Eli Barrier

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NON-TARIFF BARRIER

Non-tariff barriers did not seriously affect trade flows until the mid-1960s (Baldwin 1970). Prior to that

time, tariffs (e.g., financial surcharges) were the dominant means of distorting world trade flows to the

benefit of a particular host country. However, the success of the General Agreement on Tariffs and

Trade (GATT) rounds has resulted in relatively low tariff levels (averaging between 4 and 7 percent)among industralized countries. As tariff protection has diminished, non-tariff protection has emerged as

a difficult, challenging constraint and may now be the most significant trade distorting mechanism (Ray

and Marvel 1984). While a free, unconstrained flow of world trade is a theoretical economic ideal,

political realities make protectionism a persistent fact of life. Thus, small businesses entering

international trade markets must be familiar with the pervasiveness of NTBs. Any encounter with NTBs

can spell instant failure for the small business not cognizant of the implications. Simply stated, NTBs

provide a challenge not typically encountered in the smaller firm's domestic markets.

NTBs may be defined as "government laws, regulations, policies, or practices that either protect

domestic producers from foreign competition or artificially stimulate exports of particular domestic products" (Foreign Trade Barriers 1987). For all practical purposes, this definition is

normally broadened to include private sector business practices, such as monopolistic or oligopolistic industrial structures (e.g., closed distribution systems) that effectively preclude

foreign access to domestic markets or restrain competition with domestic organizations. This broader definition is used here, and includes both public and private sector practices that distort

trade flows.

TYPES OF NON-TARIFF BARRIERS

While NTBs are acknowledged to be important trade distorting mechanisms, few studies have

addressed their strategic implications for either large or small businesses. Several studies havecategorized NTBs in some manner (Cao 1980, Onkvisit and Shaw 1988, Ray 1981, Ray and

Marvel 1984). Other studies have provided comprehensive lists of possible NTBs (Organizationfor Economic Cooperation and Development 1985, United Nations Conference on Trade and

Development 1983). Moreover, other studies have provided insight into the NTBs that mayinfluence a particular product (Monke and Taylor 1985) or a particular industry (Food and

Agriculture Organization 1986). However, these studies generally focus on international trade policy issues and neglect the strategic implications for businesses.

The remainder of this section will provide a brief discussion of each of the 20 NTBs presented in

table 1. These 20, based on our review of the literature, appear to be those most likely to be

encountered by U.S. small businesses that are initiating international trade efforts. It is importantto note that NTBs are not applied uniformly from country to country or even among different

industries in a given country. Hence, the following discussion is intended to be illustrative of themost common types of NTBs; in specific situations, other NTBs not addressed here could be

quite important.



Currently, the U.S. export market is dominated by large companies and multinationalcorporations. Kathawaba, Judd, Monipallil, and Weinrich (1989) state that only 10 percent of the

total U.S. export business is conducted by small business despite the fact

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that foreign markets may offer the smaller firm solid opportunities for long-term growth and profitability. Furthermore, involvement in international business is not typically a formal

objective flowing from the strategic thought processes of most U.S. small businesses. Instead,initial attempts to export are often stimulated by an inquiry from a potential customer located in a

specific foreign country (Suzman and Wortzel 1984, Piercy 1981). Graham and Meloan (1986)found that 86 percent of the firms in their study initiated exporting as a result of these foreign

inquiries and only 17 percent of the firms indicated that any significant research was completed before exporting began. Johnston and Czinkota (1985) had similar findings in their study of three

industries. Only 38 percent, 50 percent, and 53 percent of the firms in each industry activelysought their first foreign order; conversely, between 47 percent and 62 percent of these firms

received their first order on an unsolicited basis. Thus, despite the potential for sales growth andthe existence of numerous government and private sector support programs, it appears that the

majority of American small businesses begin exporting because someone overseas seeks themand/or their product, not because of a planned marketing strategy to enter a foreign market.

Ironically, very few small businesses attempting to compete domestically would admit that theycan be successful by waiting for customers to come to them. It may be just as illogical to expect

high levels of international marketing success by taking this reactive approach.

Although small businesses can seemingly achieve some success in exporting by waiting for

foreign customers to contact them on an unsolicited basis, the more successful exporters probably pursue a focused, planned approach that clearly identifies foreign target markets and

adapts their current domestic strategy when and where necessary (Dawson 1985, Kaynak et al.1987, Namiki 1988). While a well organized, planned entrance into international markets will

enhance the probability of success as well as the level of success (e.g., sales or profit volumes),many obstacles and challenges are likely to be encountered. These obstacles originate from

sources both internal and external to the firm.



Non-tariff barriers (NTBs) constitute a complex set of constraints that can frustrate and thwartthe small business's international efforts. Recent literature has suggested that NTBs may now be

the major obstacle faced by firms attempting to enter foreign markets (Czinkota, Rivoli, andRonkainen 1989; Jeannet and Hennessey 1988).

The purpose of this article is to provide an analysis of the NTBs most likely to be encountered bysmall businesses and to suggest strategies that can be used to overcome these constraints tointernational trade. NTBs are thus viewed as "restraints" to the small business international

marketing efforts that can require business strategy changes in order to adapt to marketdifferences.

NON-TARIFF BARRIERS

Non-tariff barriers did not seriously affect trade flows until the mid-1960s (Baldwin 1970). Prior to that time, tariffs (e.g., financial surcharges) were the dominant means of distorting world trade

flows to the benefit of a particular host country. However, the success of the General Agreement

on Tariffs and Trade (G

ATT) rounds has resulted in relatively low tariff levels (averaging between 4 and 7 percent) among industralized countries. As tariff protection has diminished,non-tariff protection has emerged as a difficult, challenging constraint and may now be the most

significant trade distorting mechanism (Ray and Marvel 1984). While a free, unconstrained flowof world trade is a theoretical economic ideal, political realities make protectionism a persistent

fact of life. Thus, small businesses entering international trade markets must be familiar with the pervasiveness of NTBs. Any encounter with NTBs can spell instant failure for the small business

not cognizant of the implications. Simply stated, NTBs provide a challenge not typicallyencountered in the smaller firm's domestic markets.





trade flows.









The remainder of this section will provide a brief discussion of each of the 20 NTBs presented intable 1. These 20, based on our review of the literature, appear to be those most likely to be


industries in a given country. Hence, the following discussion is intended to be illustrative of the

most common types of NTBs; in specific situations, other NTBs not addressed here could bequite important.

Import quotas are fairly straight-forward quantitative restrictions on imports and may beexpressed as individual units imported or as a total value of imports. Since quotas are commonly

imposed on an annual basis, this type of NTB has the effect of forcing imports into the first partof the year as foreign competitors rush to capture domestic share before the quota is reached and

all imports cease. This NTB has implications for inventory levels (i.e., stock build up), timing of promotional efforts (i.e., early in the year), and financing and credit strategies (arranging

inventory financing).

