There are two possible ways of entering the overseas markets for an exporter
1. Direct Exporting
2. Indirect Exporting
The manufacturer is given an excellent option for decision making and has to think many times before he adopts any one of the two methods by studying many factors some of them include potential size of the market, nature of the product line, the estimated costs of entry, the structure of the company. etc. Now let us see in detail the method of Direct and Indirect Exporting.
1. Direct Exporting- means the manufacturer takes full responsibility of managing export sales himself. This also means exporting goods abroad without the help of any middlemen if chosen would serve as an intermediate source. Here the manufacturer has lots of responsibilities to be performed himself some of those are mentioned below.
(a) Direction, supervision and monitoring of export including development of
Export policy.
(b) Making the product adaptable in such a way that it is suitable for export purpose
taking care its lifespan, guarantee, warrantee and its behavior to external
climatic conditions apart from packaging.
(c) Selling concepts that include first advertising, sales promotion, sales training,
translation ,sales targets, key accounts, commissioning, etc.
(d) Transportation of the product including documentation of shipment, railway bill,
airway bill, seaway bill, letter of credit, bill of lading marine insurance and other related matters.
(e) Financing including exchange, invoicing and collection.
Direct Exporting helps the manufacturer enjoy the full fruits of profits gained from exports by himself and he has thorough knowledge about the requirement of the customer and he gets the main share of getting fully exposed to the external global market conditions on which he gains tremendous experience but the financial resources for venturing on this area is exorbitant.
2. Indirect Exporting-involves exporting overseas strictly by means of middle men and
not by themselves. This is almost equal to domestic sales as the manufacturers sell
their products in their country to another party who will take the responsibility of
selling the products abroad.
The middle men are in the form of different special trading companies of different
names some of them are merchant exporter, exporter house, trading house,
star trading house, super star trading house, visiting or resident buyers, ETC'S (
Export Trading Companies) and EMC'S (Export Management Companies) from
many parts of the world namely Japan, Australia, Korea, England, Germany, etc.
The advantage of indirect exports is that there is no need for a separate
export department within a manufacturing organization. It is enough if it has
middlemen to take care of its exports efficiently. The manufacturer can sell his
goods to export houses and he is profited because he is eliminating the staffing and
Revenue that has to be spent incase an export department is separately present.
Inspite of profits, still the manufacturer is at a loss if he does not find a suitable
export house to sell his goods for overseas exports. Apart from which the
manufacturer will not have knowledge of the export market in international levels
and has enormous scope to get cheated and meet crisis with loss if he does not
participate and volunteer to learn about international marketing conditions. The
middle men have also got to be watched always because if they find manufacturer's
selling goods at a cheaper rate, they prefer them. Also, the middlemen do not
guarantee to give any form of support if the manufacturer's sales are declining.
Many times the production of the manufacturer is also not a permanent one because
middlemen might stop buying from them.
Therefore exports must be done carefully analyzing not only market but also the method by which market penetration can be done at international levels.
The author can be contacted at sowmya_ramani@yahoo.com
