We have to export more and more. Why? Trading abroad can boost your profile, credibility and of course bottom line. In the last issue, we raised problems encountered by exporters in India. Before attempting to seek solutions, out of curiosity, I wanted to find out whether there are no problems in advanced countries like USA. Considered land of honey and rule based system, USA was picked up for such a study. Alas! Even there, exporters are facing problems. Of course, those problems are not synonymous with that India’s but at different levels. In fact, coming to think of them, solutions are not even in the hands of their Government. I am referring to the non-tariff barriers faced by the US dairy industry in countries like Canada.
But in our case, the problems are not that much insurmountable. I am examining the solutions from two angles, from the angle of exporters and government.
|A||Find new markets|
|B||Diversify in to new products in the same category in the same market|
|C||Join the Global value chain|
|D||Beat the heat with entry hubs in soft countires|
|E||Engage internatinal talent|
|F||Add Services to your portfolio|
|A||Removal of glitches in EDI|
|B||Acceptance of self declaration under the GST regime|
|C||Learn from china, continue with subsidies for labor intensive sectors|
The action points by the government, we will not discuss here. They are perhaps under their consideration and we may expect perceptible action in the days to come.
Now, let us examine, what the exporters can do!
Increase the cake size
The solution is simple, increase the size of business. What I mean here is think of enhancing the turnover by 10x. Perhaps start with 2x if your mind does not accept it. Whether 2x or 10x efforts are the same. Fix a time frame for achieving this and work on perspective plan. Okay, here are some ways to increase the cake size!
01.Find new markets.
Our chief markets continue to be US, Europe and Japan for exports. This continues to be so even now. But the rest of world is quite big and sizeable. We can perhaps learn from our neighbor China. They have covered the whole world so much that they are executing a project to link the entire world through their One Belt One Road (OBOR) initiative.
Exporters to USA can think of reaching out to Latin American countries, which are just few hours of flight. The size of Latin American is quite substantial and can very well be engaged. With a combined population of 639 million in 33 countries and per capital in the median range hovering around 15000 USS to 23000 USS, these countries offer good scope for Indian products. Another interesting observation, the grouping has almost 95 to 100% literacy rate. Back office functions may be considered using the young educated labor force!
By diversification, we mean products within the capacity range of an exporter. Product space is a term used to describe the network of relatedness between products. Relatedness is associated with the similarity in the inputs required by a certain activity, including skills, institutional and infrastructure requirements, and technological similarity, and is quantified by a measure called proximity. The concept of proximity formalizes the intuitive idea that the ability of a country to produce a product depends on its ability to produce similar products. The underlying ideas is that the production (and export) of different products requires different and very specific capabilities, such as human or physical capital, knowledge of markets, legal systems, institutions, etc. For example, the capabilities required to successfully export pineapples are very different from those required to export iPads. What differentiates these capabilities is that some of them can be easily redeployed into the production and export of many other products; that is, there are some goods that are “closer” to other goods.
In simple terms, for example, an exporter in leather goods can diversify in to products based on leather.
03.Beat the heat with global hubs
Many a time, distance becomes a problem in reaching out to customers. Little proactive thinking may solve such issues. Instead of directly exporting to far off destinations, after a careful study of demand pattern, goods can be shipped to a nearby hub and stored. Based on market needs, goods can be shipped to such markets. For example, Dubai has become a major hub for many Middle East and Africa. Dubai offers hassle free facilities to stock and export without payment of duty. FIEO operates such a facility to store goods from India and export to different destinations. It is often said that one can reach any part of the world from Dubai within 24 hours. Such is the connectivity available from Dubai.
04.Engage international talent
With communication technology advancement in the past 2 decades, the world shrunk to global village. It is in palms literally, but digitally. Search for the suitable talent worldwide and engage them. A famous diary manufacturer in Tamil nadu engaged the services of an international designer to design their diaries. He developed a team of 100 such designers. Now the result is history. These diaries are exported worldwide. In fact, the resource need not even come to India. He can operate from his own place and provide solutions to us. Acquisition of such talent provides market acceptability. Such cross-cultural exposure may even impact work atmosphere positively.
05.Add Services to your export portfolio
If china is the manufacturing hub, India is the service hub of the world. Everything is right for India at the moment; we should not hip shoot ourselves. Every manufacture will have some technique. For example, if you are manufacturing dies, you will have the capability to design a die. Die design is a very good service to be provided. Do not think you can make money only by manufacturing. Providing a design to some other manufacturer abroad also fetches money and that is Service Export!
06.Join the Global value chain.
Division of labor is complete. These are the days of multi nationals operating out of several countries. Each product or a service is broken down in to several stages or processes. Each process is assigned to a particular country in which it is good or provides value for money. In the diagram, smiley curve of a cell phone is given. Look how the processes are defined till customer service. Instead extracting all services from a single location, multi locations are preferred.
Since GVC offers huge scope for huge quantity, an exporter can think of joining a value chain if the product suits him!
– November issue of E – bulletin of ‘Andhra Chamber Of Commerce’
R R Padmanabhan
Foreign Trade Sub Committee
Andhra Chamber of Commerce.