Sign up today to receive the latest TradeReady articles, international business job postings, and more! For example, when a company first begins to export, it may create an export department with a full or part-time manager who reports to the head of domestic sales and marketing. . The process of documentation, shipping, financing, collection etc. Although their market coverage is less and their export volume is less than the direct channel users, they have been at it just as long as the direct firms and have similar export plans regarding new markets, sales penetration, and the role of exports in the total sales mix. Foreign retailers A company may also sell directly to a foreign retailer, although in such transactions, products are generally limited to consumer lines. Direct exporting has its own advantages and disadvantages.
Such information is useful in gauging how much the representative knows about your industry; it provides valuable market research, as well. Just as the firm is seeking information on the foreign representative, the representative is interested in corporate and product information on the export firm. For example, when you first begin to export, you may create an export department with a full- or part-time manager who reports to the head of domestic sales and marketing. Who are its key accounts? What are its sales objectives for next year? Direct Exports Defined Direct exporting means that a producer or supplier directly sells its product to an international market, either through intermediaries -- such as sales representatives, distributors, or foreign retailers -- or directly selling the product to the end user. The terms and length of association between your company and the foreign distributor are established by contract. In addition to that, while a licensing agreement involves things such as intellectual property, trade secrets and others while in franchising it is limited to trademarks and operating know-how of the business.
Customer profile What kinds of customers is it currently contacting? Companies that are new to exporting or are unable to commit staff and funds to more complex export activities may find indirect methods of exporting more appropriate. It is also impossible for organizations to establish after-sales service or value-added activities, and this can have an adverse effect on their reputation in a foreign country. If the company has the necessary information, it may wish to contact a few of the foreign firm's domestic clients to obtain an evaluation of their representative's character, reliability, efficiency, and past performance. In such cases, these big sellers offer to handle all the paperwork, customs, and logistics—for a fee. If not, what percentage of its total business would you represent? Contacting and Evaluating Foreign Representatives Once your company has identified a number of potential representatives or distributors in the selected market, you should write, e-mail, or fax each one directly.
Normally, the forwarder receives a commission in exchange for the services provided. Such plans include a good attorney, qualified and highly experienced accountant. Promotional thrust Can it help you compile market research information to be used in making forecasts? For first time drivers information see. The Japanese are well-known international traders and examples of Japanes companies active in South Africa include Mitsui and Itochu. In these situations, organizations should consider another strategy.
The different indirect exporting options We have said that indirect exporting is when you sell your products to local companies in South Africa as though they were local salesl; you are paid in rands and the sale, yet your products still end up crossing the border and being sold in other countries. There are several different indirect exporting options available to you. Piggyback exporting This means using a company with an established export distribution system to sell your product as well as its own. The differences in strategy produces more conflicts of interest in the later partnership Lilley and Willianms, 1991. A direct exporter of products must assume responsibility for all losses during shipping and storage overseas. This information is not only useful in gauging how much the representative knows about the exporter's industry, it is also valuable market research in its own right. Territorial analysis What territory does it now cover? Greenfield Investments Greenfield investments require the greatest involvement in international business.
Four general approaches may be used alone or in combination: 1. This direct export channels involves direct contact with a wholesaler or retailer in the host country. If your product requires servicing, is it equipped and qualified to do so? Advantages and disadvantages of direct exporting Direct exporting as a market entry strategy has its advantages. Export trading companies facilitate the export of U. Other concerns affecting direct exporting include drops in exchange rates and unpredictable orders from foreign markets. It is important to keep in mind that the agent does not purchase the merchandise. If your company chooses to export directly to foreign markets, it usually will make internal organizational changes to support more complex functions.
It has to carefully decide the most appropriate channel to link the domestic operations to the overseas channels. As the age and experience of the winery in exporting increases, we would expect a shift to direct export channels. This is a very good way to enter foreign markets as the client is normally a government and often the project is being financed by an international financial agency such as the World Bank so the risk of not being paid is eliminated. In their study, a limited number of successful mobile networks entry cases have been selected for deep investigation of entry models in Albania, to find out the most important and efficient determinants of foreign mobile networks entry into Albania's telecommunication market in the future as well. Another party has decided that the product in question meets foreign demand. A company may obtain much of this information from business associates who currently work with foreign representatives. A company with distinct product lines may create an international department in each product division.
If the target market has different regulations, legal systems, cultures or ways of conducting business, and the organization is inexperienced in international trade, direct exporting might be very difficult and risky. Manufacturers that engage in indirect exporting hire export management companies, distributors and commissioned agents or brokers to work as intermediaries with the end-users, retailers and distributors in the foreign markets. There are two major types of modes: equity and non-equity modes. At later stages a company may choose to increase the autonomy of the export department to the point of creating an international division that reports directly to the president. You should be aware that if a product is sold in such a direct fashion, your company is responsible for shipping, payment collection, and product servicing unless other arrangements are made.
Partnering Partnering is almost a necessity when entering foreign markets and in some parts of the world e. Now, for discovering new ways to get lower quotes go to Read this article if your after information. They pack and label the products according to their own specifications. Under these circumstances, you will not know who your ultimate consumers are. In contrast, the indirect method focuses on having intermediaries so that they can be the contact with the final client.
Passively filling orders from domestic buyers, who then export the product. Advantages and disadvantages of indirect exporting Indirect exporting is the cheapest entry strategy available to an organization. What is its method of stock control? Disadvantages of this method include the difficulty of setting up a distribution method and the time and effort that must be put in to providing customer support for all products. You can hire a foreign agent — who may be paid by commission, retainer or a combination of the two — for their knowledge of business practices, language, laws and culture in the overseas market. These characteristics serve to differentiate the wine and reduce the need for control and coordination of the marketing activities in the host country. When is indirect exporting a suitable strategy? The model guiding this research is depicted in Figure 2.