Week 3: Trade Theories / Export Readiness

Question 1

Benefits of Exporting (For Firms)

Answer 1

• Access to additional / larger markets (increase sales income)
• Economies of scale (reduce unit costs)
• Product life cycle impact (products can be more valuable elsewhere)
• Reduce local market volatility and / or seasonality
• ‘Forward defence’ of domestic market
• Capitalise on government incentives and assistance

Question 2

Potential Risks of Exporting (For Firms)

Answer 2

• Hasty decision making
• Financial risks (e.g. currency fluctuations, payment delays)
• General business risks (e.g. scams)
• Political and legal risks

Question 3

Export Readiness

Answer 3

• A firm’s level of preparedness to do business in an export market
• Has characteristics that can be exploited to ensure success in an export venture

Question 4

3 Export Ready Characteristics

Answer 4

Competitive Advantage
- To overcome / outdo potential competition in the target market

Suitable / Adequate Resources

• Tangibles (e.g. finances, human resources, production facilities)
• Intangibles (e.g. brand name, knowledge, patents)

Clear Strategy / Commitment
- Relevant goals/objectives