Exporting:

Levels of Exporting
For most companies, export operations are the first step in internationalization. The process of export development is the key to increased internationisation for the majority of companies. Level I Export of surplus-the firm is interested only in overseas sales of surplus products, or is without resources to fill overseas order on a continuing basis Level II Export Marketing- the firm actively solicits overseas sales of existing products and is willing to make limited modifications in its product and marketing procedures to accommodate overseas buyer requirements
2

Levels of Exporting
Level III Overseas market Development- The firm makes major modifications in products for export and in marketing practices in order to be able to reach buyers in other countries Level IV Technology Development The firm develops new products for existing or new markets.

Global Market Entry Strategy : Entry as a channel decision

A market entry strategy consists of an entry mode and a marketing plan. The entry mode is important as it determines the degree of a companys control over the marketing mix and to an extent the degree of its commitment, in the target market. In developing its entry mode a company should plan two things when its products pass through the structure of distribution: The flow of transactions The flow of the physical product Many specific types of organization may be involved Marketing organizations, Facilitating organizations

The Whole Channel Concept

Management should be striving always to select the best international marketing channel.( One that comes closest to completely satisfying the target consumers, fits the international marketing mix and still satisfies the companys overall objectives. For the whole channel concept , there are three basic components The headquarters organization The channels between nations The channels within nations
5

Entry as a strategy
Entry mode is influenced by the international strategy pursued by the firm for its foreign venture or market expansion. All market entries may not be motivated by the same international strategy. Thus, the choice of entry mode is made to facilitate the firms international strategy for a particular market. The elements of entry strategy Objectives and goals in the target market Needed policies and resource allocations The choice of entry modes to penetrate the market The control system to monitor performance in the markets A time schedule

Factors influencing choice of Entry mode

The type of entry mode to be used and thus the channel length. The selection of individual channel members Managing the channel

Type of mode
Target Market(distribution of customers, preferences of customers, level of economic development) Nature of product Availability of market organizations Company considerations Governmental Policies

Entry mode and involvement

Each entry mode decision considers extent of involvement. Each mode of entry can be viewed in terms of desired degree of involvement- indirect export would have the least involvement while equity Foreign entry mode has tended to be viewed as a singular entity, even though companies often use multiple or mixed modes in the same foreign market-

Muliple Entry Modes

Unrelated modes occurs when a company uses more than one mode in a foreign market, but there is no connection between their uses within that market. An example is a company that does business in different industries or markets and uses a different mode for each Segmented modes occurs when a company uses multiple modes in the same industry or market to serve different segments. Mode complementarity multiple modes are used in a combined mutually supporting way to achieve the firms objectives. The same segment may be involved, but different activities in the value chain are handled by different modes Competing modes compete with each other by targeting the same segment and performing the same activities.

10

Export Entry Modes

Indirect exports occurs when the exporting manufacturer uses independent organizations located in the producers country. Two broad alternatives available to the manufacturer wanting to export indirectly: a) using international marketing organizations b) exporting through a cooperative organization. In the marketing organizations , two basic types of marketing intermediaries: merchants and agents. The basic distinction between the two is that the merchant takes ownership of the products to be sold, while the agent does not.
11

Marketing Organizations
Home country based merchants Export merchants Trading company Export Desk Jobber Home country based agents Export Commision house Conforming house Resident buyer Broker Export Management company Manufacturers export agent

12

Export merchants
The domestic based export merchant buys and sells on its own account. Generally, engaged in both exporting and importing. The export merchant company is free to choose what it will buy, where it will buy and at what prices. The export merchant is unwilling to allow the manufacturer much more than a manufacturing profit on any merchandise.

13

Trading company
In many countries , export merchants known as trading companies. While the smaller trading companies usually limit their activities to foreign trade, the larger general trading companies are also heavily involved in domestic distribution and other activities.

14

Export Desk Jobber

Used primiraly in the international sales of raw materials , the desk jobbers never see or physically acquire the goods that they buy or sell. In all other aspects , the desk jobber operates as a regular export merchant, except that goods are owned for a very short time. The manufacturer using this type of export merchant comes a little closer to direct export in that he or she is responsible for the physical movement of his or her products to the desk jobbers customer.