Minimum import pricing is intended to provide a pricing floor which is pegged in some manner to the domestic price structure. Depending upon the required price level, this can effectively

increase the domestic firm's gross profit margin and shift its marketing strategy emphasis to non- price elements. This may be a significant strategic barrier for small businesses with generic or

commodity products where product differentiation is difficult or impossible to achieve.

Marketing or advertising restrictions are placed on the types of products that can be advertised,

the types of advertising claims allowed, and ads which name competing products (i.e.,comparative advertising). Small businesses whose domestic promotional strategies rely on such

approaches may find creating customer awareness very difficult in foreign markets.

Restrictive transportation requirements may include pallet size, container size, and materialhandling limitations. Also, many less developed countries (LDCs) simply lack a reliable

domestic transportation infrastructure. China offers an excellent example of this NTB.

Port-of-entry taxes or levies are sometimes placed on imports flowing through a country's portsof entry. The original purpose of this NTB was to generate a user-based tax to help defray

infrastructure development costs for airports as well as port facilities. However, these taxes oftenendure well past the time necessary to offset the original capital cost and are often higher than

operating costs would indicate. These NTBs may vary from port of entry to port of entry in thesame country. As with many other NTBs, a small business looking into foreign markets must

assess the impact of these taxes on their anticipated margins, price competitiveness, and overallfinancing goals.

mport licensing requirements can take one of two forms. First, the right to import certain types of products can be limited through the allocation of import licenses, restricting the number of

foreign competitors in a given industry. Thus, a late market entrant would be excluded from thatcountry. Second, import licenses may be unlimited, but the process of obtaining the license is

difficult. Due to bureaucratic delays, it may take a year or more to obtain the right to import



products. Thus, a strategic window could close before a firm would be able to respond to amarket [TABULAR DATA OMITTED]

opportunity. Without a foreign agent or partner who "knows the system," a small business may

be excluded from such markets.

Customs procedures, while uniformly applied, may be an NTB through shear complexity.Without the help of foreign-based expertise, the American small business may experience great

difficulty in overcoming this NTB.

Product quality or technical standards for determining a product's quality level are not uniform

from country to country and product testing performed in one country may be of little or novalue in another country. Thus, the product testing for many products must be done in those

foreign countries due to the unacceptability of foreign data. Also, product adaptation may benecessary to meet unique technical requirements.

Arbitrary product classification refers to the sometimes unpredictable manner in which a foreigncountry classifies the small business's product(s). A given product's classification, which can behighly subjective, affects its duty status. In some cases, the small business may be able to change

its classification to a more advantageous position by altering its packaging or other informational programs.

Safety and health requirements can be an obstacle as many countries have unique product

content requirements not found elsewhere. Again, product changes for the small businessrepresent one of the costliest changes and may therefore suggest a "no-go" entry decision.

Currently, the U.S. export market is dominated by large companies and multinational

corporations. Kathawaba, Judd, Monipallil, and Weinrich (1989) state that only 10 percent of thetotal U.S. export business is conducted by small business despite the fact



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that foreign markets may offer the smaller firm solid opportunities for long-term growth and profitability. Furthermore, involvement in international business is not typically a formal

objective flowing from the strategic thought processes of most U.S. small businesses. Instead,initial attempts to export are often stimulated by an inquiry from a potential customer located in a

specific foreign country (Suzman and Wortzel 1984, Piercy 1981). Graham and Meloan (1986)

found that 86 percent of the firms in their study initiated exporting as a result of these foreigninquiries and only 17 percent of the firms indicated that any significant research was completed before exporting began. Johnston and Czinkota (1985) had similar findings in their study of three






Although small businesses can seemingly achieve some success in exporting by waiting for

foreign customers to contact them on an unsolicited basis, the more successful exporters

probably pursue a focused, planned approach that clearly identifies foreign target markets andadapts their current domestic strategy when and where necessary (Dawson 1985, Kaynak et al.

1987, Namiki 1988). While a well organized, planned entrance into international markets willenhance the probability of success as well as the level of success (e.g., sales or profit volumes),

many obstacles and challenges are likely to be encountered. These obstacles originate fromsources both internal and external to the firm.

Non-tariff barriers (NTBs) constitute a complex set of constraints that can frustrate and thwart

the small business's international efforts. Recent literature has suggested that NTBs may now bethe major obstacle faced by firms attempting to enter foreign markets (Czinkota, Rivoli, and

Ronkainen 1989; Jeannet and Hennessey 1988).

The purpose of this article is to provide an analysis of the NTBs most likely to be encountered by

small businesses and to suggest strategies that can be used to overcome these constraints tointernational trade. NTBs are thus viewed as "restraints" to the small business international

marketing efforts that can require business strategy changes in order to adapt to marketdifferences.

NON-TARIFF BARRIERS


flows to the benefit of a particular host country. However, the success of the General Agreementon Tariffs and Trade (GATT) rounds has resulted in relatively low tariff levels (averaging

between 4 and 7 percent) among industralized countries. As tariff protection has diminished,non-tariff protection has emerged as a difficult, challenging constraint and may now be the most





not cognizant of the implications. Simply stated, NTBs provide a challenge not typically

encountered in the smaller firm's domestic markets.





trade flows.








table 1. These 20, based on our review of the literature, appear to be those most likely to beencountered by U.S. small businesses that are initiating international trade efforts. It is important

to note that NTBs are not applied uniformly from country to country or even among differentindustries in a given country. Hence, the following discussion is intended to be illustrative of the

most common types of NTBs; in specific situations, other NTBs not addressed here could bequite important.

Import quotas are fairly straight-forward quantitative restrictions on imports and may be

expressed as individual units imported or as a total value of imports. Since quotas are commonlyimposed on an annual basis, this type of NTB has the effect of forcing imports into the first part

of the year as foreign competitors rush to capture domestic share before the quota is reached andall imports cease. This NTB has implications for inventory levels (i.e., stock build up), timing of promotional efforts (i.e., early in the year), and financing and credit strategies (arranging








the types of advertising claims allowed, and ads which name competing products (i.e.,comparative advertising). Small businesses whose domestic promotional strategies rely on suchapproaches may find creating customer awareness very difficult in foreign markets.

Restrictive transportation requirements may include pallet size, container size, and material

handling limitations. Also, many less developed countries (LDCs) simply lack a reliabledomestic transportation infrastructure. China offers an excellent example of this NTB.


infrastructure development costs for airports as well as port facilities. However, these taxes often

endure well past the time necessary to offset the original capital cost and are often higher thanoperating costs would indicate. These NTBs may vary from port of entry to port of entry in thesame country. As with many other NTBs, a small business looking into foreign markets must

assess the impact of these taxes on their anticipated margins, price competitiveness, and overallfinancing goals.

