INTRODUCTION TO

EXPORT BUSINESS
TWO BASIC COMPONENTS
FOREIGN TRADE

EXPORTS IMPORTS
 CONDITIONS FOR EXPORT
TRANSACTION
 Goods/Services must be sent across
national boarder to another country.
 Payment of goods so dispatched
must be realized in exporter’s
country.
GOODS
HOME COUNTRY FORRIGN COUNTRY
(EXPORTER) (IMPORTER)
PAYMENT
 CONDITIONS FOR IMPORT
TRANSACTION
 Import transaction involves buying
and physically transporting goods
from a foreign country to ones
country.
 Dispatching of payment to foreign
country. GOODS
HOME COUNTRY FORRIGN COUNTRY
(IMPORTER) (EXPORTER)
PAYMENT
 CLASSIFICATION OF
EXPORTERS
 Active & Passive exporter
 Manufacturer exporter
 Merchant exporter
 Service exporter
 Project exporter
 BENEFITS OF EXPORTS

A. To Home (Exporting Country)

 Foreign exchange earning
 Improved quality products
 Skill development
 Technological advancement
 Access to new markets
 Reducing unemployment
 B. Benefits to Exporter
(Businessman)
 Increased sales and profit
 Gain global market share
 Reduced dependence on domestic markets
 Make use of excess production capacity
 Enhance competitiveness
 More stability
 Access to foreign exchange
 IMPACT OF IMPORTS
 Foreign exchange outlay
 Makes available scarce/unavailable
inputs
 Technical know-how
 Aid to exports
 Better relations
 WAY TO SUCCESSFUL
EXPORTING
A. BASIC RULES
 Target one market at a time.
 Overseas design and product requirements must
be carefully considered
 Exporter must try to reach as close as possible to
the market for selling his product
 The fewer intermediaries one has the better
 The goods for exports must be efficiently
produced
 B. OTHER RULES
 Selling in export is tough
 Deliveries must be on time
 Goods must be properly serviced
 Speedy communication
 Product testing
 Initial attack
 Attitude
 BASICS FOR SETTING EXPORT
BUSINESS
1. Setting up an appropriate business
organization
 sole proprietary firm
 partnership firm
 Company
– The proper selection of an organization
depends upon
 The ability of exporter to raise finance
 Risk bearing capacity of exporter
 The extent of control over business
 Nature of regulatory framework applicable on
business.
2. Choosing appropriate mode of
operation

 Merchant exporter
 Manufacturer exporter
 Sales/commission agent
 Buying agent
3. Naming the business

Name and style of business should be:

 Soft
 Attractive
 Short and meaningful
 Simple and attractive name indicating the
nature of business is ideal
4. Selection of product

 Trends of different export items from

exporting country
 The selected product should be in demand in
countries where it is to be exported
 Produced economically to develop
competitiveness
 Produced in sufficient quantity
5. Effective business communication
For creating favorable and excellent impression the
exporter must use

 Decent letter head on superior quality paper

 Good envelop, nicely printed, giving full details
of firm’s name, telephone, fax number and
email address etc.
 Language should be polite, soft, brief and to
the point giving a very clear picture of the
subject to be put before the customer.
 Letters should be typed/computer typed,
preferably in the language of importing
country.
6. Selecting the market

Factors to be considered:
 Political embargo
 Scope of exporter’s selected product
 Demand stability
 Preferential treatment to products from
developing countries
 Distance of potential product
 Transport problems
 Tariff and non-tariff barriers
 Size of demand in market
7. Selecting channels of
distribution
The following channels of distribution are
generally utilized while exporting to
overseas markets:

– Exporting through canalizing agencies

– Export through merchant exporters, export
houses or trading houses
– Direct exports
– Export through overseas sales agent
– Export through ecommerce
8. Negotiating with prospective buyers
While conducting business negotiations, the
prospective exporter should avoid
 Conflict
 Controversies
 Criticism of other party
 During conversation the attitude should be to
communicate effectively so as to grab the
export order from prospective buyer.
9. Processing an export order
One should not be happy merely on receiving an export order,
rather he should first acknowledge the export order, and then
proceed to examine carefully in respect of:
 Items
 Specifications
 Pre shipment inspection
 Payment conditions
 Special packaging
 Labeling
 Shipment and delivery date
 Marine insurance documentation etc.

 If satisfied a formal confirmation should be sent to the buyer.

 Otherwise clarification should be sought from buyer before
confirming the order.
10. Entering into export contract
In order to avoid disputes it is necessary to enter into an export
contract with the overseas buyer.
The following points are generally included in export contract:

 Product standard and specifications

 Quantity
 Inspection
 Total value of contract
 Terms of delivery
 Taxes, duties, and charges
 Period of delivery/shipment
 Packaging, labeling and marking
 Terms of payment-amount/mode and currency
 Discounts and concessions
 Insurance
 Documentary requirements
 Guarantee
 Force Majeure of excuse for non-performance of contract
 Remedies
 arbitration
11. Export Pricing
Export pricing is the most important tool for promoting
sales and facing international competition

However, there is no fixed formula for successful export

pricing. It will differ from exporter to exporter depending
upon whether the exporter is a merchant exporter,
manufacturer exporter, or exporting through canalising
agency.

As regards the quoting of price to the overseas buyer, the

same are quoted in the following internationally terms:
 Ex-Works (EXW)
 Free Carrier (FCA)
 Free Alongside Ship (FAS)
 Free on Board (FOB)
 Cost & Freight (C&F)
 Cost Insurance Freight (CIF)
 Carriage Paid To (CPT)
 Carriage & Insurance Paid to (CIP)
 Delivered to Frontier (DAF)
 Delivered Ex-Ship (DES)
 Delivered Ex-Quay (DEQ)
 Delivered Duty Unpaid (DDU)
 Delivered Duty Paid (DDP)
12. Undertaking risk in
international trade
While selling abroad the exporter
undergoes the following risks:
 Currency risk
 Credit risk
 Carriage/Cargo risk
 Country risk