Case 8-1: Increasing U.S.

Exports: The Assignment

Overview: Only about 1 percent of America’s businesses—300,000 out of 30 million total firms—
export. And, nearly two-thirds of those companies export to just one country. For many of these
firms, exporting represents a major untapped market opportunity.

Even so, the U.S. Small Business Administration (SBA) estimates that there are tens of thousands
of small companies that could export but do not.

Other reasons have also been offered. One is the limited ambition exhibited by many American
business owners; this may result in complacency and a lack of export consciousness. A second
barrier is lack of knowledge of market opportunities abroad or misperceptions about those
markets. The perceived lack of necessary resources— managerial skill , time, financing, and
production capacity—is a third barrier that prevents companies from pursuing export
opportunities.

Unrealistic fears are a fourth barrier. When weighing export expansion opportunities, managers
may express concerns about operating difficulties, environmental differences, and credit risks.
Rounding out the list is management inertia—the simple inability of company personnel to
overcome export myopia.
Discussion Questions

1. A potential American exporter is worried that he’ll “have to learn to speak German or French”
if he wants to market to customers in Europe. Is this a realistic concern?
2. Why is it the case that many small business owners in the United States traditionally gave little
thought to exporting?
3. How has the current economic environment impacted growth opportunities for small and
medium-sized businesses?
4. Assess the prospects for achieving President Obama's goal of doubling U.S. exports by 2015?

Answers
1. America is now in a situation where imports are higher than exports or can be regarded as a
deficit, many factors could be the cause, one of which is the number of employers from the
United States are hesitant to import and prefer domestic markets to market their products.
one of the reasons they are afraid to import is because they assume that if they want to
export goods abroad such as France or Germany they must master their language. in my
opinion this is very absurd, it might be one of the factors that helps, but it is not the main
factor needed in exporting. important factors when exporting are.
a) An understanding of the target market environment, the target market is the end
consumer which the company wants to sell its end products too.
 Target marketing involves breaking down the entire market into various
segments and planning marketing strategies for each segment to increase the
market share.In simple words, not all products can be consumed by customers
and each product has a different set of consumers who want to purchase the
product. In order to attract a particular segment of the market, the company at
times, modifies the product accordingly. Creating the target market involves
conceptualizing the product, understanding the product in a market, studying its
target audience etc. Target marketing would revolve around deploying marketing
techniques for a particular segment of markets that could be key to attract new
customers, expand across the geographies and distribution networks to the
Widen the Reach.There are various steps involved in defining the target market.
The first is to understand the problem of a customer whom you are addressing.
Once it is done, the customers can be identified who are interested in that
product. For example, you make water purifiers - so you address the problem of
contaminated water quality. We know that the farm houses don't have a regular
water connection and the water they get from underground is hard. So, there is a
wide opportunity for water-purifier makers to enter into this segment and tap
the market. The next step is to understand your customer according to the
region, income level, etc. Always think about the market, know your competition
and the pricing of the product. It will help you in creating a benchmark. There are
two important features, which the company should always consider before it
decides to capture a separate market segment. First is the attractiveness of the
segment, which means that it has less competition, high margin business etc. The
second falls in line with the company’s objective, vision etc.
b) The use of market research and identification of market potential
c) Decisions concerning product design, pricing, distribution and channels,
advertising, and communications

2. An astonishing 97 percent of all U.S. companies that export products are actually small
businesses. That’s according to new research by SCORE, a nonprofit association for small
businesses.International Export Has Clear Benefits for Small Businesses
Data gathered by SCORE reveals U.S. companies that export grow faster and are nearly 8.5
percent less likely to go out of business than non-exporting ones.
And that’s not the only reason to consider international trade. About 26 percent of companies
that trade internationally significantly outperform their market.
Small Business Concerns Regarding International Trade
Despite the obvious benefits of trading internationally, less than one percent of America’s 30
million companies export. That’s probably because they have a few concerns. Data reveals
thirty-nine percent say their goods are not exportable and 37 percent don’t know how to start.
A large number of small businesses (63 percent), however, would like to export their goods and
services.
(Source : https://smallbiztrends.com/2017/03/us-exporters-small-business.html)

Small business are afraid to export is because they didn’t know much about exporting, they
think about their losses, lack of knowledge is the main factors. The NSBA study showed that
more than 40 percent of small companies not currently exporting would consider doing so if
their concerns about credit, making sure buyers pay them, and understanding foreign
markets were addressed
(Source : https://www.allbusiness.com/obamas-export-goals-target-small-business-14278730-1.html)
3. Global economic activity is picking up with a long-awaited cyclical recovery in investment,
manufacturing, and trade, according to World Economic Outlook. World growth is expected
to rise from 3.1 percent in 2016 to 3.5 percent in 2017 and 3.6 percent in 2018. Stronger
activity, expectations of more robust global demand, reduced deflationary pressures, and
optimistic financial markets are all upside developments. But structural impediments to a
stronger recovery and a balance of risks that remains tilted to the downside, especially over
the medium term, remain important challenges. changes in external conditions may affect
the pace of income convergence between advanced and emerging market and developing
economies. the trend in the declining share of income that goes to labor and the root causes.
Overall, this report stresses the need for credible strategies in advanced economies and
emerging market and developing ones to tackle a number of common challenges in an
integrated global economy. (source-world economic outlook report 2017)