15

Export Commision House

The export commission house is a representative of the foreign buyers who resides in the exporters home country. He is overseas customers hired purchasing agent, in the exporters domestic market, operating on the basis of orders or indents. The export commission house essentially becomes a domestic buyer . The export commision house essentially becomes a domestic buyer. It scans the market for a particular merchandise

16

Confirming house & Resident Buyer

It assists the overseas buyer by confirming ,as a principal, orders already placed, so that the exporter may receive payment from the confirming house when the goods are shipped. More particularly in UK. One form confirming house is the resident buyer. These buyers represent foreign concerns that want to have close and continuous contact with their overseas sources of supply. These residents buyers are permanently employed representatives of foreign buyers, the manufacturer has a good chance to build up a steady and continuouss business with foreign markets.

17

Broker
Another type of home country based agent is the export/import broker. The chief function of a broker is to bring a buyer and seller together. Once the transaction is complete the foreign buyer pays the brokers fee.

18

EMC & Manufacturers Export agent.

Export Management company is an international sales specialist who functions as the exclusive export department for several allied but non competing manufacturers. EMCs are independent intermediary organizations, but for the overseas buyers these firms are the manufacturing firms. MEA retains its own identity by operating in its own name. Manufacturers Export agent is paid a straight commission and does not engage in buy sell arrangements.

19

Cooperative Organizations
Piggyback marketing Exporting combinations

20

Piggybank Marketing
This occurs when one manufacturer uses its foreign distribution facilities to sell another companys products alongside its own

21

Exporting Combinations
A manufacturer can export cooperatively by becoming a member of some type of exporting combination, as a more or less formal association of independent and competitive business firms with membership being voluntary organized for purposes of selling to foreign market.

22

Direct Exports
It occurs when a manufacturer or exporter sells directly to an importer or buyer located in a foreign market. Home country based departments a) built in export departments b) separate export departments c) export sales subsidiary Foreign sales branch Storage or warehousing facilities Foreign Sales Subsidiary Traveling Salesperson The internet and E Commerce Gray Market

23

Built In Export Department

It is the simplest in structure and thus the easiest to establish. In the simplest form this organization will consist of an export sales manager with some clerical help. Operates usually when 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, existing marketing resources not fully utilized in the domestic market.
24

Separate Export Department

It is a self contained and largely self sufficient unit in which most of the export activities are handled within the department itself, making it relatively complete export marketing department. Most of the conditions that may cause trouble in the built-in form are eliminated when a separate department is established.

25

Export Sales Subsidiary

To completely do away with export marketing activities from domestic operations, some companies have establised an export sales subsidiary as a separate corporation. Wholly owned and controlled by the parent company, it is essentially a quasi independent firm. With this form of export organization, a manufacturer may be better able to ascertain the profitability of its foreign businesss.

26

Foreign sales branch

A foreign sales branch handles all of the sales and distribution and promotional work throughout a designated market area and sells primarily to marketing organizations or at times to industrial buyers The foreign sales branch is the initial link in the marketing channel within a foreign market Warehousing and storage facility Foreign sales branches are often established after a market area has been developed and built up by local distributors and agents. When it is desirable for the manufacturer to display its product line. Branch office can set aside facilities for this purpose.

27

Storage or Warehousing Facilities

When it is necessary and profitable for a manufacturer to maintain an inventory in foreign markets. Such facilities may be part of a sales branch. It is not necessary that a foreign storage or warehousing branch provides stocks for a single market area. In such a situation the storage or warehousing is located in the free trade zone.

28

Foreign Sales Subsidiary

The foreign based sales subsidiary is a variation of the home country based export sales subsidiary. It enjoys greater autonomy because of its foreign domicile. Foreign sales subsidiary has broader responsibilities and perform many functions beyond those of a foreign sales office It is a flexible type of organization. It can include the entire process of manufacturing including a manufacturing unit or may be just a small office.

29

Traveling Salesperson
A traveling export salesperson is one who resides in one country , often the home country of the employer and travels abroad to perform the sales duties. In contrast a resident sales person is sent out of the home country to live and work in a foreign market Three functions of the sales personnel: Actual sales to be performed Getting deeply involved in customer relations Information Gather and communicator.

30