Import licensing requirements can take one of two forms. First, the right to import certain types

of products can be limited through the allocation of import licenses, restricting the number of foreign competitors in a given industry. Thus, a late market entrant would be excluded from that

country. Second, import licenses may be unlimited, but the process of obtaining the license isdifficult. Due to bureaucratic delays, it may take a year or more to obtain the right to import




Customs procedures, while uniformly applied, may be an NTB through shear complexity.

Without the help of foreign-based expertise, the American small business may experience greatdifficulty in overcoming this NTB.




Arbitrary product classification refers to the sometimes unpredictable manner in which a foreigncountry classifies the small business's product(s). A given product's classification, which can be

highly subjective, affects its duty status. In some cases, the small business may be able to change





content requirements not found elsewhere. Again, product changes for the small business

represent one of the costliest changes and may therefore suggest a "no-go" entry decision.

Packaging and labeling are typically unique for each country. This NTB requires that inventory

be maintained separately for each destination country and carries with it significantly increasedfinished product inventory levels.

Low-cost government financing or direct government subsidies to domestic firms indicates therelationship between government and business in many foreign countries is much closer and

more symbiotic than in the U.S. This often results in the government, either directly or indirectly, providing loans at very favorable rates to its domestic businesses. This pattern is particularly

prevalent in the "planned" economies of the Pacific Rim.

Local content regulations are typically expressed as a minimum percentage of a product's totalvalue added that must be produced in a host country to avoid high tariffs. This can be satisfied

through acquisition of component parts, product assembly, or finish work and is intended to provide a degree of domestic employment.

Rebates of domestic taxes to exporters are often found in countries with a heavy export reliance.

Commonly, a portion of value added taxes are rebated or credited to domestic producers basedon the total value of exports. This has the effect of reducing the marginal cost associated with the

level of production that is exported. Another commonly rebated tax is the import duty on itemssuch as component parts intended for further re-export. Somewhat less common is the rebating

of tariffs on imported equipment and machinery, if the equipment or machinery is used tosupport an export directed product. The small firm that exports to such a country may actually

pay the import tax while the domestic firm receives the rebate.

Discriminatory government procurement contracts are one of the oldest and most common NTBs.

This NTB reflects the desire to spend public funds in the domestic economy. Examples of this NTB can be found in almost every country (e.g., U.S. Government purchases), and the large

volume of public expenditures in the industrialized economies makes the economic impact of this NTB significant. Bidding deadlines are also often sufficiently short to make it difficult for

foreign small businesses to effectively

Required countertrade is an NTB found primarily in developing countries and less developedcountries. The intent is to boost domestic exports while maintaining an even balance of trade. A

small business will have to carefully assess whether or not they can use and/or effectively market products they would receive as part of a countertrade arrangement.

Voluntary export restraints (VER), sometimes referred to as "orderly market arrangements," are"gentlemen's" agreements among countries that limit the level of product flows in international

trade. The internal allocation of exports is typically fixed on a base year, and market share



becomes fixed at that level. This implies that "growing" countries or firms are at a disadvantagewhile the industry leader is at a distinct advantage. Looking from the opposite side, small

businesses "late" into a market would be precluded from exporting to a country enforcing a VER.

Domestic monetary restrictions, particularly those in the less developed or newly industrialized

countries, impose limitations on the expatriation (removal) of profits from their country. Thiseffectively forces profits to be reinvested domestically. Tight controls on cash transactions arealso imposed in many countries, thus dictating cash management strategy.

Exchange rates between industrialized countries are often allowed to float within targeted ranges

while exchange rates in less developed countries are more volatile. Large differences in relativeexchange rates may result in a competitive delivered cost position in one country and a

prohibitively high delivered cost in another country. The small business manager must anticipateexchange fluctuations and deal with this NTB just as larger organizations do.

Lack of access to suitable marketing channels occurs in many of the Pacific Rim countries that

are "planned" economies requiring close coordination between government and industry. Thefrequent result of this coordination is the development of industries that are controlled byrelatively few firms. If a U.S. small business attempts to export to such a situation, it must deal

with one of the dominant firms or be shut out of the desired market.

NTB SUMMARY

The NTBs discussed above appear to be the more important ones that may occur in many foreignmarkets. However, there are numerous other NTBs that can be significant obstacles in specific

situations. Additionally, NTBs are rarely applied individually. Rather, they are often used incombination so that the effective level of protectionism can be quite high. In some cases, the

quantity and severity of a foreign country's NTBs may be such that the small business's entryinto the market is not economically viable. However, in other cases, the costs are not as large,

and knowledged of NTBs suggests to the small business why and how their current (domestic) business/marketing strategy should be altered to achieve international success.

ENTRY STRATEGIES

One small business owners/managers decide to engage in international trade, they must decidehow they are going to enter foreign markets. The alternative approaches are referred to as entry

strategies. It has been noted that closed markets (i.e., those with a high level of tariffs and/or NTBs) are the biggest challenge to firms entering international trade (Jeannet and Hennessey

1988). However, the level of protectionism encountered may be influenced by a firm's choice of entry strategies. The entry strategies of direct and indirect exporting usually face more barriers

than other strategies such as joint ventures, foreign licensing, or direct investment. Sinceexporting countries or firms gain more benefits (profits, wages, employment, etc.) than importing

countries or firms (lower prices, increased variety), many countries may discriminate againstimports. Those same countries may be very encouraging for joint ventures or licensing

agreements, however. Therefore, the selection of an entry strategy should be directly related tothe level and nature of protectionism likely to be encountered. Thus, the choice of an entry



strategy should "flow" from knowledge about specific NTBs that will be encountered. Thefollowing sections will review the various entry strategies that a small business might pursue in

relation to obstacles presented by the NTBs discussed previously.

Indirect exporting involves using a middleman to handle exporting activities. The most common

types of middlemen are export brokers and manufacturing export agents who develop expertisein particular countries. These individuals develop a network of contacts in a given country andgain experience in penetrating foreign markets. Thus, they become quite familiar with the

various NTBs in a country and are often knowledgeable about whether or not one cancircumvent trade constraints, and if so, how. By operating on a commission basis, these

middlemen represent only variable costs for the exporter. Unfortunately the use of indirectexporters typically results in the small business gaining very little direct knowledge about how

NTBs affect its success. Thus, a small business that shifts from an indirect to direct marketingexporting approach to seek more profits often does so without the aid of this significant

experience. A small business that finds success in indirect exporting may only learn that foreigndemand for its products exists in a given country. However, it may never be fully cognizant of

how or why certain NTBs affect its strategy and related success or failure.

