck on the rocky coast of their island. Source: Wikipedia
[iv] Please see two of my previous articles for examples- 1) International Terms of Commerce and 2) Getting Paid for Foreign Sale. Both are instructional to buyers in addition to sellers and may be found at https://web.extension.illinois.edu/state/community/entrepreneurship/international_trade.php