By Christopher Freeburn
For small businesses, one of the upsides of rapid globalization has been the ability to sell products in foreign markets. A confluence of technological innovations (telecommunications, the Internet), cheap shipping costs, and the spread of trade-friendly policies throughout the world has made it relatively easy for even the smallest businesses to sell their products abroad. Last year, the sliding value of the U.S. dollar against other currencies gave an added boost to U.S.-based small businesses struggling to compete in the global marketplace.
The currency yo-yo
National currencies are valued against each other on currency exchanges around the world. The values of individual currencies rise and fall based on a number of factors pertaining to the economy of each nation, including domestic interest rates, inflation, economic outlook and political stability. In recent years, as the U.S. federal deficit has risen, the value of the nation’s currency has slid noticeably compared to the currencies of many other major economic currencies (the European Union’s euro and Japan’s Yen, in particular).
The dollar does not fluctuate against all currencies, however. Given the dollar’s role as the world’s reserve currency (the most stable money), some nations, including, most notably, China, as well as those in the Caribbean and oil-rich Middle East, have “pegged” their currencies’ value to the dollar itself, which means that the value of these currencies-usually set at a substantial discount to the dollar-move roughly in tandem with the dollar. Other countries, like Afghanistan, Cambodia, and a few nations in central and South America, have adopted the U.S. dollar outright as their national currency.
While a weak U.S. dollar punishes Americans traveling abroad through higher costs for food, lodging, and sightseeing, it also benefits U.S. producers who are trying to sell products overseas, since the foreign buyers can purchase more American products with less of their own money. This economic ebb and flow was in full evidence in 2009, as the U.S. trade deficit experienced a record total dollar-value decline last year, a trend that has not abated in early 2010 as the amount of American exports continue to slowly inch up in comparison to the importation of foreign goods.
“For U.S. businesses, the falling dollar means that their products cost a lot less in other countries,” says Robert Berman, a Providence, Rhode Island-based business consultant and CPA. “In some places, less than the goods produced domestically in that country. It’s an opportunity small businesses should not ignore.” Of course, the value of the dollar, relative to other major currencies, may well reverse course, and in recent months the dollar has rallied a bit as more positive news about the economy appears. Still, taking advantage of the dollar’s current diminished value offers the chance to build permanent benefits for your business. “Getting your products into the hands of overseas customers raises your company’s profile and can provide a beachhead for your company in that market,” Berman notes, even if the dollar rises back to levels where it was three or four years ago.
Taking advantage of the dollar’s fluctuating fortunes
A weaker dollar also represents an opportunity not only for small businesses that produce goods that can be sold abroad, but also for many others that do not. It reduces prices for U.S. products sold abroad, and also makes the U.S. a tempting venue for foreign tourists who can take advantage of low prices for American products and services during their visits to the U.S. Thus small businesses that provide hospitality services, or market products aimed at travelers, are well positioned to prosper when the dollar is weak, particularly against European and Asian currencies.
Small businesses that produce products that can be marketed and sold overseas, can take advantage of a weak dollar by partnering with other companies already selling in markets where the low dollar gives their products and advantage or by attending trade shows and conferences, usually hosted by various U.S. government agencies or the Chamber of Commerce, or even foreign governments. These shows are often frequented by representatives from foreign firms eager to import American products.
Using the World Wide Web for World Wide Sales
Aside from seeking partnerships to export your products abroad, or visiting trade fairs organized by foreign governments, the easiest way for small businesses to sell products abroad is online. If your business doesn’t have it’s own website, it’s time to get one started. Websites can be easily and affordably created and maintained through web-hosting companies, which take much of the effort out of the process. Adding e-commerce capabilities to your website, including electronic payment options, is equally simple.