Direct exporting typically requires that the small business assume responsibility for all theactivities necessary to deliver its product(s) to a foreign market. Such a business might hire

specialized firms to assist in fulfilling various tasks, but the ultimate responsibility rests with theexporter. Due to the higher level of involvement, small businesses gain experience in

international trade very quickly. A working, first-hand knowledge of NTBs is a major benefit of direct exporting. However, much international trade experience is unique to a given country.

Therefore, specific NTB knowledge may not be transferable to other foreign markets. One studyof small business exporters indicated that each exporter was exporting to an average of nine

countries (Kedia and Chhokar 1985). If this is typical of all small business exporters, muchmanagerial commitment and many resources will be nece

Indirect exporting involves using a middleman to handle exporting activities. The most commontypes of middlemen are export brokers and manufacturing export agents who develop expertise

in particular countries. These individuals develop a network of contacts in a given country andgain experience in penetrating foreign markets. Thus, they become quite familiar with the







specialized firms to assist in fulfilling various tasks, but the ultimate responsibility rests with the



exporter. Due to the higher level of involvement, small businesses gain experience ininternational trade very quickly. A working, first-hand knowledge of NTBs is a major benefit of

direct exporting. However, much international trade experience is unique to a given country.Therefore, specific NTB knowledge may not be transferable to other foreign markets. One study

of small business exporters indicated that each exporter was exporting to an average of nine

countries (Kedia and Chhokar 1985). If this is typical of all small business exporters, muchmanagerial commitment and many resources will be necessary to become familiar with theunique environment in each country.

Currently, the U.S. export market is dominated by large companies and multinational

corporations. Kathawaba, Judd, Monipallil, and Weinrich (1989) state that only 10 percent of thetotal U.S. export business is conducted by small business despite the fact



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that foreign markets may offer the smaller firm solid opportunities for long-term growth and

profitability. Furthermore, involvement in international business is not typically a formalobjective flowing from the strategic thought processes of most U.S. small businesses. Instead,

initial attempts to export are often stimulated by an inquiry from a potential customer located in aspecific foreign country (Suzman and Wortzel 1984, Piercy 1981). Graham and Meloan (1986)

found that 86 percent of the firms in their study initiated exporting as a result of these foreigninquiries and only 17 percent of the firms indicated that any significant research was completed before exporting began. Johnston and Czinkota (1985) had similar findings in their study of three








Although small businesses can seemingly achieve some success in exporting by waiting for foreign customers to contact them on an unsolicited basis, the more successful exporters

probably pursue a focused, planned approach that clearly identifies foreign target markets andadapts their current domestic strategy when and where necessary (Dawson 1985, Kaynak et al.

1987, Namiki 1988). While a well organized, planned entrance into international markets will

enhance the probability of success as well as the level of success (e.g., sales or profit volumes),many obstacles and challenges are likely to be encountered. These obstacles originate fromsources both internal and external to the firm.

Non-tariff barriers (NTBs) constitute a complex set of constraints that can frustrate and thwart

the small business's international efforts. Recent literature has suggested that NTBs may now bethe major obstacle faced by firms attempting to enter foreign markets (Czinkota, Rivoli, and

Ronkainen 1989; Jeannet and Hennessey 1988).

The purpose of this article is to provide an analysis of the NTBs most likely to be encountered bysmall businesses and to suggest strategies that can be used to overcome these constraints to

international trade. NTBs are thus viewed as "restraints" to the small business internationalmarketing efforts that can require business strategy changes in order to adapt to market

differences.

NON-TARIFF BARRIERS

Non-tariff barriers did not seriously affect trade flows until the mid-1960s (Baldwin 1970). Prior

to that time, tariffs (e.g., financial surcharges) were the dominant means of distorting world tradeflows to the benefit of a particular host country. However, the success of the General Agreement

on Tariffs and Trade (GATT) rounds has resulted in relatively low tariff levels (averaging between 4 and 7 percent) among industralized countries. As tariff protection has diminished,

non-tariff protection has emerged as a difficult, challenging constraint and may now be the mostsignificant trade distorting mechanism (Ray and Marvel 1984). While a free, unconstrained flow

of world trade is a theoretical economic ideal, political realities make protectionism a persistentfact of life. Thus, small businesses entering international trade markets must be familiar with the

pervasiveness of NTBs. Any encounter with NTBs can spell instant failure for the small businessnot cognizant of the implications. Simply stated, NTBs provide a challenge not typically

encountered in the smaller firm's domestic markets.

NTBs may be defined as "government laws, regulations, policies, or practices that either protectdomestic producers from foreign competition or artificially stimulate exports of particular

domestic products" (Foreign Trade Barriers 1987). For all practical purposes, this definition isnormally broadened to include private sector business practices, such as monopolistic or

oligopolistic industrial structures (e.g., closed distribution systems) that effectively precludeforeign access to domestic markets or restrain competition with domestic organizations. This broader definition is used here, and includes both public and private sector practices that distort

trade flows.




While NTBs are acknowledged to be important trade distorting mechanisms, few studies haveaddressed their strategic implications for either large or small businesses. Several studies have

categorized NTBs in some manner (Cao 1980, Onkvisit and Shaw 1988, Ray 1981, Ray andMarvel 1984). Other studies have provided comprehensive lists of possible NTBs (Organization

for Economic Cooperation and Development 1985, United Nations Conference on Trade and

Development 1983). Moreover, other studies have provided insight into the NTBs that mayinfluence a particular product (Monke and Taylor 1985) or a particular industry (Food andAgriculture Organization 1986). However, these studies generally focus on international trade

policy issues and neglect the strategic implications for businesses.

The remainder of this section will provide a brief discussion of each of the 20 NTBs presented intable 1. These 20, based on our review of the literature, appear to be those most likely to be



quite important.





Minimum import pricing is intended to provide a pricing floor which is pegged in some manner

to the domestic price structure. Depending upon the required price level, this can effectivelyincrease the domestic firm's gross profit margin and shift its marketing strategy emphasis to non-

price elements. This may be a significant strategic barrier for small businesses with generic or commodity products where product differentiation is difficult or impossible to achieve.






Port-of-entry taxes or levies are sometimes placed on imports flowing through a country's ports

of entry. The original purpose of this NTB was to generate a user-based tax to help defrayinfrastructure development costs for airports as well as port facilities. However, these taxes often

endure well past the time necessary to offset the original capital cost and are often higher thanoperating costs would indicate. These NTBs may vary from port of entry to port of entry in the



same country. As with many other NTBs, a small business looking into foreign markets mustassess the impact of these taxes on their anticipated margins, price competitiveness, and overall

financing goals.


of products can be limited through the allocation of import licenses, restricting the number of foreign competitors in a given industry. Thus, a late market entrant would be excluded from thatcountry. Second, import licenses may be unlimited, but the process of obtaining the license is

difficult. Due to bureaucratic delays, it may take a year or more to obtain the right to import products. Thus, a strategic window could close before a firm would be able to respond to a

market [TABULAR DATA OMITTED]

opportunity. Without a foreign agent or partner who "knows the system," a small business may be excluded from such markets.



