EXPORT CONSULTANCY SERVICES In today’s globalization era, it has become imperative for

companies to expand outside their home markets in order to survive.

With margins shrinking in the domestic markets due to competition from small size vendors; large companies have been forced to expand their operations in other countries

. Organizations face severe challenges while expanding their operations outside their home territories. These challenges could be linguistic, cultural, or legal. Companies also face regulatory problems due to their limited knowledge about local business practices;

it is at this juncture that business consulting services prove to be useful

DEFINITION OF EXPORT CONSULTANCY SERVICES

includes services contracted for and provided to organizations byspecially trained and qualified persons, who assist in an objective and independent manner.

The client organization to identify management problems, analyze such problems, recommendsolutions to these problems, and help, when requested, in the implementation of solutions.

These business consulting outfits provide information, consulting, and insights to exporters so that they can take accurate decisions.

Most of these agencies are staffed with professionals who have decades of experience in international sales management and export consulting.

Availing the services of these business consulting outfits will helps to acquire the know-how to penetrate foreign markets successfully. If you are looking for a suitable acquisition target to complement your existing bouquet of services then these consulting outfits will help you search for the right company for acquisition or investment.

These agencies suggest acquisition targets only after doing a thorough analysis of the target company’s business model and financials

SERVICES PROVIDED BY EXPORT CONSULTANCY

CONTD….. Usually services begin right from the first client

meeting till the signing of the contract. If clients want assistance during business

negotiations or while drafting business contracts these agencies will help them with this also.

Assistance with respect to sourcing of suppliers is also provided.

Whether you are looking for new equipment manufacturers or procurement vendors these agencies will assist you on all these counts helping you to stay competitive in the marketplace

CONTD….

Some of these business-consulting outfits also offer linguistic support enabling you to enter those markets where English is not the native language.

In fact, English is the native language of less than ten percent of the global population which highlights how important these agencies are for international business development.

This type of translation support proves very crucial while translating brochures, advertising texts, contacts, web pages and similar such marketing literature.

Though these business consulting services are slightly costly but the experience of companies who have availed these services is that the return on investment far exceeds the investments made

India’s Growing service sector

India’s services sector has matured considerably during the last few years and has been globally recognized for its high growth and development. This sector has been growing at an annual growth rate of about 28% during the last 5 years. Services exports amounted to a meager US$ 8.9 billion in 1997 but over the years services exports have  grown substantially. There has been rapid growth in the services exports from the year 2002. The exports have grown up from US $ 19.1 billion to US $ 73 billion in 2006. Presently services sector account for about 55% of India’s GDP

Contd.. India’s share in worldwide service

exports  is expected to almost triple itself from current 2.3 % to 6 % by 2012, if the present  annual growth rate of 28% has been maintained. India’s global exports of commercial services during the last 10 years can be seen from the table below –

 

India’s Years ExportsUS $ (Billion 1997 8.9 1998 11.0 1999 14.0 2000 16.0 2001 16.8 2002 19.1 2003 23.1 2004 38.5 2005 68.0 2006 73.0 Source: WTO

BPO IMP.

Business process outsourcing (an important source of services export income) in India

such as data entry, insurance claims, call centres and database services, grew at an

extraordinary 100 per cent per annum in the five years t

TYPE OF SERVICES

Management Consultancy Advertisement Manpower recruitment Business Auxiliary Consulting Engineer / IPR Insurance Banking & financial Telephone

Type of export of services Advertising agency (e) * Banking and Financial services (zm) *

Broadcasting (zk) * Business auxiliary services (zzb) * Cable Operator (zs) * Computer network (On-line information and data base access or retrieval) (zh) * Consulting Engineer (g)

Facsimile (FAX) (zg) * Foreign exchange broking (zzk) * Franchise (zze) * General insurance of other than immovable property (d) * Insurance Auxiliary (zy and zl) * Intellectual property  (zzr)

Leased circuit (zd) * Life insurance  (zx) * Management Consultant (r) * Mailing list compilation and mailing (zzzg) * Manpower recruitment agency (k) * Pager (c) * Programme Producer (of TV or Radio programmes) (zzu)

