Maintaining competivity for your company while increasing your profit margin can only be accomplished if you are constantly on the lookout for innovative ways to save money while still producing a quality product. One way a business can save a great deal of money is to purchase their raw materials internationally. However, many business owners are unsure of how to create a strong, trustworthy relationship with an overseas company. They may be apprehensive about purchasing from overseas suppliers, or they may not understand the culture enough to negotiate prices. Often times, business owners find themselves in a bad situation with a less than reputable company due to their lack of knowledge or research.
Before making the jump to purchasing raw materials overseas, you must do a great deal of research. Allow plenty of time to perform this research. You cannot just expect to do an online search, find a company that looks decent, and begin purchasing immediately. While this could be possible, most likely you’ll find yourself in a mess.
First, do research to find which country or area would be the best to purchase your type of raw material. Some countries are known for their expertise in a certain product. For example, South Africa may be known for its diamond exports, while China, one of the the world’s leading raw materials exporters, is known for rare metals used in technology. If a particular country is known for producing higher quality materials and is actually a specialist in that particular item, it will pay for you to import. By purchasing from a country that specializes in the material, you can avoid higher premiums from countries that do not readily produce the item.
After determining the country or region you would like to research further, find several top companies to compare. You will want to compare prices, wait times, and shipping and payment terms. You should also ask for references to check the reliability and quality of the material. This type of research will allow you to choose the best company and can save you thousands of dollars by avoiding companies that offer unsatisfactory products. When researching the company, you may run into foreign language barriers, so it may be wise to hire a trusted translator to ensure accurate communication and understanding. Be sure to find out any hidden costs, such as shipping. It would be beneficial to have the company provide an itemized list of each cost and fee you will incur. If they cannot provide this list, most likely they are not the type of company you want to do business with.
The biggest mistake business owners make is to fall for a deal that seems too good to be true. If the prices seem outrageously lower than you are used to, begin by inquiring why. The business may claim to ship the same product as competitors, but if their prices are significantly lower, there must be a reason why. In most cases, the difference is in the quality. Remember, don’t forgo quality for a cheaper price. The cheaper quality product will not satisfy your demanding customers. If you expect to remain competitive in your field, you need to ensure that the product you are researching is of the same, if not better quality. You can do so by asking for samples.
Importing raw materials from overseas can save your company a great deal of money over time. You can bring in materials at a substantially lower price and, in turn, raise your profit margin. You may find that the products are of better quality and offer originality or authenticity. However, be sure to spend a great deal of time doing research to find a company that will safely deliver a quality product on time and for the prearranged price.
Solomon Assefa says
Very good insight ! Thank you for the explanation how to save moany by importing raw material.
What are the effect of importing raw materials on competitivness of African companies?