Hence the slowly changing demand abroad enables the American exporting firm to temper the more or less sudden changes in the domestic market and to do so gradually, and without great, if any, loss of invest ment. Machinery and partly finished products need not always be scrapped for they can perhaps be used up in supplying the foreign consumer.
7. Seasonal demands offset each other.—Many products are subject to seasonal demand. Such goods are produced at relatively .high cost. Accord ingly, unless some other provision is made for its use, the machinery needed for a full-capacity output will for months stand idle either wholly or in part. This is expensive. On the other hand where the factory Is kept running thruout the year, a large stock of fin ished goods is accumulated during the slack season that may exceed the demand coming later. This again is expensive.
Where an active foreign market is available, the situation is much more favorable. When it is winter in the United States, summer dresses and straw hats are in demand in the Southern hemisphere. A fac tory supplying both North and South America need never stand idle. Less risk attends its enlargement. With the demand extending thru the year, it is not necessary to accumulate large stocks of finished goods. The demand can be largely, if not wholly, supplied as it arises.
8. Dumping as a business policy.—Where the do mestic market is limited in its power to absorb certain goods the development of foreign markets may pre sent itself as the only means of securing the advan tages of large scale production. In either case, it improves his competitive position at home. He may sell in the foreign market at cost and take his profit in the home market. Even if he has to sell there at a figure below cost he may still make a larger total profit than before his expansion. This selling in foreign markets at a price below the domestic market price and sometimes even below cost, is called "dumping." Foreign dumping by American manufacturers is not necessarily at the expense of the domestic con siner. He may get his products cheaper than he could have bought them before as a result of the large scale production made possible by it, tho to be sure not so cheaply as the foreigner.
In most discussions of dumping it seems to be as sumed that such a policy must, in the nature of the case, be temporary inasmuch as no sane manufacturer could be expected in the long run to sell below cost.
It should be clear, however, from what has been said that dumping may be carried on for an indefinite period.
9. Educational value of foreign the least of the advantages of carrying on an export trade is the broadening effect which a careful study of for eign markets, customs and languages gives. The pleasure and intellectual profit that comes from an understanding of unfamiliar conditions, from the widening of one's horizon, is in itself a compensation for much of the effort expended. The experience gained in foreign lands is also an aid in solving do mestic problems. Lastly, foreign trade introduces an element of adventure and romance into the humdrum of the daily routine, and thus invigorates the staff promotes cooperation and efficiency.
10. The character of foreign competition.—In the foreign markets as at home, price, quality and service constitute the three weapons in the competitive strug gle. Speaking in general terms, that firm is certain to conquer the trade in any market which can prove conclusively to the prospective buyer that it excels in supplying these three factors in the largest degree. Where the price is not as favorable as that offered by other firms, especially good quality or superior service may save the day.
11. Price.—Price is naturally the strongest selling argument. If then we consider the high wages paid American workmen and the short hours of work, it seems that these place the American manufacturer in a most unfavorable position to compete with the lower wages and longer hours of foreign factories. Yet the fact is that the very industries where labor consti tutes a relatively important part of the cost of pro duction have been most successful in meeting foreign competition. The American automobile, typewriter and shoe industries have underbid all rivals. The industrial changes which have taken place in the Eu ropean countries as a result of the war, involving an increased use of labor-saving machinery and more ef ficient management, can hardly fail, however, to modify his advantage.