Rail travel agent (zz) * Scientific and technical consultancy (za) * Survey and map making of other than immovable property (zzzc) * Telegraph (ze) * Telephone (b) * Telex (zf) * Transport of goods through pipeline or other conduit (zzz)

Meaning of Export of Service – Example

EXPORT OF SERVICE

A Inc. (Non resident)(Instructor)

X Ltd.(resident) (Service Provider)

P Ltd. (resident)(Beneficiary of Service)

-Whether export of service

- Residence not essential for Category 2

EXPORT OF SERVICES

Outside India

Overseas MT Agency (Bank)

Overseas MT Agency (Bank)

Mr. XSends money

(Service Recipient)

Mr. XSends money

(Service Recipient)

Representative of Overseas Bank

Representative of Overseas Bank

In India

Pay

Mon

ey

Indian BeneficiaryMr. Y

Indian BeneficiaryMr. Y

Confirm Payment

Reimbursement

App

roac

h R

ep.

Pay

Mon

ey

CODE

Distinction between Service & Activity

Example of export services

Services relating to property :

e.g. General Ins., Architect, Interior Decorator, Real Estate Agent, Construction, Site preparation, Dredging/ Map making

Rule : Property should be outside India

EXPORT SERVICES : Rule 3 (ii)

Service provided from India

Used in business or for any other purpose outside India; and

Payment in convertible currency

Clients

• Most consultancy assignments originate with the request from the client.

A useful technique for identifying the real decision-maker early in the project is to propose several reasonable outcomes for the client's problem.

• The response to these reasonable ideas indicates whether or not the consultant is dealing with the real client, the decision-maker. In consulting sector, the clients are broadly classified into different categories i.e. Government institutions, funding agencies (Bilateral Agencies andMultilateral Agencies), corporate clients and others like Non Government organisations

Size of the Consultancy sector in India

• The development of consultancy capabilities and business is directly proportional to growth ineconomic and industrial development. Due to the nature of the industry, getting accurate estimates of its size is difficult. It is estimated that the consultancy business in India engages about 100,000 persons in about 5000 consulting firms. According to estimates, the current size of the consulting industry in India is about Rs. 10,000 crores including exports and is expected

to grow at a CAGR of approximate 25% in the next few years.

Competitiveness of Indian Consultancy Exports

• International firms are larger in size and operate across countries which give them market access to these countries and also the opportunity to tap the market for consulting business.However Indian consulting organisations are growing with great pace to compete with international organisations

• Local presence in the countries benefits multinational organisations in liaisoning with cliente in these countries with sustained business development resulting better prospecting record with

large expenditure on business development when compared to Indian firms who largely

depend on proactive business development in these countries at low business development

cost.

Drivers for Export Consulting Services

The demand for consulting services tends to increase with the economic development of the country.

The requirement for consultancy services stems from a diverse range of clients largely governed by the large corporate sector and the Government in various forms, viz,

country, institutions, bilateral / multilateral agencies

Management consultancy

Types of Consultancy Organisations • Since the origin of consultancy, the firms have been

characterized by diverse functional areas such as engineering, accounting, law, or banking.

Consulting organizations are generally classified as Management consultancy organizations,

Engineering consultancy organizations and Others which include Legal consultancy

organizations, Socio Economic consultancy organizations and Financial consultancy organizations

TIPS FOR EXPORTER AFTER SELECTING SERVICE SECTOR AS A FIELD OF EXPORTS With the growing competition and technology change regularly

now-a-days, there is a need of comprehensive strategy and follow-up for entering in exports market.  The following are some of the measures for successful exporters:

  STRATEGY    In order to be successful in exporting one must research its

markets. No one should ever try to tackle every market at once. Many enthusiastic persons bitten by the export bug fail because they bite off more than they can chew. Overseas strategy for services must be carefully considered.   All services must be efficiently planned. They must be processed with due regard to the need of the export markets. 

SELLING KNOWS HOW One should concentrate on making  ‘own brand’ of theirservices ,

which is much demanded by buyers in oversea

FAST  DELIVERY OF SERVICES   Services must be delivered as per the time framed.  Late executions of services are not

always the exporter’s fault.  But such difficulties can invariably be overcome, and anyone contemplating entering export for the first time must be determined to let nothing stand in the way of-fast and efficient  execution of services . In most of the cases person rendering the service is himself responsible for timely delivery unlike physical export and hence this must be ensured.

