Concept of Export Business and Market Environment - Coursework Example

Export Management Name Institutional Affiliation Date Introduction Export business is one of the most lucrative ventures in the business world. Apart from widening one market, export business can lead to expansion of one’s profit margin. However, such a venture can be risky if careful forecasting is not conducted. The purpose of this essay is to discuss key concepts in export business. They include: market and business environment, market segmentation and chain distribution. In addition to this the essay dissects the likely hindrances to successful export venture and the issues an exporter must consider before initiating such a business. Concept of Business and Market Environment In marketing, the term business environment is used to define both the forces and factors that have an impact on the ability of a company to sustain a productive relationship with their customers (Cherunilam 2010). These factors and forces fall in three levels. The first level entails the minor internal forces in the company that hamper its basic operation. The second category is called the meso environment. The Macro environment captures wider forces in the society up to and beyond the national level that affect the operation of the business. The macro factors are major determinants and factors that ought to be taken into consideration in any export business. From the definition of a business environment it is clear that the relationship that a company fosters with its customers is indispensable in determining the success or failure of a business (Mathur, 2008). Thus, in order to maintain a favourable and healthy relationship a business ought to evaluate the collection of factors that have an effect on the operation of a business. In order to get an insight into the business and market environment an exporter needs to collect a series of pieces of information. The first piece of information relates to demographic and social changes. An exporter needs to know the societal changes that are more likely to have an impact on the business. Demographic changes relate to population. An increase in the population, change in its structure may favour or affect negatively thriving of a business or purchase of given products. For instance, a population structure that has more elderly people than the young favours demand for medical services and their allied products due to the increased demand of medical services. The second factor that one needs to find out is the political changes in the country. Political changes, as they occur, have a huge influence on public spending due to taxation laws, policies and the extent to which the law protects the consumers. The third and most important factor that one needs to know is economic trends. This includes studying the economic growth rate, rise and fall of inflation and their inherent impact on consumer spending. For instance, the economic recession of 2007 had grave impact on the economic growth. Such recession led to downfall of economies, a factor that consequently affected negatively the purchasing power, consumer spending, inflation, and investment. Market Segmentation and Distribution Channels In marketing the term market segmentation refers to the process of subdividing the market in target into sub categories of countries, consumers, or businesses that share similar priorities and needs (Dibb, S. et al., 2013). .Once the market is subdivided into such subsets; strategies are designed to oversee the implementation of the market segmentation itself. The value of market segmentation lies in its unique ability to help the business identify potential customers and position itself for achievement. Marketing segmentation can be classified under various categories .The first one is demographic segmentation that relies on population data to subdivide the market. Geographic segmentation adopts the segmentation based on the physical location of the market e.g. a country, region, city, town, or village. For instance, in a region where the culture is biased towards consumption of a particular type of food that region can be segmented on the latter criteria. The subsets of the market can also be based on a people’s attitude, feelings, or rate of usage of a product or loyalty towards a given company or their product. The other form of segmentation is based on a people’s lifestyle. This is called psychological segmentation. A researcher in this case, finds out the tastes and preferences of people from a given community and then gives a tentative on their lifestyle. Based on their lifestyle one can then decide what they consume most, what their needs are and their purchasing trends... Distribution Channels, on the other hand, refer to the path that a product passes through form the vender to the customer. It can be a direct transaction or through middlemen like wholesalers, retailers, agents, or distributors. The item, as it passes from one chain to the next, adds up its cost until it reaches the final consumer. In market segmentation, some factors ought to be looked at. One is how the segmentation relates to purchase or rather the use of the products. This is termed as relevance. Closely linked to this is accessibility which implies that the new outlets or distribution channels must be within reach of the consumers. The other crucial factor is measurability. This means that the markets being targeted must be measurable and in addition to this have the capability to be monitored. The last issue to consider is the productivity of the segmentation process. The Kind of Information an Exporter Would Need to Collect to Understand Market Segmentation and Distribution Channels