Product quality or technical standards for determining a product's quality level are not uniformfrom country to country and product testing performed in one country may be of little or no

value in another country. Thus, the product testing for many products must be done in thoseforeign countries due to the unacceptability of foreign data. Also, product adaptation may be

necessary to meet unique technical requirements.

Arbitrary product classification refers to the sometimes unpredictable manner in which a foreigncountry classifies the small business's product(s). A given product's classification, which can be

highly subjective, affects its duty status. In some cases, the small business may be able to changeits classification to a more advantageous position by altering its packaging or other informational

programs.


content requirements not found elsewhere. Again, product changes for the small businessrepresent one of the costliest changes and may therefore suggest a "no-go" entry decision.

Packaging and labeling are typically unique for each country. This NTB requires that inventory

be maintained separately for each destination country and carries with it significantly increasedfinished product inventory levels.

Low-cost government financing or direct government subsidies to domestic firms indicates the

relationship between government and business in many foreign countries is much closer andmore symbiotic than in the U.S. This often results in the government, either directly or indirectly,

providing loans at very favorable rates to its domestic businesses. This pattern is particularly prevalent in the "planned" economies of the Pacific Rim.



Local content regulations are typically expressed as a minimum percentage of a product's totalvalue added that must be produced in a host country to avoid high tariffs. This can be satisfied

through acquisition of component parts, product assembly, or finish work and is intended to provide a degree of domestic employment.

Rebates of domestic taxes to exporters are often found in countries with a heavy export reliance.Commonly, a portion of value added taxes are rebated or credited to domestic producers basedon the total value of exports. This has the effect of reducing the marginal cost associated with the




Discriminatory government procurement contracts are one of the oldest and most common NTBs.This NTB reflects the desire to spend public funds in the domestic economy. Examples of this

NTB can be found in almost every country (e.g., U.S.G

overnment purchases), and the largevolume of public expenditures in the industrialized economies makes the economic impact of

this NTB significant. Bidding deadlines are also often sufficiently short to make it difficult for foreign small businesses to effectively respond.



Voluntary export restraints (VER), sometimes referred to as "orderly market arrangements," are

"gentlemen's" agreements among countries that limit the level of product flows in internationaltrade. The internal allocation of exports is typically fixed on a base year, and market share



Domestic monetary restrictions, particularly those in the less developed or newly industrializedcountries, impose limitations on the expatriation (removal) of profits from their country. This

effectively forces profits to be reinvested domestically. Tight controls on cash transactions arealso imposed in many countries, thus dictating cash management strategy.

Exchange rates between industrialized countries are often allowed to float within targeted rangeswhile exchange rates in less developed countries are more volatile. Large differences in relative

exchange rates may result in a competitive delivered cost position in one country and a prohibitively high delivered cost in another country. The small business manager must anticipate

exchange fluctuations and deal with this NTB just as larger organizations do.

Lack of access to suitable marketing channels occurs in many of the Pacific Rim countries thatare "planned" economies requiring close coordination between government and industry. The



frequent result of this coordination is the development of industries that are controlled byrelatively few firms. If a U.S. small business attempts to export to such a situation, it must deal

with one of the dominant firms or be shut out of the desired market.

NTB SUMMARY



quantity and severity of a foreign country's NTBs may be such that the small business's entryinto the market is not economically viable. However, in other cases, the costs are not as large,

and knowledged of NTBs suggests to the small business why and how their current (domestic) business/marketing strategy should be altered to achieve international success.

ENTRY STRATEGIES

One small business owners/managers decide to engage in international trade, they must decidehow they are going to enter foreign markets. The alternative approaches are referred to as entry

strategies. It has been noted that closed markets (i.e., those with a high level of tariffs and/or NTBs) are the biggest challenge to firms entering international trade (Jeannet and Hennessey

1988). However, the level of protectionism encountered may be influenced by a firm's choice of entry strategies. The entry strategies of direct and indirect exporting usually face more barriers

than other strategies such as joint ventures, foreign licensing, or direct investment. Sinceexporting countries or firms gain more benefits (profits, wages, employment, etc.) than importing

countries or firms (lower prices, increased variety), many countries may discriminate againstimports. Those same countries may be very encouraging for joint ventures or licensing

agreements, however. Therefore, the selection of an entry strategy should be directly related tothe level and nature of protectionism likely to be encountered. Thus, the choice of an entry

strategy should "flow" from knowledge about specific NTBs that will be encountered. Thefollowing sections will review the various entry strategies that a small business might pursue in

relation to obstacles presented by the NTBs discussed previously.




middlemen represent only variable costs for the exporter. Unfortunately the use of indirectexporters typically results in the small business gaining very little direct knowledge about how NTBs affect its success. Thus, a small business that shifts from an indirect to direct marketing

exporting approach to seek more profits often does so without the aid of this significantexperience. A small business that finds success in indirect exporting may only learn that foreign

demand for its products exists in a given country. However, it may never be fully cognizant of how or why certain NTBs affect its strategy and related success or failure.





international trade very quickly. A working, first-hand knowledge of NTBs is a major benefit of

direct exporting. However, much international trade experience is unique to a given country.Therefore, specific NTB knowledge may not be transferable to other foreign markets. One studyof small business exporters indicated that each exporter was exporting to an average of nine

countries (Kedia and Chhokar 1985). If this is typical of all small business exporters, muchmanagerial commitment and many resources will be necessary to become familiar with the

unique environment in each country.

Licensing allows a foreign firm to produce and/or market product(s) in return for an initial feeand a royalty on each unit sold. License agreements may include patents, copyrights, production

and technical expertise, etc. The license agreement normally specifies geographical and timehorizon agreements. This entry strategy requires little initial cash investment by the domestic

small business, but it does require careful research in identifying the possible foreign firm(s) tolicense. Foreign licensing can provide additional cash flow to defray product development costs

and effectively extend product life cycles. A possible limitation of foreign licensing is theemergence of the foreign licensee as a competitor in other markets. Also, countries with currency

restrictions make the repatriation of royalty earnings difficult. The small business may also haveto buy products for export in the host country, import the products to the United States, and sell

the product to realize the royalty earnings (that is, it may have to countertrade).

Franchising is essentially an advanced form of licensing that results in a much higher level of control by the franchisor. The franchisor typically provides marketing programs, training,

managerial support, and operations policies and guidelines. As with licensing, franchisingusually requires a foreign firm to pay an initial franchise fee and subsequent royalties with little

direct foreign investment required by the franchisor. The problems of franchisee selection, product adaptation, and repatriation of royalty fees are the primary constraints.

