While the advantages of exporting by far outweigh the disadvantages, small and medium size enterprises especially face some challenges when venturing in the international marketplace.

Extra Cost: Because it takes more time to develop extra markets, and the pay back periods are longer, the up-front costs for developing new promotional materials, allocating personnel to travel and other administrative costs associated to market the product can strain the meager financial resources of small size companies.

Product Modification: When exporting, companies may need to modify their products to meet foreign country safety and security codes, and other import restrictions. At a minimum, modification is often necessary to satisfy the importing country's labeling or packaging requirements.

Financial Risk: Collections of payments using the methods that are available (open-account, prepayment, consignment, documentary collection and letter of credit) are not only more time-consuming than for domestic sales, but also more complicated. Thus, companies must carefully weigh the financial risk involved in doing international transactions.

Export Licenses and Documentation: Though the trend is toward less export licensing requirements, the fact that some companies have to obtain an export license to export their goods makes them less competitive. In many instances, the documentation required to export is more involved than for domestic sales.

Market Information: Finding information on foreign markets is unquestionably more difficult and time-consuming than finding information and analyzing domestic markets. In less developed countries, for example, reliable information on business practices, market characteristics, cultural barriers may be unavailable.

Entering an export business requires careful planning, some capital, market know-how, access to quality product, competitive pricing strategy, management commitment and realizing the challenges and opportunities without them it is almost impossible to succeed in the export business. While there are no hard-and-fast rules that can help companies make decision to export and to become successful, understanding the advantages and disadvantages of exporting can help smooth entry into new markets, keep pace with competition and eventually realize profit.


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