Fear comes naturally to anyone new to exporting. Fear of the unknown, or lack of information, is one of the reasons that many businesses that are doing well nationally are reluctant to engage in exporting.

Fear of the unknown encourages deeper thinking. By thinking and careful planning, the risk of failure in exporting can be reduced. Never allow fear to impede exporting. Exporting is vital to the growth and prosperity of the company and the country.

The process of exporting is not like a walk in the park. Neither is the process like mastering Beethoven's piano sonatas and concertos. Exporting is never easy but it can be learned and can be done well. The process of exporting is challenging!

The business ground is a battleground. Exporting, like any other business, involves risks. It is necessary to prepare for the challenges and the consequences. Engaging in exporting is akin to engaging in a war. It is a war of price, quality, delivery and service. It is a battle for the business orders. It is a fight for the company's survival---profits and growth. In practice, rough strategies are often used by some exporters in order to win contracts.

Overnight export success will not happen. Short-term export profits rarely occur. Exporting requires long-term commitment from management and employees. Dedicating long hours to the business is necessary, especially for the fledgling exporter.

Problems are inevitable in exporting. New exporters will usually encounter lots of unanticipated problems. Problems cannot be solved by panicking. There is always a solution to a problem. Learning from experience is indispensable. Successful companies learn from their mistakes.

Export businesses are mainly classified into export-traders, export-manufacturers and service-exporters.

Export-Traders

The export-traders include the export companies known as trading houses, trading companies, buying offices, buying agents, purchasing agents, resident buyers, sourcing agents, export representatives, export distributors, export agents, export management companies (EMCs), and manufacturers' representatives.

The export-trader operates on a buy-and-sell basis or a commission/fee basis, or a combination of these two. In the buy-and-sell basis, the export-trader buys from export-manufacturers and adds a markup to the export price. In the commission/fee basis, the export-trader collects a commission or fee from the export-manufacturer or the foreign importer, or from both of them without adding a markup to the price.

Export-Manufacturers

Export-manufacturers include the manufacturers, producers, assemblers and processors of export goods. Export-manufacturers either directly export the goods or indirectly export the goods through the export-traders.

Service-Exporters

Service-exporters include the banks, ocean shipping (steamship) companies, air cargo companies or airlines, trucking companies, rail carriers, insurance companies, freight forwarders or consolidators, consulting firms, and miscellaneous service companies. Service-exporters provide services to export-traders and export-manufacturers.

Friends do not always make the best business partners. It is false that friends can always help in time of business needs. It is true that some partners undercut other partners in business.

When selecting a business partner, it is important to look for someone who can share business goals and can commit to the business. Look for a partner who can supplement the business needs. When venture capital is needed, someone with strong financial resources can supplement the business needs. When export expertise is needed, someone with long international trade experience can supplement the export needs.

The home-based business is a business whose economic activity is carried out primarily at the owner's residence. The number of home-based business is growing in numerous countries, including the U.S.A. and Canada, out of economic necessity and convenience. To base a business at home is a practical alternative to renting an office, when renting is not absolutely necessary. It is wise to be practical, especially during tough economic time.

It is true that the size of home-based business is usually small. It is false that home-based businesses are unreliable. Unfortunately, many people still perceive home-based businesses as incompetent.

There are limitations for an export business being home-based. It is usually restricted to export-trading and export consulting firms. It is a fact that only a few foreign importers are interested in home-based exporters. Those who are interested usually have long business or personal ties to the exporters.

In some developing countries, the home-based export-trader (trading firm) needs only an office and a showroom. The manufacturer (vendor) cooperates with the export-trader. The delivery of goods is from the vendor's warehouse directly to the foreign buyer. The vendor provides free warehousing (storage), for example, when there is a shipping delay. Some vendors even allow the free use of their premises for consolidation of container shipment by the export-trader, provided the other goods for consolidation are not from competitors. This cost-saving arrangement will work in developed countries as well, despite their different business practices, if vendors are willing to cooperate.

The vendors' support is essential to the survival of the small export-trading firms, including the small home-based exporters in developed countries.

The three most common forms of business organization are the sole proprietorship, the partnership, and the corporation. Business laws and the usage of company titles in some countries may vary from the definition and description of each form of business organization given below.

Sole Proprietorship

Sole proprietorship---single proprietorship or individual proprietorship---is the simplest form of business organization. As the name suggests, the business is owned by one person.

