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Methods of Exporting and Channels of Distribution The most common methods of exporting are indirect selling and direct selling. In indirect selling, an export intermediary such as an export management company (EMC) or an export trading company (ETC) usually assumes responsibility for finding overseas buyers, shipping products, and getting paid. The principal advantage of indirect exporting for most companies is that it provides a way to penetrate foreign markets without the complexities and risks of direct exporting. Direct selling occurs when the producer deals directly with a foreign buyer. This approach has the advantages of providing more control over the export process, having a potential for higher profits, and allowing a closer relationship to the overseas buyer and marketplace. However, the company must spend more time, personnel, and corporate resources than with indirect exporting. The paramount consideration in determining which method to use is the amount of resources a company is willing to devote to its international marketing effort. Other important factors to consider are the size of the firm, the nature of its products, previous export experience and expertise, and business conditions in the selected overseas markets. Export Licenses Many countries require export licenses to be obtained before exporting certain products therefrom. Export licenses can be required for a number of reasons, but usually apply to products dealing with natural resources, national security, or health and safety. Export licenses are also sometimes required to ensure compliance with international treaties or conventions. Preparing Products for Export Selecting and preparing a product for export requires not only product knowledge but also knowledge of the unique characteristics of each market being targeted. Before the sale can occur, a product may need to be modified to satisfy buyer tastes or needs in foreign markets. Product adaptationÊTo achieve success in a foreign market, a product may have to be modified in order to conform it to foreign government regulations, geographic and climatic conditions, buyer preferences, or standards of living. A product may also need to be modified to facilitate shipment or compensate for possible differences in engineering or design standards. Foreign government product regulations are common in international trade and are expected to expand in the future. These regulations can take the form of high tariffs or of non-tariff barriers, such as tough product standards. Engineering and redesignÊFundamental aspects of a product may require redesign. For example, electrical standards in many foreign countries differ. It is not unusual to find phases, cycles, or voltages that would damage or impair the operating efficiency of equipment designed for use in other countries. Branding, labeling, and packagingÊSome of the considerations that an exporter should undertake regarding the branding and labeling of products are:
InstallationÊAn exporter should also consider the ease of installing the product overseas. If technicians or engineers are needed overseas to assist in installation, it is wise to preassemble or pretest the product before shipping in order to minimize the time in the field. If a product is sent disassembled, there may be savings in shipping costs, but there also may be a delay in payment if completion of the sale is contingent on the delivery of an assembled product. If trained personnel are not sent to install the product, all product information, such as training manuals, installation instructions, and parts lists, may need to be provided in the local language. It is also advisable to provide a quickly accessible line of communication-telephone, fax, or other-for customer service if you do not have a representative on site. WarrantiesÊIn some instances, companies should include a warranty on their products, particularly if the buyer is likely to expect a specific level of performance and a guarantee that it will be achieved. However, consumer expectations for warranties vary from country to country depending on the level of development, competitive practices, activism of consumer groups, local standards of production quality, and other similar factors. If a warranty is not expected, the exporter generally need not provide one; to do so might cause production costs to be higher than a competitor's. Exporters should keep in mind that servicing warranties is more expensive and troublesome in foreign markets. It is usually desirable to arrange warranty service locally with the assistance of a representative or distributor. Preparing a Product for Shipping When preparing to ship a product overseas, the exporter needs to ensure that the merchandise is packed correctly so that it arrives in good condition; labeled correctly to ensure that the goods are handled properly and will arrive on time and at the right place; documented correctly to meet government requirements, as well as proper collection standards; and insured against damage, loss, and pilferage and, in some cases, delay. Freight forwardersÊThe international freight forwarder acts as an agent for the exporter in moving cargo to the overseas destination. The freight forwarder can assist with an order from the start by advising the exporter of the freight costs, port charges, consular fees, cost of special documentation, and insurance costs, as well as the freight forwarder's handling fees-all of which help in preparing price quotations. The freight forwarder may also recommend the type of packing for best protecting the merchandise in transit and can arrange to have the merchandise packed at the port or placed into containers. PackingÊIn packing an item for export, the shipper should be aware of the demands that transport puts on a package, namely, breakage, weight, moisture, and pilferage. Because proper packing is essential in exporting, the buyer often specifies packing requirements. One popular method of shipment is the use of containers obtained from carriers or private leasing concerns. These containers vary in size, material, and construction, and can accommodate most cargo. Refrigerated and liquid bulk containers are readily available as well. LabelingÊSpecific markings and labeling are used on export shipping cartons and containers to meet shipping regulations, ensure proper handling, conceal the identity of the contents, and help receivers identify shipments. The overseas buyer usually specifies which export marks should