Most economists agree that with today’s lower long-term interest rates, advanced economies
can sustain significantly more debt than they might otherwise; but the notion that it is a free
lunch is foolish. High debt levels make it harder for governments to respond aggressively to
shocks, whether it be a financial crisis, a cyberwar, a pandemic or a trade war that blows out
of proportion. The inability to respond aggressively to major shocks significantly heightens the
risk of long-term stagnation, and is an important explanation of why most serious non-
political academic studies find that very high debt levels are associated with slower long-term
growth.
If progressive policies rely too much on debt (as opposed to higher taxation on the wealthy) in
order to redistribute income, it is easy to imagine markets coming to doubt that countries will
grow their way out of very high debt levels - and if they do, it could well push interest rates up
to uncomfortable levels.
Of course, there are many other risks to global growth, including ever-increasing political
chaos in the US, a messy Brexit, Italy’s debt problems and heightened geopolitical tensions.
So with all these outside risks, is the outlook for global growth necessarily grim? There are
also upside risks. The baseline case for the US is still strong growth, and Europe’s growth
could be above trend as well as it continues its long, slow recovery from the European debt
crisis. The Chinese economy has been proving its doubters wrong for many years. So 2019
especially could register as another year of solid global growth. But unfortunately, it is more
likely than not to be a nerve-wracking one
And the impact to small business or medium business could are kind of strong, wether they’ll
be succesfull or bankrupt, but the the conditions where the U.S dollar currently low it’ll be
beneficial because of affordable prices in export market. The trend toward free and open
trade is another driving force. Tariffs come down dramatically, rules become simpler, and
[intellectual property] protections become greater. That opens the door for small businesses.
And also emerging market will another chance for small business or medium size business too
expand their market.

4. Ex president Obama Creating opportunities in export,

he vowed to boost credit for entrepreneurs by $2 billion, delivered through the Export-Import
Bank, which helps support exporters by providing credit, loans, and other services.
Obama also launched a new Cabinet panel dedicated to exports and pledged to increase the
number of trade experts posted in U.S. embassies overseas, among other new initiatives.
Meanwhile, the U.S. Trade Representative’s office, which develops trade policy and conducts
trade negotiations, created a position to promote trade issues for small companies, and the
 SBA pledged to extend its Export Express pilot program, which provides rapid credit for
exporters.
Based on SBA, they are trying to find small business that has potential to export, and traing
17.000 small business company how to export.

Obama initiative also aims to push exporters to large developing markets like China, India,
and Brazil. The Department of Commerce is hiring new trade experts knowledgeable about
these countries. This strategy makes sense. If entrepreneurs are going to expand their
exports, they’ll have to break in to these high-growth markets. Currently, China ranks eighth
among top export destinations for small U.S. companies, and India doesn’t even make the list.

Case 8-2: Asian Shoe Exports to Europe: The Assignment

Overview: Europe is famous as a source for fine leather goods such as handbags and shoes. Each
year, consumers in Europe buy 2.5 billion pairs of shoes. Shoes from China currently account for
about one-third of the market; since 2001, when China joined the WTO, Chinese imports have
increased tenfold. Imports from Vietnam have doubled in the same period (see Exhibit 8-1). The
flood of shoe imports from China and Vietnam has been a boon for European retailers and value-
conscious consumers. Officially, the EU tariffs on Chinese and Vietnamese shoe imports are
known as antidumping duties. In general, such tariffs reflect a finding that products are being sold
in export markets for less than the selling price in the exporter’s home country. In other words, as
explained in the chapter, they are being “dumped.” In economic terms, China and Vietnam—both
ruled by Communist governments—are considered “nonmarket economies.” From the EU’s point
of view, this means that the two countries’ domestic prices are artificial. In such countries, where
many enterprises are state-owned, profitability in the Western sense is less of a priority than job
creation. To prove dumping, investigators have only to compare the cost of the imported shoes
with the prices of shoes produced in true market economies where the laws of supply and
demand determine costs and prices. In such a comparison, the Chinese and Vietnamese appear
to have a significant price advantage.

Questions:

1.When tariffs are imposed on European imports of shoes from China and Vietnam, who stands
to gain? Who stands to lose?

2.European policymakers object to the fact that some Asian shoe production is government
subsidized. But as, an editorial in the Financial Times noted, “If Beijing and Hanoi want to
subsidize European consumers to build their shoe collections, let them.” Do you agree?
3.Antidumping duties can be described as a form of protectionism. As the global economic crisis
deepened in 2008 and 2009, many countries began implementing protectionist policies. Is this a
positive trend, or are such policies likely to prolong the recession?
Answers

1. When tariffs are imposed on European imports of shoes from China and Vietnam, who stands to
gain? Who stands to lose?
In the situation when tariffs are imposed against China and Vietnam, EU countries will get more gain
because if China and Vietnam still want to enter EU’s market, they must pay high tariff to EU
government which means, high income for EU. In addition, the situation can also give advantage for
other country such as Indonesia to enter the market because EU not imposed anti dumping to
Indonesian product, yet.
Surely, the situation will make China and Vietnam go into collapse because they must pay high tariff
with uncertain profits.

2. European policy makers object to the fact that some Asian shoe production is government susidized.
But as an editorial in the Financial times noted “ If Beijing and Hanoi want to subsidize European
consumers to build their shoe collections, let them “. Do you agree?
I’m not agree with that. In my opinion, government of China and Vietnam have reason why they
subsidize shoe production and that reason is to fulfill their people’s need rather than to fulfill other
countries people. Eventhough exporting the products to other country can give income to
government but I think it will be better for them to satisfy local people need first and they can satisfy
other countries need next.

3. Antidumping countries can be described as a form of protectionism. As the golobal economic crisis
happened in 2008 and 2009, many countries began implementing protectionist. Is this a possitive
trend or are such policies likely to prolong the recession?

In my opinion, anti dumping can be described as protection to local product against the import one.
Local product can help countries to help from crisis because the money flow only happened in one
country. I think it is a positive trend and can make a country become more independent and survive
from the crisis. If they don’t do antidumping, it can can harm their local product, make them more
dependent to other country.