Entrepreneurs Seek Import Business Advantages

Checklist of Key Success Factors for New Import Projects

Dec 8, 2008 Daniel Workman

Import ventures offer opportunities to entrepreneurs who carefully analyze these 7 key characteristics of profitable imported products.

When it comes to importing, an international trade entrepreneur seeks to derive significant competitive advantages from the use of resources and the sale of inputs imported from multiple countries into a targeted home-country market.

The analysis below highlights core advantages that drive a successful import business.

Importing businesses offer strategic opportunities for entrepreneurs in Canada and the United States to rebuild their economies by providing jobs that support North American core competencies.

1. Imported Products that Satisfy Unmet Demand

One of the most common reasons to launch an import business is to deliver products that fill a void or gap in the home country’s supply chain. The imported product is typically new, unavailable or produced in insufficient quantities to meet target market demand.

For example, the sweet dessert alcoholic beverage known as ice wine can only be produced in four cold-climate countries: Canada, Germany, Austria and China. Import businesses in America, South Korea, Japan and China use their competitive advantages in distributing ice wine to market and distribute wine lovers willing to pay premium prices for a product not produced by local industry.

Similarly, Americans consume more bananas than any other fresh fruit. While bananas can be grown in Florida, the U.S. imports most of its bananas year-round from foreign suppliers led by Costa Rica, Ecuador, Honduras and Colombia.

2. Perceived Value of Imported Goods

Another compelling reason for setting up an import business is to meet demand for an imported product that consumers perceive is of superior value to comparable brands produced at home.

Old World Wines from countries like France, Italy and Germany have a rich tradition of fermenting top-class wines. These imported vintages command premium prices around the world. New World Wines like those from California, Chile, Australia and South Africa are also enjoying increased demand from importers as affluent middle-class drinkers pursue new unique taste experiences.

The ability to afford premium imported wines is seen as a status symbol, particularly in emerging economies like China and India. This in turn increases the perceived value of imported wines from these countries.

3. Quality of Imported Supplies

The quality of imported goods had a direct impact on the level of sales in the domestic market. Because of product dependability and superior performance, Intel is a world leader in sales of microprocessor chips that go into desktop and notebook computers as well as network servers.

Importing businesses in the Asia-Pacific region are well aware of the quality of Intel products. According to Hoovers, importers in the Far East and Australia generate more than half of Intel’s revenues.

4. Imported Products with Cost-Efficiencies

Many importers take advantage of the fact that some products can be produced more inexpensively elsewhere and therefore are cheaper when imported. This includes foreign-made automotive products from countries like Mexico where the average automotive parts worker earns about $3 per hour. Excluding rich employee benefits and retirement packages, employees working for American or Canadian automotive companies make more than $18 an hour and are unionized.

To lower their costs, importers in developed countries often focus on products made in lower cost nations including Mexico, China, Taiwan and South Korea. Another example is the Canadian company Gildan Activewear which makes the bulk of its T-shirts, underwear and socks in the Honduras - one of the poorest countries in the Western Hemisphere. Gildan then supplies its low-cost textile products to importers in North America and Europe.

5. Lower Shipment Costs

The mode of transportation for imported goods can involve lower costs than shipments within the domestic country. Shipping Red and Golden Delicious apples from Washington State via truck to importers in the nearby Canadian province of British Columbia costs less than comparable shipments from orchards in other Canadian provinces like Ontario or Prince Edward Island.

6. Falling Foreign Currencies Good for Import Businesses

Imports often increase when the currency of the exporting country falls, principally because the exporting country can afford to buy more of the imported products. After the Mexican peso was devalued in 1994, American imports of fresh vegetables from Mexico rose sharply by 36% within 2 years.

7. Comparative Advantage Like Technology

Entrepreneurs often build their import businesses based on products from another country with leading technological features. Looking past the current financial meltdown, America has strong competitive advantages in successfully launching products with world-leading technologies. Apple iPods and iPhones are leading imports into global markets around the world because they represent the leading edge technological advances.

Main Reason to Import

Some entrepreneurs focus on financial loans and grants or government relief or remissions programs to protect against bad debts. However, most entrepreneurs develop import businesses for one simple reason: to maximize profits.

Reference:

David M. Neiport, A Tour of International Trade (Prentice Hall 2000).

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At the core of any import business