Import And Countertrade Case Study

Import and Export / Countertrade

In today’s business world, many smaller companies that specialize in small niche markets have trouble surviving in their home country. Exporting has proven to be the answer to maintaining the survival of these businesses. Morgan Motors, Wadia, and Malden Mills are just three examples of companies that specialize in smaller niche markets. Although these niche-based businesses are successful, their niche markets are too small in any one given area, and without exporting they would potentially collapse.

According to Hill (2010), Morgan Motors exports approximately 70 percent of their production line. This means that roughly only 30 percent of their production line is sold in their home country of the United Kingdom.

According to Hill (2010), 70 to 80 percent of Wadia’s sales come from the overseas market. This means that only between 20 to 30 percent of their niche compact disk player market is in their home country, the U.S. With roughly eight out of ten products being sold abroad, it is easy to see how Wadia would have trouble staying afloat if business was conducted solely in the U.S. market. Although not stated in the case study, it can be reasonably assumed that Wadia is also importing several electronic components for the product line. Just like the case with Morgan Motors, importing specific components allows Wadia to focus innovation and specialty on their compact disk players, rather than on highly technical electronic components. This alone would increase the cost per unit due to the requirement of having a department and employees that were highly skilled in the development and production of electronic components. Other costs savings would be similar to those mentioned in the Morgan Motors example.

However, it is much more complex than this, and many barriers or impediments may exist in the exporting process. There are obviously cultural barriers that exist in different foreign environments, such as different languages, different currencies, different standards, different laws, and different

Exports can improve a country’s position in the balance of trade (Barrett, 1990). When a country exports, they gain access to foreign exchange resources. Additionally, exports enable a county to sell the excess production capacity. This will enhance the economy and will promote global expansion for the local businesses. Exports will also potentially bring stability to otherwise fluctuating market demands. Because of these reasons, local and national government are attracted to exports because their local businesses can gain a share in the global market.

Conclusion

Morgan Motors and Wadia are just two examples of companies that would not survive with exporting. There are many benefits to exporting such as increasing sales and profits, reducing the risks of being bound only to the domestic market, balancing growth across multiple markets, and potentially lowering unit costs, and possibly achieving economies to scale. Therefore, these types of companies choose to export for these reasons as well as for gaining the continued ability to survive in the