Advantages of Sole Proprietorship

Not many formalities are needed to establish a sole proprietorship. Start-up costs are low and working capital requirements are minimal. The owner manages and controls the business, free from outside interference, except for government regulations. All profits go to the owner. The owner is free to choose to reinvest the profits in the business or to dispose of them. Possible tax advantage.

Disadvantages of Sole Proprietorship

The liability of sole proprietor is unlimited. The owner is personally liable for all the debts of the business to the full extent of the owner's property. Illness of the owner may interrupt the business and the owner's demise may terminate it. It can be difficult to raise capital.

Partnership

In a partnership form of business, there are two or more owners known as partners. The partnership law differs from country to country and the applicable terms to the partnership vary. A partnership business can be a limited partnership or an unlimited partnership.

In a limited partnership, at least one partner, but not all partners, assumes limited liability---liability only to the extent of the capital the partner has contributed to the partnership. The company name may end with the words "Co. Ltd.", "Company Limited", "Ltd.", "Limited", or their equivalent in other languages.

In Europe and some other areas, the words "Limited Company", "Limited Partnership", or their equivalent in other languages may signify a corporation.

In an unlimited partnership, all partners assume unlimited liability---liability for the partnership debts to the full extent of the their personal property. The company name may end with the word "Co." or "Company", or its equivalent in other languages.

Advantages of Partnership

Partnership is easy to form. Start-up costs are low. The partners provide additional sources of venture capital. The management base is broader. It is free from outside interference, except for government regulations. Possible tax advantage.

Disadvantages of Partnership

Partners assume unlimited liability in an unlimited partnership. It lacks continuity---death of a partner dissolves the partnership. The authority is divided. The profits are divided among partners in a proportion agreed upon in the partnership contract. It can be difficult to raise additional capital. Often it is difficult to find suitable partners.

Classifications of Partners in the Partnership

The partners are generally classified according to the extent of the liability, contribution to the partnership, and management participation.

• Extent of the liability: the limited partner and the unlimited partner
  

  A limited partner assumes limited liability---liability only to the extent of the capital the partner has contributed to the partnership.

  An unlimited partner assumes unlimited liability---liability for the partnership debts to the extent of the partner's personal property.

  
  
  
• Contribution to the partnership: the capital partner and the industrial partner
  

  A capital partner contributes cash and/or assets to the partnership. The capital partner may or may not be active in the management of the partnership.

  An industrial partner contributes service to the partnership. The industrial partner is active in the management of the partnership.

  
  
  
• Management participation: the general partner and the silent partner
  

  A general partner participates in the management of the partnership. An industrial partner is a general partner. A capital partner can be a general partner.

  An silent partner does not participate in the management of the partnership. A capital partner may or may not be a silent partner.

Corporation

A corporation is a legal entity---an artificial being, invisible, intangible, and existing only in the contemplation of law. Corporate laws vary from country to country. Legal advice is necessary to form a corporation. The corporate name may end with the word "Corp.", "Corporation", "Inc.", "Incorporated", or its equivalent in other languages.

A corporation is limited in duration by law. It can have a legal life of generally 20 or more years. The articles of incorporation---certificate of incorporation or corporate charter---specify the details of the organization. A corporation requires a minimum number of persons, generally 3 or more. The ownership of the corporation is represented by its capital stock, which is divided into identical units or groups of identical units called shares or stocks. These shares are represented by the written instruments known as stock certificates. Stock certificates are usually classified into common stock and preferred stock, with different preferences, restrictions and limitations. The owners of the shares are called stockholders.

A corporation can be public or private. In a public corporation, anyone can become a shareholder and its stocks are usually traded on a stock exchange. In a private corporation, the number of shareholders is restricted and its stocks are not traded on a stock exchange.

Advantages of Corporation

The liability of stockholder is limited to the stocks owned. The ownership is transferable without affecting the corporate existence. It enjoys continuous succession. It is easier to raise large sums of capital through the sale of stocks to the public. Management is specialized, concentrated in the hands of a Board of Directors. Possible tax advantages.

Disadvantages of Corporation

The corporation is the most expensive form of business organization. It is closely regulated. It requires extensive record keeping. There is double taxation---the corporation is a legal entity required by law to pay income tax, the stockholder is also required to pay income tax on dividends, that is, the earnings from stocks received from the corporation.