Seeking profit opportunities in export trade, a number of U.S. companies have faced
foreign competition head-on and successfully established themselves in world markets. Many
businesses, however, lack the resources or expertise to export on their own. By exporting together,
American firms can increase their competitiveness and each firm can benefit from lower individual export costs and
increase its efficiency in every phase of exporting. Possible sources of
savings include sharing the costs of transportation, insurance, overseas warehousing,
overseas representation and after sales servicing.
COMPETITIVE ADVANTAGES FROM
Export joint ventures offer firms the opportunity to
reduce costs by capturing economies of scale. Joint ventures also enable participating
firms to spread risks. These benefits are likely to be greatest for small and medium-sized
firms that are either new to exporting or have limited export experience.
However, firms of all sizes and levels of international business experience can use
joint exporting to reduce per unit export costs and develop proactive export
strategies which may not be feasible for individual exporters. The ability to
reduce export costs and risks is especially important when considering entry into a new or
complex export market.
Specific areas in which gains can be obtained will vary
with the nature of the product and the targeted foreign markets. The following examples
are suggestive of the kinds of things potential joint venture partners should consider.
U.S. firms can join together to share the costs of foreign market research (including
hiring expertise), travel, and overseas activities.
U.S. firms can reduce the average costs of overseas trade shows and missions through joint
activities. Firms with complementary products can offer more attractive "full
line" packages to prospective buyers. Cost reductions can also be achieved by jointly
conducting generic advertising intended to cultivate or increase demand for American
U.S. firms can increase sales and profits through joint bidding. As a group, the joint
venture can respond to foreign orders requiring quantities beyond the productive capacity
of the individual member firms, and it can accomplish sales while frustrating a foreign
buyer's ability to play U.S. sellers off against one another.
Joint exporting agreements can be effective in overcoming some non-tariff trade barriers,
such as specific labeling, packaging, and quality control requirements, as well as
certification standards imposed by foreign governments. By jointly operating a one-stop
facility, firms can reduce average costs of compliance. In addition, by joining together,
U.S. firms secure increased leverage to work for the reduction of non-tariff barriers.
Shipping: Volume discounts can be negotiated with carriers. Through an
export joint venture, firms can guarantee carriers sufficient cargo to make these
discounts available. In some cases, longer-term contracts with carriers might be
negotiated, enabling export firms to quote delivered prices to foreign buyers with greater
Joint bidding and Selling
Arrangements: Any number of joint venture partners may join together
and submit a single bid on a particular project or tender. The partners can use the same
overseas representative, agree to sell separate products as a unit, prepare joint
catalogs, and allocate among participating partners the sales which result from joint
bidding or selling arrangements.
Two or more joint venture partners might agree to establish uniform minimum export prices
for particular products in order to avoid price rivalry with each other. For some joint
ventures, higher profits might be secured through joint negotiations on prices and on
terms of sale with foreign buyers.
Service and Promotional
Activities: Joint venture partners may jointly engage in a variety of
activities that will promote or support their combined export sales. These activities
might include establishing joint warranty service and training centers, conducting joint
trade shows or missions, and joint advertising. In addition, the pooling of information
may open up new avenues for export finance.
Joint export ventures undertaken by domestic competitors might raise questions under
U.S. antitrust laws. Fortunately, there is a program that enables U.S. exporters to obtain
antitrust protection. Under Title III of the Export Trading
Company Act, any U.S. resident, business association or state and local government
entity may apply to Export Trading Company Affairs in the Department
of Commerce for an Export Trade Certificate of Review . A
Certificate of Review provides exporters with immunity from federal and state government
antitrust suits with regard to all export activities specified in the Certificate.
With a growing need to sharpen competitive skills in world
markets, it is time to consider an Export Trade Certificate of Review.
For further information call the office of Export Trading Company Affairs at (202)
482-5131, or email ETCA