Joint ventures typically involve equity infusions from both the host country small business firmand the foreign firm. To be successful, both partners must have goal congruity and clearly

defined responsibility. Often the host country partner will maintain operating control. Jointventures often are intended to circumvent protectionistic barriers due to import restraints or

restrictions on foreign business ownership. The problems with cultural differences, divergentgoals, and disputes over control and responsibility are the major difficulties in joint venture

relationships. These relationships, to be successful, require a substantial amount of research andinformation seeking. Many small businesses lack the resources and commitment to fully develop

meaningful joint ventures.

Wholly-owned subsidiaries usually involve larger multinational co

Wholly-owned subsidiaries usually involve larger multinational corporations pursuing a direct

investment strategy. A more recent type of international strategy (strategic alliances) occurswhen two firms agree to share resources and expertise. While both of these strategies are



common among larger firms, they are typically beyond the resources of most small businesses.Therefore, smaller firms are unlikely to use these strategies.

IMPLICATIONS

The selection of an entry strategy is a result of both internal and external analysis. The internalanalysis focuses on resources that a small business has at its disposal and management'swillingness to commit resources to international marketing efforts. If a firm has a limited

resource base, it may lack the ability to make a long-term investment to penetrate a foreignmarket through internal efforts. In this situation, pursuing indirect exporting through the use of

export agents or brokers may be the most appropriate entry strategy. Similarly, a small businessthat has excess productive capacity may be looking for a short-term market to reduce inventory.

This situation would also favor the indirect exporting strategy. Conversely, if a firm anticipatessignificant potential in foreign markets, possesses sufficient resources, and is committed to a

strategic focus on international markets, a direct exporting or joint venture entry strategy may bemore appropriate. However, such a strategy may take years to implement and require significant

managerial commitment and financial resources. Thus, the longer term a firm's commitment tointernational marketing is, the more appropriate the more complex entry strategies.

The external analysis consists of identifying market potential, evaluating the competitivesituation, and assessing the environment for international trade. The focus of this article was on

the environmental constraints of diverse protectionistic measures exemplified by non-tariff barriers (NTBs), but the foreign market potential and foreign competitors also influence the

international trade decision and are quite important. The small business considering internationaltrade must gather considerable data to make effective "go/no-go" and "how to" decisions.

Assuming that a small business decides to conduct research on the international trade

opportunities and obstacles prior to developing an entry strategy, the first step must beinformation acquisition. Sources of information are diverse and variable from state to state and

from country to country. Table 2 presents a summary of sources commonly available. Due to thegeographical diversity, these types of organizations may not exist in all states, or they may be

supplemented by other organizations in some states. However, the sources will provide thestarting point for information acquisition.

Many of the foreign organizations fulfill a somewhat different role than their U.S. equivalents.

For example, banks play a more active trade development role in many foreign countries than inthe U.S. Accounting firms provide a diverse array of services overseas, much broader than found

in the U.S. Thus, business people seeking information should not be restricted by their perceptions of what services will be available. The original role of the Japanese External Trade

Organization (JETRO) was to encourage and facilitate Japanese exports. However, the current primary role of JETRO is to facilitate imports into Japan. Therefore, JETRO now providesextensive data bases on market potential in Japan.

When evaluating the array of entry strategies, it is essential for a small business to take a long-

term perspective. Some



[TABULAR DATA OMITTED]

marketing mix variables, such as pricing and promotion, can be changed very quickly, but other mix variables, such as product features and channels of distribution, are much more costly to

change. Since selection of an entry strategy is, at least, an implicit selection of a distribution

channel, a small business must carefully consider its long-term international business goals. If the long-term goal is to establish a permanent presence in foreign markets, then investing thetime and money to pursue direct exporting would probably be justified. Due to a greater level of

managerial control, direct exporting also holds more sales and profit potential over the long term.Conversely, if a small business is simply experimenting with exporting to reduce inventory or to

determine if foreign demand exists, then an indirect exporting strategy, which requires lesscommitment, may be more appropriate. Knowledge of NTBs should dramatically aid the small

business in assessing this risk/return tradeoff.

Currently, the U.S. export market is dominated by large companies and multinationalcorporations. Kathawaba, Judd, Monipallil, and Weinrich (1989) state that only 10 percent of the

total U.S. export business is conducted by small business despite the fact



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that foreign markets may offer the smaller firm solid opportunities for long-term growth and

profitability. Furthermore, involvement in international business is not typically a formalobjective flowing from the strategic thought processes of most U.S. small businesses. Instead,

initial attempts to export are often stimulated by an inquiry from a potential customer located in aspecific foreign country (Suzman and Wortzel 1984, Piercy 1981). Graham and Meloan (1986)

found that 86 percent of the firms in their study initiated exporting as a result of these foreigninquiries and only 17 percent of the firms indicated that any significant research was completed

before exporting began. Johnston and Czinkota (1985) had similar findings in their study of threeindustries. Only 38 percent, 50 percent, and 53 percent of the firms in each industry actively

sought their first foreign order; conversely, between 47 percent and 62 percent of these firmsreceived their first order on an unsolicited basis. Thus, despite the potential for sales growth and

the existence of numerous government and private sector support programs, it appears that themajority of American small businesses begin exporting because someone overseas seeks them



and/or their product, not because of a planned marketing strategy to enter a foreign market.Ironically, very few small businesses attempting to compete domestically would admit that they

can be successful by waiting for customers to come to them. It may be just as illogical to expecthigh levels of international marketing success by taking this reactive approach.

Although small businesses can seemingly achieve some success in exporting by waiting for foreign customers to contact them on an unsolicited basis, the more successful exporters probably pursue a focused, planned approach that clearly identifies foreign target markets and

adapts their current domestic strategy when and where necessary (Dawson 1985, Kaynak et al.1987, Namiki 1988). While a well organized, planned entrance into international markets will

enhance the probability of success as well as the level of success (e.g., sales or profit volumes),many obstacles and challenges are likely to be encountered. These obstacles originate from

sources both internal and external to the firm.

Non-tariff barriers (NTBs) constitute a complex set of constraints that can frustrate and thwartthe small business's international efforts. Recent literature has suggested that NTBs may now be

the major obstacle faced by firms attempting to enter foreign markets (Czinkota, Rivoli, andRonkainen 1989; Jeannet and Hennessey 1988).

The purpose of this article is to provide an analysis of the NTBs most likely to be encountered bysmall businesses and to suggest strategies that can be used to overcome these constraints to

international trade. NTBs are thus viewed as "restraints" to the small business internationalmarketing efforts that can require business strategy changes in order to adapt to market

differences.

