3.

2 Direct Export
Manufacturer or exporter sells
directly to an importer or buyer
located in the foreign market area.
This proactive approach gives the
company greater controls on issues
such as the finished product, the
selling and marketing methods
 Continued

The actual transaction flow

between nations is handled
directly by a dependent
organization of the manufacturer
or a foreign-based marketing
organization or customer.
 Continued
Seven Ps of marketing mix:
i. Product
ii. Place
iii. Promotion
iv. Price
v. Process
vi. People
vii. Physical aspects
 Continued

Involve capital commitment &

resource allocation of mgmt &
production, adaptation of products
overseas buyers needs
 Continued
Example: agents (475), distributor
(475), joint ventures (490),
licensing (491-492), consortia
(484), franchising (485), Free
Trade Zone (487), government
procurement (488), leasing (489),
strategic alliance (497), mergers
and acquisitions (482),
management contracts (495-496),
wholly owned subsidiaries (482),
B2B & B2C (482)
Direct Export Alternatives

3.2
DIRECT
EXPORT

3.2.4 3.2.6
3.2.3
3.2.1 3.2.2 FOREIGN 3.2.5 FOREIGN-BASED
HOME- STORAGE SALES TRAVELING DISTRIBUTORS
FOREIGN OR
COUNTRY SALES
SUBSIDIAR SELASPERSON &
WAREHOUSE
BASED BRANCH
Y
FACILITIES AGENTS
DEPARTMENT
(REPRESENTATVES
)
 3.2.1 Home-Country Based Department
Export department or division in the home
country.

Also known as dependent organization.

Involved directly in making export sales.

Serve as the home-based export marketing

department to coordinate and control the
activities of other dependent organizations
located in foreign markets.
 Continued
Three different types of home-
country based export
organizations:

Separate or self-contained export

department
Export sales subsidiary
Built-in export departments
3.2.2 Home-country Based Department
 (i) Built-in Export Department
The simplest form of export organization.

Consist of an export sales manager with

some clerical help.

Primary job of the sales manager is to do

the actual selling or directing of selling.
 Continued

All functions connected with

export transactions.

May have problems getting

support from other units and in
carrying out technical functions.
 Built-in form is best suited for direct
export for the manufacturer who
operating under any of the following
conditions:

Small in size;
New or relatively new to export
marketing;
Expected foreign sales volume is
moderate to small;
Management philosophy not oriented
toward growth of foreign business;
Company resources are limited.
 (ii) Separate Export Department
As overseas business increases, separate export
department may be established to take care of it.

Essentially self-sufficient unit and well equipped to

handle export activities.

Structured internally upon the basic of functions,

geographic region, product, or a combination of these.
 Characteristics of separate export
department (SED):

No inherent possibility for clash between

the international and domestic sides of
the firm regarding the time to be spent by
domestic marketing personnel on foreign
business matters.

Export operations can be conducted on a

full-time basis by knowledgeable and
trained personnel; specifically committed
to exporting.
 Continued

Has a fairly high degree of

flexibility in terms of where it
is located.
 (iii) Export Sales Subsidiary
(ESS)
Much more complex and almost completely
independent organization.
Wholly owned and controlled by the parent
company.
Functions same as SED but differs
significantly in financially and
organizationally.
ESS purchase goods from parent company
and resell in foreign countries.
 Advantages:

provides unified control;

profit center;
can more easily allocate orders and supervise
traffic management;
ease of financing;
wider product line; and
tax advantages in some countries.
 COMPARISON
Built-in Separate Export sales
department export subsidiaries
department
Organizations simplest complex much more
structure complex
Conflicting high high low
pressures
Independent dependent independent quasi-
degree independent
profitability low medium high

Ease of difficult easy easiest

financing
Financial none moderate high
control
degree
 Advantages Disadvantages
Built in simple in structure problems in getting
Department easy to establish support
flexible and economical from other units and in
use carried out technical
functions.
Separate Export most of the export chance for conflict
Department activities regarding allocation of
are handle within resources between
department international and
domestic
conditions that cause side of the firm
trouble
in built-in form are
eliminated

Export Sales unified control high cost to establish

Subsidiary profit center
ease of financing
wider products line
tax advantage
 3.2.3 Foreign Sales Branch
Serious involvement in
international trade.

a. Primary purpose:
Closer supervision of foreign
sales by manufacturer in home
country.

b. Secondary purpose:
A foreign facility for
manufacturer to display its
product line (Display center).
 Responsibility:

Provides control, service, dedicated staff for your

products; costly.

Handles all of sales distribution and promotion in a

designated market area.

Storage or warehouse facilities

Used when inventory in foreign markets is necessary or

profitable.

May be for one country or regional.

 3.3 MARKET ENVIRONMENT
Overseas Market Environment Key
Areas

i. Who are the main players in the global market &

profiles market share/position, financial
resources, current situation, future plan &
nature of business
ii. Accessibility to the market & legal environment
market stability, infrastructure,
logistics/transports, communication, facilities
 Continued
iii. Product quality
(national/international)
standard, development stage
(first/second generation,
low/high tech.)
iv. Computer & logistically literate,
importer/exporter adaptability &
flexibility
 Continued
v. Exchange rate stability, importation cost
(Import duty, sea/port charges & sales
tax)
vi. Membership of regional economic/
trading bloc (regulations, procedures,
policies)
vii. Stages of market development
less/developing/develop, and country
status in term of skill/unskilled workforce,
technology in used, currency.
 Continued

viii. Investment inward (joint

ventures, franchising, licensing,
M & A, etc)
ix. Local government & financial
environment (employment law,
taxation, incentives, trade
zones)
x. Perceived benefits of the market
3.4 Market Entry Strategy
Strategic focus in decision-making
process of selecting and entering
market/overseas.
i. Customer portfolio with international
base
ii. Increase production by lowering unit
cost lead to competitive pricing
iii. Market risk more market served,
spread risk, then lower risk
iv. Raise firm profile technology
advancement, capital, funds for R & D
 Continued
v. Fully utilization of company resources
& infrastructure
vi. Increase market share & dominance,
being a marketing led company
vii. Increase companys competitiveness,
wide range of products offer
locally/internationally
viii. Long-term plan, develop a proactive
company that globally focused &
market driven environment
 Continued

ix. Develop an international brand image

personnel, product, commitment
x. Use available techniques in all areas of
company operations
xi. Membership of trade associations and
accreditation
xii. Increase profit and ROI
Independent Local Distributors

Three objectives:
i. Desire to control business at a
strategic stage
ii. Partnering with local distributors at
least for the first years to benefit from
local expertise
iii. Minimizing cost and risks in new
ventures
 Life-cycle of the Intl. Distributors

i. Select and choose the distributors (at

trade fair/exhibition)
ii. Capability of distributors develop
market and serve long-term
relationship
iii. Treat as local distributor and willing to
share info & knowledge in marketing,
etc
iv. Support market entry if necessary
money, workers, marketing ideas,
info of prospect country
 Continued

v. Maintain control over marketing

strategy
vi. Detailed market and financial
performance data
vii. Networks with national
distributors
viii. Assess how it performs relative
to customers expectations