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Exporting

Exporting represents the most straightforward and commonly adopted strategy for entering foreign markets. It offers several advantages and can take various forms, each with its own set of considerations and the involvement of different export intermediaries.

Advantages of Exporting

  • Limited Financial Need: Companies can enter international markets with minimal financial resources, especially when partnering with a distributor in the host country.
  • Reduced Risk: Gradual market entry allows companies to understand the host country’s market, culture, and customers, thereby reducing risk.
  • Motivation: Exporting can be motivated by both proactive opportunities in the host country and reactive factors.

Forms of Exporting

1. Indirect Exporting

Involves selling products, either unchanged or modified, through another domestic company to foreign markets. Example: Indian publishers selling books through domestic exporters.

2. Direct Exporting

Entails selling products directly in a foreign country through self-managed distribution arrangements or via a distributor in the host country. Example: Baskin Robbins exporting ice cream to Russia before establishing a local plant.

3. Intra-corporate Transfers

Refers to selling products to an affiliated company in another country, treated as exports in the home country and imports in the host country. Example: Hindustan Lever selling to Unilever in the USA.

Considerations for Exporting

  • Government Policies: Export and import regulations, financing, and foreign exchange.
  • Marketing Factors: Brand image, distribution networks, customer responsiveness, awareness, and preferences.
  • Logistical Considerations: Costs related to physical distribution, warehousing, packaging, transportation, and inventory.
  • Distribution Issues: Preference for own networks or leveraging those of host country companies, like Japanese firms Sony and Hitachi using subsidiary networks.

Export Intermediaries

Export intermediaries facilitate small companies in exporting goods through various functions:

  • Export Management Companies: Act as the exporting firm's external export department, working on commission or taking title to goods.
  • Co-operative Societies: Formed by domestic companies wishing to export, managing the exporting operations of its members.
  • International Trading Companies: Engage in direct exporting and importing, purchasing goods from domestic companies to export.
  • Manufacturers’ Agents: Commission-based agents soliciting domestic orders for foreign manufacturers.
  • Manufacturers’ Export Agents: Similar to manufacturers’ agents, but focus on selling domestic products in foreign markets, acting as the foreign sales department.
  • Export and Import Brokers: Bridge the gap between exporters and importers.
  • Foreign Forwarders: Assist in the physical transportation of goods, customs documentation, and arranging transport services.
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