NON-TARIFF BARRIERS


flows to the benefit of a particular host country. However, the success of the General Agreementon Tariffs and Trade (GATT) rounds has resulted in relatively low tariff levels (averaging

between 4 and 7 percent) among industralized countries. As tariff protection has diminished,non-tariff protection has emerged as a difficult, challenging constraint and may now be the most



not cognizant of the implications. Simply stated, NTBs provide a challenge not typicallyencountered in the smaller firm's domestic markets.

NTBs may be defined as "government laws, regulations, policies, or practices that either protectdomestic producers from foreign competition or artificially stimulate exports of particular

domestic products" (Foreign Trade Barriers 1987). For all practical purposes, this definition isnormally broadened to include private sector business practices, such as monopolistic or

oligopolistic industrial structures (e.g., closed distribution systems) that effectively precludeforeign access to domestic markets or restrain competition with domestic organizations. This



broader definition is used here, and includes both public and private sector practices that distorttrade flows.


While NTBs are acknowledged to be important trade distorting mechanisms, few studies haveaddressed their strategic implications for either large or small businesses. Several studies havecategorized NTBs in some manner (Cao 1980, Onkvisit and Shaw 1988, Ray 1981, Ray and





table 1. These 20, based on our review of the literature, appear to be those most likely to beencountered by U.S. small businesses that are initiating international trade efforts. It is importantto note that NTBs are not applied uniformly from country to country or even among different


quite important.
















infrastructure development costs for airports as well as port facilities. However, these taxes oftenendure well past the time necessary to offset the original capital cost and are often higher than

operating costs would indicate. These NTBs may vary from port of entry to port of entry in the

same country. As with many other NTBs, a small business looking into foreign markets mustassess the impact of these taxes on their anticipated margins, price competitiveness, and overallfinancing goals.


of products can be limited through the allocation of import licenses, restricting the number of foreign competitors in a given industry. Thus, a late market entrant would be excluded from that

country. Second, import licenses may be unlimited, but the process of obtaining the license isdifficult. Due to bureaucratic delays, it may take a year or more to obtain the right to import









Arbitrary product classification refers to the sometimes unpredictable manner in which a foreign

country classifies the small business's product(s). A given product's classification, which can behighly subjective, affects its duty status. In some cases, the small business may be able to change


Safety and health requirements can be an obstacle as many countries have unique productcontent requirements not found elsewhere. Again, product changes for the small business

represent one of the costliest changes and may therefore suggest a "no-go" entry decision.

Packaging and labeling are typically unique for each country. This NTB requires that inventory be maintained separately for each destination country and carries with it significantly increased

finished product inventory levels.

Low-cost government financing or direct government subsidies to domestic firms indicates the

relationship between government and business in many foreign countries is much closer and



more symbiotic than in the U.S. This often results in the government, either directly or indirectly, providing loans at very favorable rates to its domestic businesses. This pattern is particularly

prevalent in the "planned" economies of the Pacific Rim.

Local content regulations are typically expressed as a minimum percentage of a product's total

value added that must be produced in a host country to avoid high tariffs. This can be satisfiedthrough acquisition of component parts, product assembly, or finish work and is intended to provide a degree of domestic employment.

Rebates of domestic taxes to exporters are often found in countries with a heavy export reliance.

Commonly, a portion of value added taxes are rebated or credited to domestic producers basedon the total value of exports. This has the effect of reducing the marginal cost associated with the




Discriminatory government procurement contracts are one of the oldest and most common NTBs.

This NTB reflects the desire to spend public funds in the domestic economy. Examples of this NTB can be found in almost every country (e.g., U.S. Government purchases), and the large

volume of public expenditures in the industrialized economies makes the economic impact of this NTB significant. Bidding deadlines are also often sufficiently short to make it difficult for

foreign small businesses to effectively respond.



Voluntary export restraints (VER), sometimes referred to as "orderly market arrangements," are

"gentlemen's" agreements among countries that limit the level of product flows in internationaltrade. The internal allocation of exports is typically fixed on a base year, and market share



Domestic monetary restrictions, particularly those in the less developed or newly industrialized

countries, impose limitations on the expatriation (removal) of profits from their country. Thiseffectively forces profits to be reinvested domestically. Tight controls on cash transactions are

also imposed in many countries, thus dictating cash management strategy.

Exchange rates between industrialized countries are often allowed to float within targeted rangeswhile exchange rates in less developed countries are more volatile. Large differences in relative

exchange rates may result in a competitive delivered cost position in one country and a



prohibitively high delivered cost in another country. The small business manager must anticipateexchange fluctuations and deal with this NTB just as larger organizations do.

Lack of access to suitable marketing channels occurs in many of the Pacific Rim countries that

are "planned" economies requiring close coordination between government and industry. The

frequent result of this coordination is the development of industries that are controlled byrelatively few firms. If a U.S. small business attempts to export to such a situation, it must dealwith one of the dominant firms or be shut out of the desired market.

NTB SUMMARY



quantity and severity of a foreign country's NTBs may be such that the small business's entry

into the market is not economically viable. However, in other cases, the costs are not as large,and knowledged of NTBs suggests to the small business why and how their current (domestic) business/marketing strategy should be altered to achieve international success.

ENTRY STRATEGIES

One small business owners/managers decide to engage in international trade, they must decide

how they are going to enter foreign markets. The alternative approaches are referred to as entrystrategies. It has been noted that closed markets (i.e., those with a high level of tariffs and/or

NTBs) are the biggest challenge to firms entering international trade (Jeannet and Hennessey1988). However, the level of protectionism encountered may be influenced by a firm's choice of

entry strategies. The entry strategies of direct and indirect exporting usually face more barriersthan other strategies such as joint ventures, foreign licensing, or direct investment. Since

exporting countries or firms gain more benefits (profits, wages, employment, etc.) than importingcountries or firms (lower prices, increased variety), many countries may discriminate against

imports. Those same countries may be very encouraging for joint ventures or licensingagreements, however. Therefore, the selection of an entry strategy should be directly related to

the level and nature of protectionism likely to be encountered. Thus, the choice of an entrystrategy should "flow" from knowledge about specific NTBs that will be encountered. The

following sections will review the various entry strategies that a small business might pursue inrelation to obstacles presented by the NTBs discussed previously.












international trade very quickly. A working, first-hand knowledge of NTBs is a major benefit of direct exporting. However, much international trade experience is unique to a given country.

Therefore, specific NTB knowledge may not be transferable to other foreign markets. One studyof small business exporters indicated that each exporter was exporting to an average of nine

countries (Kedia and Chhokar 1985). If this is typical of all small business exporters, muchmanagerial commitment and many resources will be necessary to become familiar with the

unique environment in each country.

