Exporting Services and International Trade Business

Export Services: How to Export Services, can services be exported

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Export Services: How to Export a Service

Export services industries span a wide variety of enterprises from hamburgers to high technology. If we take U.S. for example, The service sector accounts for about 70 percent of the U.S. GNP and 75 percent of employment. Last year, the service sector also accounted for slightly more than two-thirds of all self-employed persons.

Internationally, a similar change has taken place. World trade in export services grew in the past decade at an average rate of 5 percent a year to constitute approximately 20 percent of overall world trade today. In some countries, the share is much higher.

Spain reports a 39 percent share; Austria, 36 percent. The leading exporter of services, the United States, shows services accounting for 18 percent of all merchandise and services trade and, unlike the situation with trade in goods, has had a surplus in services trade for decades.

The income generated and the jobs created through the sale of services abroad are just as important to the economy as income and jobs resulting from the production and export of goods.

TYPICAL SERVICE EXPORTS

The service sector accounts for a great share of the economy, although some services are not easily exported. It would be very difficult to export most personal services, such as the service performed by waiters in restaurants; but most business services can be exported - especially those highly innovative, specialized, or technologically advanced services that are efficiently performed domestically. The following sectors have particularly high export potential:

Construction, design, and engineering. The vast experience and technological leadership of the local construction industry, as well as special skills in operations, maintenance, and management, frequently give local firms a competitive edge in international projects. Some firms with expertise in specialized fields, such as electric power utilities, also export related construction, design, and engineering services, such as power plant design services.

Banking and financial services. financial institutions are very competitive internationally, particularly when offering account management, credit card operations, collection management, and other services they have pioneered.

Insurance services. insurers offer valuable services ranging from underwriting and risk evaluation to insurance operations and management contracts in the international marketplace.

Legal and accounting services. Firms in this field typically aid other local firms operating abroad through their international legal and accounting activities. They also use their experience to serve foreign firms in their business operations.

Computer and data services. The computer services and data industries lead the world in marketing new technologies and enjoy a competitive advantage in computer operations, data manipulation, and data transmission.

Teaching services. The vast education sector offers substantial new services for foreign purchasers, particularly in areas such as management, motivation, and the teaching of operational, managerial, and theoretical issues.

EXPORT SERVICES VERSUS PRODUCTS

There are many obvious differences between services and products. Consequently, important features differentiate exporting services from exporting products:

Services are less tangible than products, providing little in terms of samples that can be seen by the potential foreign buyer. Consequently, communicating a service offer is much more difficult than communicating a product offer. For example, brochures or catalogs explaining services often must show a proxy for the service. A construction company, for instance, can show a picture of a construction site, but a picture of the finished building communicates the actual performance of the service more effectively. Much more attention must be paid to translating the intangibility of a service into a tangible and salable offer.

The intangibility of exporting services also makes financing more difficult. Frequently, even financial institutions with international experience are less willing to provide financial support for service exports than for product exports, because the value of services is more difficult to monitor. Customer complaints and difficulties in receiving payments can also appear more troublesome to assess.

Services are often more time dependent than products. Quite frequently, a service can be offered only at a specific time, and as time passes, the service perishes if it is not used. For example, to offer data transmission through special telephone lines may require providing an open telephone line. If this line is not heavily used, the cost of maintaining it may not be covered.

Selling services is also more personal than selling products, because it quite often requires direct involvement with the customer. This involvement demands greater cultural sensitivity when services are being provided, since a buffer of indirect communication and interaction does not exist.

Services are much more difficult to standardize than products. Service activities must frequently be tailored to the specific needs of the buyer. This need for adaptation often necessitates the service client's direct participation and cooperation in the service delivery.

Demand for certain services can derive from product exports. Many of our merchandise exports would not take place if they were not supported by service activities such as banking, insurance, and transportation. Services can be crucial in stimulating product export and are a critical factor in maintaining such exports. However, in such cases, services follow products rather than taking the lead over them.

MARKETING SERVICES ABROAD

Since service exports are often delivered in the support of product exports, a sensible approach for some beginning exporters is to follow the path of relevant product exports. For years, many large accounting and banking firms have exported by following their major multinational clients abroad and continuing to assist them in their international activities. Smaller service exporters who cooperate closely with manufacturing firms can also determine where these manufacturing firms are operating internationally and aim to provide service support for these manufacturers abroad.

For service providers whose activities are independent from products, a different strategy is needed. These individuals and firms should search for market situations abroad that are similar to the domestic market.

Many opportunities derive from understanding the process and stage of development of relevant trade activities abroad. Just as our society has undergone change, foreign societies are subject to changing economic trends. If, for example, new transportation services are opened up in a country, an expert in the area of containerization may offer services to improve the efficiency of the new system.

Leads for export services activities can also be gathered by staying informed about international projects sponsored by organizations such as the World Bank, the Caribbean Development Bank, the Inter-American Development Bank, the UN, and the World Health Organization. Very frequently, such projects are in need of service support.

Other Topics in the 'Export Management' Section

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