The Exporting Option

For the newcomer to the international scene, the exporting option is often the most attractive mode of
foreign entry. Then, sometimes it is just through the experience of exporting that the idea of a full-
fledged market entry is developed. At any rate,when unsolicited orders have started flowing in from
abroad, the firm begins to pay more attention to the potential in foreign markets, and exporting
becomes the natural first step.

Indirect Exporting

 The simplest way to manage the firm’s export business is to employ outside specialists
 The firm may hire a trading company, which becomes the “export department” for the
producer.

Advantage

1. no or very few extra staff required

2. agent knows and has access to the market and distribution channels
3. more complete market coverage possible
4. smaller financial risks
5. Identify customer market new market opportunities for products
6. Translate and act as an interpreter in business dealings
7. Assisting with local travel or living arrangements
8. Arrangements with local government regulations
9. Not assuming the rusk of market response

Disadvantages

1. lower profit margins

2. dependence on commitment of partner
3. no direct customer contact
4. Numerous business for the buyer
5. Using intermediaries lowers final profit
6. Losing control of the final product.

In the United States the arrangement whereby an export management company (EMC) performs all the
transactions relating to foreign trade for the firm has a similar character. EMCs are independent agents
working for the firm in overseas mar- kets, going to fairs, contacting distributors, organizing service, and
so on. They serve basically as an external “export department” for the firm.
This type of “indirect” exporting has its great advantage in that the firm avoids the overhead costs and
administrative burden involved in managing their own export affairs. On the other hand, there is the
disadvantage that the skills and know-how developed through experiences abroad are accumulated
outside the firm, not in it.

Direct Exporting

 Has the advantage over indirect exporting in the control of operations it affords the producer
 The firm is able to more directly influence the marketing effort in the foreign market
 The firm know how to operate abroad Without involvement in the day-to-day operations of
overseas affairs, the firm will not generate much in-house knowledge.
 For the direct exporter, the principal choice is between establishing a sales subsidiary or
employing independent middlemen.

Advantages

1. Direct customer contact

2. Higher profit margins
3. Independence from foreign partners
4. Saves cost in making and marketing the product
5. Overseas facilities
6. Minimizes risk of starting business abroad
7. Fast entry to a market
8. Sell excess production capacity
9. Obtain info about foreign competitors
10. Stabilizing seasonal market fluctuations
11. Reduces dependence on existing market

Disadvantages

1. greater financial risks

2. investment of time and staff
3. limited market coverage
4. insufficient knowledge of market and culture
5. Expensive tariff cost, marketing and exporting
6. Difficulty coordinating operations
7. Limited access to local market intelligence
8. Being "the outsider" in the local market
The Exporting Tasks

 There are many separate functions to be managed in direct exporting. Some of them, such as
those relating to legal issues, are only marginally related to marketing, while others, such as
after-sales support, directly relate to customer acceptance.
 Many of the functions can be handled by independent specialists who can be found through
department of commerce contacts, at industry fairs and conventions, through the local
telephone directories, or by contacting the consulate.