Questions

OExplain what is Exporting.

OHow the business

transaction happened
using this entry mode.
OProvide benefits &
drawbacks at this mode.

Exporting
PLEASE OPEN YOUR OXFORD
INTERNATIONAL BUSINESS
SECOND EDITION BOOK AT PAGE
436.WE WILL EXPLAIN.

Entry Mode Strategies

Simple Entry Modes : Complex Entry Modes :
Exporting
Franchising
Licensing
Offshore
Turnkey

International Joint

Venture
Mergers and

acquisitions
Total Greenfield

Investment.

Definiton
Exporting means selling goods to other

countries
Involves the movement of goods from the

home country to a foreign country and

selling them locally.
Point Exporting is the first step for a firm

to get involved in international business.

Ways of exporting
Direct Exporting :

Indirect Exporting :

Sales

Export Merchant

Representative
Distributor
Retailer
End User

Export Agent
Resident Foreign

Buying Agent
Resident Foreign

Buyer

Direct Exporting
Refers to overseas sales in which producer

controls all the activities.

Direct exporting is preferred since it

provides the freedom to choose which

foreign market to enter.
However,it requires a considerable

commitment as it is costly and requires

substantial resources.

Ways to implement direct

exporting
Sales Representative ~ A sales

representative plays the role of the

manufacturers representative,who
works on a commision basis.Product
manuals and samples are used to
persuade potential buyers.

Ways to implement direct

exporting
Distributor ~ A distributor directly

purchases the product from the

manufacturer and sells it at a larger
profit and is bound by a contract with
the company . Distributors buy the
product and are usually specialist in a
specific fields such as pharmaceuticals.

Ways to implement direct

exporting
Retailer ~ importers that sell directly to

the consumer . Contact on behalf of the

exporter is maintained by the
manufacturers agent,or by the exporters
sales representative based in territory.

Ways to implement direct

exporting
End User ~ Manufacturers can sell their

products directly to end users through trade

shows or exhibition . End users are
comprised of trading companies and play
important roles all over the world.

Indirect Exporting
Involves selling goods to overseas

markets through intermediaries , that

is through another company.
Indirect methods of exporting require

less marketing effort , but companies

might lose substantial control over the
marketing process.

Ways to implement indirect

exporting
Export Merchant ~ A trading company that

buys a local firms good outright .They

assume the risk of being able to resell them
profitably abroad.Export merchants usually
specialize in a particular line of products or in
a particular geographical market area . They
either sell goods with the original suppliers
label or use their own label.

Ways to implement indirect

exporting
Export Agent ~ Acts for local manufacturers ,

usually representing a number of noncompeting manufacturers . In returning for

obtaining exports from abroad , the export
agent recieves a commission . The export
agents does not become the owner of the
goods and does not assume the risk of not
being able to sell them abroad.

Ways to implement indirect

exporting
Resident foreign buying agent ~ Acts a

purchasing agent foreign companies . This

types of agent earns a commission on the
goods purchased . The foreign principal
advices the agent to look for a certain
products at a certain prices.

Ways to implement indirect

exporting
Resident Foreign Buyer ~ A

representative appointed by a foreign firm

in the local market . Sometimes a large
foreign firm will have its own employee
stationed in the local manufacturers
country or region . The buyer will act on
employers behalf , seeking to buy goods .

Benefits Of Exporting
Market Diversification ~ By exporting , a

company can avoid dependency on the

domestic market . Tough market condition or a
long economic recession may effect any
business.
Additional Source of Revenue ~ Selling a

broad to a reliable distributor for a long period

of time will provide company additional steady
streams of revenue.

Benefits Of Exporting
Use of Excess Production Capacity ~ Helps to

achieve an efficient level of production while

reducing fixed cost.
Business Operation Stability ~ If a companys

business operation is subject to revenue

fluctuations due to seasonal factors , exporting to
other countries that has opposite seasons will allow
the company to gain stability in its operation.

Benefits Of Exporting
Product Life Cycle Extension ~ When product

reach the maturity , many companies replace

them with new product . However , when
exporting those products to specific target
markets , mature product may still have
potential abroad.
Business Strategy ~ Exporting helps company

to create long-term plan for their future.

Benefits Of Exporting
Competitive ~ Companies aim to become

internationally competitive , helping to protect

their domestic business from imported
competitors , and at the same time enhancing
domestic competitiveness.
Cost Efficiency ~ Exporting avoids the often-

substantial cost of establishing manufacturing

operation in host country . The cost of setting up
new operations abroad may be substantial.

Drawbacks Of Exporting
Limited Market ~ Exporting to countries that

are able to produce the same product at a

much a lower cost will not be appropriate.
Cost ~ High transportation can make exporting

uneconomical , particularly , for bulky

products . Cost are also incurred , as
companies need to develop new promotional
materials for the new market.

Drawbacks Of Exporting
Trade Barriers ~ Trade barriers such as tariff and

non-tariff barriers can make exporting uneconomical .

So as the barriers from the local government through
its rules and regulations , which can make exporting
very risky.
Threats From Local Agents ~ Local agents also can

post some threats as they often carry the product of

competing firms . The products exported have to
compete before they even reach the customer.

Drawbacks Of Exporting
Licenses ~ Companies are often required to

obtain a special license for exporting . This

adds to the administrative burden and cost.
Poor Performance Of Local Agents ~ Local

agents appointed by the company may not be

able to satisfactorily perform the operations
assigned . The services given may not be up to
the expectations of the exporting company.

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