  PROPER COMMUNICATION   Communication internal and external must be far-reaching and speedy. Good

communication is vital in export of services. Failure to reply promptly to letters, using sea mail to answer airmail letters are everyday errors and speed and timely action is essence of export communication.

  FOLLOW UPS AND FEED BACKS   Follow up and feed back  should be well taken care in the service exports and with the

growing competition, customer satisfaction should be given upmost priority. After execution of services also, the exporter should attain the feedback of the services he has rendered so that in case  of any improvement is required in further orders can be attended

Export services Advertising Agency’s Services Airport Services Air Travel Agent’s Services Architect’s Services Authorised Service Station Services Management Consultant’s Services Manpower Recruitment or Supply

Agency’s services Market Research Agency’s Services

Banking and other financial services As per section 65(12), “banking and other financial services” means – (a) the following services provided by a banking company or a financial institution

including a non-banking financial company or any other body corporate or commercial concern, namely –

i. Financial leasing services including equipment leasing and hire-purchase ii. Credit card services iii. Merchant banking services iv. Securities and foreign exchange (forex) broking v. Asset management including portfolio management, all forms of fund

management, pension fund management, custodial, depository and trust services, but does not include cash management

vi. Advisory and other auxiliary financial services including investment and portfolio research and advice, advice on mergers and acquisitions and advice on corporate restructuring and strategy

vii. Provision and transfer of information and data processing and viii. Other financial services namely, lending; issue of pay order, demand draft,

cheque, letter of credit and bill of exchange; providing bank guarantee, over draft facility, bill discounting facility, safe deposit locker, safe vaults; operation of bank accounts.

(b) foreign exchange broking provided by a foreign exchange broker other than those covered under sub-clause (a).

[clause (viii) added by Finance (No. 2) Act, 2004 w.e.f. 10-9-2004]

Beauty Treatment Services Broadcasting services Credit Rating Agency’s Services Courier Services Consulting Engineer’s Services Event Management Services Franchise Services- Some well known examples of

franchise are – Coca-Cola, Pepsi, NIIT, Aptech, McDonald etc.

i. promotion or marketing or sale of goods produced or provided by or belonging to the client; or

ii. promotion or marketing of service provided by the client; or iii. any customer care service provided on behalf of the client; or iv. procurement of goods or services, which are inputs for the client; Explanation - For the

removal of doubts, it is hereby declared that for the purposes of this sub-clause, "inputs" means all goods or services intended for use by the client or [This clause was inserted w.e.f. 10-9-2004. The explanation has been inserted w.e.f. 16-6-2005]

v. production or processing of goods for, or on behalf of, the client  [This clause was inserted w.e.f. 10-9-2004. It was amended w.e.f. 16-6-2005. Words during the period 10-9-2004 upto 16-6-2005 were –‘production of goods on behalf of the client’]; or

As per section 65(19), ‘business auxiliary service’ means any service in relation to  — i. provision of service on behalf of the client; [This clause was inserted w.e.f. 10-9-2004]. or ii. a service incidental or auxiliary to any activity specified in sub-clauses (i) to (vi), such as

billing, issue or collection or recovery of cheques, payments, maintenance of accounts and remittance, inventory management, evaluation or development of prospective customer or vendor, public relation services, management or supervision,

Business Auxiliary Service

Commission agent services (a) "Commission agent" means any person who acts

on behalf of another person and causes sale or purchase of goods, or provision or receipt of services, for a consideration, and includes any person who, while acting on behalf of another person—

(i) deals with goods or services or documents of title to such goods or services; or

(ii) collects payment of sale price of such goods or services; or

(iii) guarantees for collection or payment for such goods or services; or

(iv) undertakes any activities relating to such sale or purchase of such goods or services.

INFORMATION TECHNOLOGY SERVICES

(b) ‘Information Technology Service’ means any service in relation to designing, developing or maintaining of computer software, or computerized data processing or system networking, or any other service primarily in relation to operation of computer systems [Explanation to section 65(19)] [The definition of ‘commission agent’ has been inserted w.e.f. 16-6-2005].