appear on the cargo for easy identification by receivers. DocumentationÊExporters should seriously consider having the freight forwarder handle the formidable amount of documentation that exporting requires, because freight forwarders are specialists in this process. Documentation must be precise. Slight discrepancies or omissions may prevent merchandise from being exported, result in firms not getting paid, or even result in the seizure of the exporter's goods by foreign government customs. ShippingÊThe export marks should be added to the standard information shown on the domestic bill of lading and should show the name of the exporting carrier and the latest permissible arrival date at the port of export. The exporter should also include instructions for the inland carrier to notify the international freight forwarder by telephone on arrival. InsuranceÊExport shipments are usually insured by cargo insurance against loss, damage, and delay in transit. For international shipments, the carrier's liability is frequently limited by international agreements, and the coverage is substantially different from domestic coverage. Arrangements for cargo insurance may be made by either the buyer or seller, depending on the terms of sale. Exporters are advised to consult with international insurance carriers or freight forwarders for more information. Damaging weather conditions, rough handling by carriers, and other common hazards to cargo make marine insurance important protection for exporters. If the terms of sale make the firm responsible for insurance, it should either obtain its own policy or insure cargo under a freight forwarder's policy for a fee. If the terms of sale make the foreign buyer responsible, the exporter should make sure via examination of documentation (not assume or even take the buyer's word) that adequate insurance has been obtained. If the buyer neglects to obtain coverage or obtains too little, damage to the cargo may cause a major financial loss to the exporter. Additional information on exporting can be found in "International Marketing" on page 15 and "International Payments" on page 27. | ||
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Size of Sales Force 1. How many field sales personnel does the representative or distributor have? 2. What are its short and long range expansion plans, if any? 3. Would it need to expand to accommodate your account properly? If so, would it be willing to do so? Sales Record 1. Has its sales growth been consistent? If not, why not? Try to determine sales volume for the past five years. 2. What is its sales volume per outside salesperson? 3. What are its sales objectives for next year? How were they determined? Territorial Analysis 1. What territory does it now cover? 3. Is it consistent with the coverage you desire? If not, is it able and willing to expand? 3. Does it have any branch offices in the territory to be covered? 4. If so, are they located where your sales prospects are greatest? 5. Does it have any plans to open additional offices? Product Mix 1. How many product lines does it represent? 2. Are these product lines compatible with yours? 3. Would there be any conflict of interest? 4. Does it represent any other firms from your country? If so, which ones? 5. If necessary, would it be willing to alter its present product mix to accommodate yours? 6. What would be the minimum sales volume needed to justify its handling your lines? Do its sales projections reflect this minimum figure? From what you know of the territory and the prospective representative or distributor, is its projection realistic? Facilities and Equipment 1. Does it have adequate warehouse facilities? 2. What is its method of stock control? 3. Does it use computers? Are they compatible with yours? 4. What communications facilities does it have (fax, modem, telex, etc.)? 5. If your product requires servicing, is it equipped and qualified to do so? 6. If necessary and customary, is it willing to inventory repair parts and replacement items? Customer Profile 1. What kinds of customers is it currently contacting? 2. Are its interests compatible with your product line? 3. Who are its key accounts? 4. What percentage of its total gross receipts do these key accounts represent? 5. How many principals is it currently representing? 6. Would you be its primary supplier? 7. If not, what percentage of its total business would you represent? Promotional Thrust 1. Can it help you compile market research information to be used in making forecasts? 2. What media does it use, if any, to promote sales? 3. How much of its budget is allocated to advertising? How is it distributed among various principals? | ||
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1. Develop a plan. Before starting an export business, obtain qualified expert counseling and develop a master international marketing plan that clearly defines your goals and objectives and identifies the problems you anticipate, plus potential solutions. 2. Get commitments. If necessary, secure a commitment from top management to overcome the initial difficulties and meet the financial requirements of exporting. 3. Pick distributors with care. Take sufficient care in selecting overseas distributors, because they will generally operate much more independently than their domestic counterparts. 4. Create a successful pattern. Establish a basis for profitable operations and orderly growth, and do not simply rely on unsolicited trade leads. 5. Devote attention to exporting. Devote continuing attention to your export business, even if your domestic market is also booming. 6. Consider international distributors equal to domestic ones. Treat international distributors on an equal basis with domestic counterparts by offering such things as institutional advertising campaigns, special discount offers, sales incentive programs, special credit term programs, and warranty offers that are appropriate to their situation. 7. Different markets require different plans. Do not assume that a given market technique and product will automatically be successful in all countries. 8. Don't be afraid to change products for markets. Be willing to modify products to meet regulations or cultural preferences in other countries. 9. Adhere to language changes. Print service, sale, and warranty messages in locally understood languages. 10. Provide reliable service. Provide readily available servicing for the product, since an otherwise successful product may acquire a bad reputation if it lacks the necessary service support. |