SMALL BUSINESS AND EXPORTS

U.S. Small Business Expansion through Exporting

U.S. Small Business Expansion through Exporting

Introduction

Exporting is the foreign market entry mode most commonly adopted by small business organizations of United States have the aim to grow and develop in international markets and operations. As opposed to foreign direct investment methods (e.g., licensing, joint venturing, and wholly owned production) export engagement requires lower fixed and operating costs, involves fewer resource commitments, and exposes a small firm to lower business risks. Exporting is a highly desirable business activity by small business of United States as it can assist small companies in (Hill, 2011): (1) improving their financial position through more sales revenues and profits; (2) accumulating valuable marketing experience by operating in difficult and multifarious markets; (3) transferring innovative technologies and know-how from more advanced and sophisticated environments; and (4) exploiting idle operating capacity and improving production efficiency. Furthermore, increased emphasis on globalization demands that small firms to rationalize their international production and supply markets through exporting. In this connection, the goal of this research paper is to explain the method how a U.S. small business would be able to expand through exportation. To achieve this goal, this study will present argument stressing on the benefits of exports for small firms, and how exports can expose small firms to unlimited opportunity to grow.

Discussion and Analysis

Automobile manufacturers provide an excellent example in this regard. German car manufacturers, Mercedes Benz and BMW, for example, manufacture several globally popular models only in the USA and supply all other markets through exporting. These beneficial outcomes can in turn help firms strengthen their competitive edge and achieve sustainable growth. However, small firms of United States engage in exporting for a variety of reasons and a number of theories have attempted to explain this activity (Arnold, 2008). There is a consensus, however, among experts that firms, particularly small ones of United States, often engage in exporting reactively rather than pursuing a proactive and conscious strategic thrust intended to make them international. The reasons frequently cited by small firms for initially engaging in exporting include receiving an unsolicited order from abroad, manufacturing overcapacity and/or excess inventory, domestic economic downturns, intense domestic competition (especially from foreign firms) and request/demand by an important domestic customer who is moving abroad. It is thus not surprising that exporting is the oldest and virtually indispensable mode of internationalization.

In the context of exporting, resources are the firm-specific asset stocks that constitute the raw materials available to the export business venture of the firm, whereas capabilities are the processes by which resources are developed, combined, and transformed into value offerings for the export market (Hillstrom & Hillstrom, 2002). This paradigm suggests that firms are idiosyncratic bundles of resources and capabilities that are possessed or are available for deployment by the firm. The deployment of superior resources and superior capabilities should lead to the achievement of competitive advantage in the market in which the firm has chosen to operate, and this in turn should enhance ...