Why U.S. Manufacturers Need to Export
Exports are a growing and substantial part of the U.S. economy, with more than 304,000 U.S. companies exporting goods last year. Of those companies, nearly 98% were small- or medium-sized businesses (SMBs) with fewer than 500 employees.
Exporting makes solid business sense for companies large and small, as more than 95% of the world’s purchasing power is located outside of the United States. Reaching this audience of potential customers is the main reason for U.S. companies to consider exporting; here are five more:
Exporting Improves Your Bottom Line
According to the U.S. Census Bureau, exporting plants with fewer than 250 employees had 1.9 times more revenue than non-exporting plants. The U.S. International Trade Commission found that small and medium-sized manufacturers in the U.S. that exported earned more per firm than those companies who did not engage in export activity. In addition, revenue per employee was 70% greater for exporting manufacturers than non-exporting manufacturers, which indicates greater productivity.
Employees of Exporters Earn More
In a study of 94 of the 100 largest metropolitan areas, for every $1 billion in exports of a metro area industry, workers in that industry earn roughly 1-2% higher wages. The wage gains apply to employees without high school diplomas, and are evident even after adjusting for occupation, worker characteristics, or characteristics of the metropolitan area. Regardless of their size, firms that export have been shown to be more skilled, more productive, and more likely to pay higher wages than non-exporting firms.
Companies That Export Grow Faster
The U.S. International Trade Commission examined the domestic and global operations of smaller enterprises. In their report, the commission found that U.S. exporters consistently outperform their non-exporting counterparts. Whether they deal in services or manufacturing, exporting businesses show higher total revenues, faster total revenue growth, and higher labor productivity than their peers that focus exclusively on domestic markets.
Exporting Increases Your Global Market Share
About 95% of consumers reside outside the U.S., which translates into 84% of the world’s spending power. As the middle class grows around the globe, so too will the share of spending power that resides outside the U.S.’s borders. While a majority of smaller companies that do export do so in a reactive or passive manner, taking a strategic approach could lead to greater global market share in less time.
Exporters Become More Innovative Two Years After Starting to Export
In a study conducted at USC and the University of Minnesota, professors found that, two years after exporting, exporters file seven times more patents than their non-exporting peers. In addition, exporters also deliver four times more product innovations. That’s because exporters can often access diverse knowledge bases that are not available in the domestic market.
From this data, the benefits of exporting for U.S. manufacturers of any size are clear. From the ability to reach a larger audience, to greater growth and earning potential, if exporting is not a part of your strategic initiative, you may want to consider this as a viable and sustainable part of your corporate strategy.