According to Paul & Aserkar (2008), an exporter needs to collect information on various items in order to understand market segmentation and distribution channels. One of them is the behavioural characteristics of the given market. It includes an analysis of the people’s lifestyle and how that influences their spending and purchasing power. The next item that one needs to know is the demographic trends. These can be attained from census reports, statistical data, and population projections. Population data gives crucial information on age structure and size that can be used to project the demand for given products. Similarly, the geographical and psychological differences that exist among various people of the world. The world population encompasses people from diverse backgrounds whose cultures are different and this factor can largely affect the distribution and market segmentation. Issues an Exporter must Consider Financial issues In developing an export strategy, there several financial issues that one ought to look at one of them is the capital required to carry out export of goods/starting up of new business abroad and other related costs (Cook, Alston & Raia 2012). This is a costly venture and a prospective firm needs to be aware of these and find adequate resources for the same. For instance, this process will involve additional operation cost (e.g. marketing costs in the new destination).These are additional expenses to the current ones incurred in the current business. Other costs due to increased staffing at the sales department, support staff and even training cost will shoot the capital high thus making it rather expensive business venture. The cost of running such a firm may go high because of revenue that may vary from one country to the next based on their revenues laws. An exporter thus needs to forecast the expected expenditure after a careful analysis of all the liabilities and source for the funds needed before engaging in the business. Export Practicalities and Technicalities Exporting products is poised to have encounter given hurdles. One if one lacks information about the market this can lead to loss of sales. At times, it is not necessarily the failure of the business to research widely but unavailability of sales information in the target country. Worse still, at times a researcher may collect inaccurate information that is potentially going to affect the business negatively. On the other hand, there arise technicalities with regard to documentation requirements. Some legislative pieces in some countries may be hostile to foreign business since they fathom it as potentially competitive to the local business. In such isolated cases, it becomes extremely hard to register a firm or conduct free and easy trade across the countries. Other technicalities regard to how external business is regulated by the home country. Where the home country has put in place stringent measures and high tariffs on exports it becomes an uphill task to conduct both business and sustain its growth (Cook 2001). An exporter ought to also be aware of the attitude of foreign government towards given exports. In some cases, foreign governments may have positive attitude and this will automatically boost the business. In a case where the latter is negative, the governments tend to be biased towards those businesses. This negative attitude often trickles down to the kind of laws they would make. More often, in the presence of such an attitude, biased laws are made whose goal is to curtail foreign trade. An exporter should not, therefore, assume the attitude of the foreign government as it is a great determinant in how successful a business would be. The other technicality involved is the attitude of the foreign public. This is either towards the products on sale or the company the country form which that product is made. In some countries, people (for some reason) have a poor attitude towards products from some countries. This is due to history or generalization pegged on rumours. This whole mentality needs to be altered through either rebranding or marketing to weed out the negative impact. Conclusion In summary, the article has examined the concepts of “business and market environment”, “market segmentation and chain distribution” and how the aforementioned factors relate to export management. The definition of each concept and explanation above is followed with a discussion on information that an exporter ought to know in relation to the concept discussed. The essay further expounds on the financial issues, export technicalities, as well as practicability that likely to be experienced by a potential exporter. References Top of Form Cherunilam, F. (2010). International trade and export management. Mumbai [India], Himalaya Pub. House. http://site.ebrary.com/id/10415378. Bottom of Form Top of Form Cook, T. A. (2001). The ultimate guide to export management. New York, AMACOM. http://search.ebscohost.com/login.aspx?direct=true&scope=site&db=nlebk&db=nlabk&AN=62882. Bottom of Form Top of Form Cook, T. A., Alston, R., & Raia, K. (2012). Mastering import & export management. New York, American Management Association. http://www.aspresolver.com/aspresolver.asp?BIZP;2647786. Bottom of Form Dibb, S., and Simkin, L. (2013). Market Segmentation Success Making It Happen!Hoboken, Taylor & Francis. http://public.eblib.com/choice/publicfullrecord.aspx?p=668631. Top of Form Mathur, U. C. (2008). International marketing management text and cases. New Delhi, IN, Sage. http://public.eblib.com/choice/publicfullrecord.aspx?p=409030. Bottom of Form Top of Form Paul, J., & Aserkar, R. (2008). Export import management. Oxford, Oxford University Press. Bottom of Form Read More