Question

explain the "pitfalls of exporting" and the "strategic role" of foreign factories. Which of the two is easier? Make sure you use the textbook and business journals to support your thoughts.

Answer 1

According to Daley and Scott (2000), exporting refers to the production of goods and services in a home country but selling them in another country different from the home country. Exporting involves custom officials of the home country and to the country to which the goods are being exported. Exporting has numerous benefits but also a number of pitfalls. One critical pitfall is an export strategy; the lack of an export strategy can have serious consequences to the exporter. Through an export strategy, an individual can assess the reasons, benefits and risks concerned with exporting the particular product.

According to Small Business, another pitfall is charging different markets the same prices. It is important to understand that the price of a similar product can vary between different markets. The variation is attributed to differences in import duties, taxes, and costs of complying with foreign standards among others. Another pitfall is providing for a management of risks, one example is risks associated with extending risks to customers. The pitfall can lead to a strain in the cash flow of the one exporting hence it is critical to provide a management for the risks that have been identified.

According to Ferdows (2016), many companies do not tap the potential of their foreign companies. Many firms use their foreign companies to take advantage of the tariff, trade concessions, capital subsidies, cheaper labor and the reduction of logistics that would have to be incurred by manufacturing in the home country and thereafter exporting to the other. This is are among just a few of the strategic role played by foreign factories. Other roles include getting closer to their customers and suppliers, attracting skilled employees in the particular foreign country and this has led to innovation.

By comparing between exporting and running foreign factories it is seen that foreign factories are easier and have more benefits compared to exporting.