Export Management6

8/7/2019 Export Management6

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Methods Of Exporting

There are two basic methods of exporting.

1. Indirect exporting

2. Direct exporting

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Indirect Method

Under the indirect method, you hire aforeign sales representative who acts asyour intermediary. This company or

individual is responsible for doing the actualexporting, thus you have no contact with theoverseas buyer. Plus, you usually assume noresponsibility for transporting the product to

its destined market.

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Filling orders fromdomestic buyers whothen export the product.

These sales are indistinguishable fromother domestic sales as far as theoriginal seller is concerned. Someone

else has decided that the product inquestion meets foreign demand. Thatparty takes all the risk and handles all of the exporting details, in some cases

without even the awareness of the2/25/11 44



Seeking out domesticbuyers who representforeign customers.In this case a company may know its

product is being exported, but it is still

the buyer who assumes the risk and

handles the details of exporting.

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Exporting throughintermediariesWith this approach, a company

engages the services of an

intermediary firm capable of findingforeign markets and buyers for itsproducts.

Export management companies(EMCs), export trading companies

(ETCs), international trade consultants,and other intermediaries can ive the2/25/11 66



Licensing

A business arrangement in which the

manufacturer of a product (or a firmwith proprietary rights over certaintechnology, trademarks, etc.) grants

permission to some other group orindividual to manufacture that product(or make use of that proprietarymaterial) in return for specified

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Franchising

Franchising is the practice of usinganother firm's successful business

model. A franchise is a right granted toan individual or group to market acompany's goods or services within acertain territory or location.

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Contracting

Agreements with foreignmanufacturers to produce your

product, as opposed to exporting yourproduct, are referred to as contractmanufacturing.

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Piggyback Marketing

Piggyback marketing is an arrangement inwhich one firm distributes a second firm'sproduct or service. The second company

adds value by offering a more completesolution to the foreign market.

The second company piggybacks its

products on to the international market,without incurring the marketing anddistribution costs associated with exporting.

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Remarketer

A remarketer purchases productsdirectly from the manufacturer, and

repackages the products according totheir own specifications. They then sellthese products overseas through theircontacts in their own names and

assume all risks.

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2. Direct Exporting

With direct exporting the exporterhandles every aspect of the exportingprocess.

● Market research

● Foreign distribution

● Collections

The direct method, however, requires

you to arrange your own overseas2/25/11 1212



Methods of directexporting

1. Sales Representatives

2. Distributors

3. A Foreign Retailer

4. Direct sales to the End User

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Sales Representatives

A sales representative is often called a

manufacturer's representative or asales agent. The term "salesrepresentative" is preferred becausethe term "agent" has legalconnotations in some countries.

He uses the company's product,literature and samples to present the

roduct to otential bu ers. And he2/25/11 1414



Distributor

A foreign agent who sells for a supplier

directly and maintains an inventory of

the supplier's products.

Use a distributor if you need to

maintain inventory on the foreign

country and do not want to maintain

your own distribution network.2/25/11 1515



Foreign Retailer

A Company may sell directly to a

foreign retailer. These transactions

often involve consumer products.

Effective in countries that have large

retail chains.

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End User

A company may sell directly to a foreignend user. Selling overseas may incur someadded costs. Unless other arrangements

are made, the seller is responsible for:

Shipping

Payment collection

Product support and service

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Other Methods Of Exporting

1. Subsidiary

2. Joint Venture

3. Strategic Alliance

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1. Subsidiary

Companies that truly want to commit toexporting to a market form a subsidiary.

Subsidiaries are usually formed aftermarket success has been achieved byother methods.

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2. Joint Venture

A joint venture brings together yourfirm and a foreign company withsimilar goals to establish a market

entry and a distribution network.Each partner brings specialized skillsand contributes to the endeavor.

Each partner makes a substantial2/25/11 2020



Strategic Alliance

A strategic alliance is a form of presence in an overseas market that ismore than a simple buy/sellagreement.

A strategic alliance may be one ormore of the following agreements:

1. Product development

2. Distribution agreement

3 Cross licensing2/25/11 2121

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Export Management6