Licensing allows a foreign firm to produce and/or market product(s) in return for an initial feeand a royalty on each unit sold. License agreements may include patents, copyrights, production

and technical expertise, etc. The license agreement normally specifies geographical and timehorizon agreements. This entry strategy requires little initial cash investment by the domestic

small business, but it does require careful research in identifying the possible foreign firm(s) tolicense. Foreign licensing can provide additional cash flow to defray product development costs

and effectively extend product life cycles. A possible limitation of foreign licensing is theemergence of the foreign licensee as a competitor in other markets. Also, countries with currency

restrictions make the repatriation of royalty earnings difficult. The small business may also haveto buy products for export in the host country, import the products to the United States, and sell

the product to realize the royalty earnings (that is, it may have to countertrade).

Franchising is essentially an advanced form of licensing that results in a much higher level of

control by the franchisor. The franchisor typically provides marketing programs, training,managerial support, and operations policies and guidelines. As with licensing, franchising

usually requires a foreign firm to pay an initial franchise fee and subsequent royalties with littledirect foreign investment required by the franchisor. The problems of franchisee selection,

product adaptation, and repatriation of royalty fees are the primary constraints.

Joint ventures typically involve equity infusions from both the host country small business firmand the foreign firm. To be successful, both partners must have goal congruity and clearly

defined responsibility. Often the host country partner will maintain operating control. Jointventures often are intended to circumvent protectionistic barriers due to import restraints or

restrictions on foreign business ownership. The problems with cultural differences, divergentgoals, and disputes over control and responsibility are the major difficulties in joint venture

relationships. These relationships, to be successful, require a substantial amount of research andinformation seeking. Many small businesses lack the resources and commitment to fully develop

meaningful joint ventures.



Wholly-owned subsidiaries usually involve larger multinational corporations pursuing a directinvestment strategy. A more recent type of international strategy (strategic alliances) occurs

when two firms agree to share resources and expertise. While both of these strategies arecommon among larger firms, they are typically beyond the resources of most small businesses.

Therefore, smaller firms are unlikely to use these strategies.

IMPLICATIONS

The selection of an entry strategy is a result of both internal and external analysis. The internalanalysis focuses on resources that a small business has at its disposal and management's

willingness to commit resources to international marketing efforts. If a firm has a limitedresource base, it may lack the ability to make a long-term investment to penetrate a foreign

market through internal efforts. In this situation, pursuing indirect exporting through the use of export agents or brokers may be the most appropriate entry strategy. Similarly, a small business

that has excess productive capacity may be looking for a short-term market to reduce inventory.This situation would also favor the indirect exporting strategy. Conversely, if a firm anticipates

significant potential in foreign markets, possesses sufficient resources, and is committed to astrategic focus on international markets, a direct exporting or joint venture entry strategy may be

more appropriate. However, such a strategy may take years to implement and require significantmanagerial commitment and financial resources. Thus, the longer term a firm's commitment to

international marketing is, the more appropriate the more complex entry strategies.

The external analysis consists of identifying market potential, evaluating the competitive

situation, and assessing the environment for international trade. The focus of this article was onthe environmental constraints of diverse protectionistic measures exemplified by non-tariff

barriers (NTBs), but the foreign market potential and foreign competitors also influence theinternational trade decision and are quite important. The small business considering international

trade must gather considerable data to make effective "go/no-go" and "how to" decisions.

Assuming that a small business decides to conduct research on the international tradeopportunities and obstacles prior to developing an entry strategy, the first step must be

information acquisition. Sources of information are diverse and variable from state to state andfrom country to country. Table 2 presents a summary of sources commonly available. Due to the

geographical diversity, these types of organizations may not exist in all states, or they may besupplemented by other organizations in some states. However, the sources will provide the

starting point for information acquisition.

Many of the foreign organizations fulfill a somewhat different role than their U.S. equivalents.For example, banks play a more active trade development role in many foreign countries than in

the U.S. Accounting firms provide a diverse array of services overseas, much broader than foundin the U.S. Thus, business people seeking information should not be restricted by their perceptions of what services will be available. The original role of the Japanese External Trade

Organization (JETRO) was to encourage and facilitate Japanese exports. However, the current primary role of JETRO is to facilitate imports into Japan. Therefore, JETRO now provides

extensive data bases on market potential in Japan.



When evaluating the array of entry strategies, it is essential for a small business to take a long-term perspective. Some

[TABULAR DATA OMITTED]

marketing mix variables, such as pricing and promotion, can be changed very quickly, but other mix variables, such as product features and channels of distribution, are much more costly tochange. Since selection of an entry strategy is, at least, an implicit selection of a distribution

channel, a small business must carefully consider its long-term international business goals. If the long-term goal is to establish a permanent presence in foreign markets, then investing the

time and money to pursue direct exporting would probably be justified. Due to a greater level of managerial control, direct exporting also holds more sales and profit potential over the long term.

Conversely, if a small business is simply experimenting with exporting to reduce inventory or todetermine if foreign demand exists, then an indirect exporting strategy, which requires less

commitment, may be more appropriate. Knowledge of NTBs should dramatically aid the small business in assessing this risk/return tradeoff.

CONCLUSION

International trade is often viewed as a complex, high-risk activity for small businesses. It isinteresting (but not surprising) to note that small businesses involved in exporting have

consistently more favorable attitudes toward exporting than firms not engaged in exporting(Kedia and Chhokar 1985, Johnston and Czinkota 1985, Cavusgil and Nevin 1981). Thus,

negative perceptions of exporting may be a significant deterrent to initiating export efforts.

If closed markets are the biggest challenge to international trade, as suggested by Jeannet andHennessey (1988), then studying the level of protectionism must be a major part of market

analysis. With the decreasing level of tariffs and increased use of NTBs instead as tradedistorting measures, the study of NTBs in a particular country of interest seems to be a critical

starting point for the small business contemplating business in foreign markets.

A major determinant of success in international business is managerial commitment to

international activities (Cavusgil and Nevin 1981). To overcome the array of important NTBsfound in foreign markets, a small business must be strongly committed to international trade.

This is likely to be reflected in an aggressive, opportunistic approach to international efforts andwill clearly require a long-term commitment and a well-designed strategy. Specifically,

overcoming NTBs requires a well-organized effort that extends over a period of several years.Furthermore, the choice of entry strategies (exporting, foreign direct investment, joint ventures,

acquisition, mergers, etc.) must reflect the relative importance of NTBs as an environmentalconstraint in a given country. Overlooking the importance of this environmental constraint can

lead to failure of a small business's attempt to enter international markets.

Dr. Naumann is associate professor of marketing at Boise State University. His current researchareas include a variety of international marketing issues. He has conducted numerous

international research projects in the Pacific Rim.



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