export entry modes direct export

8/10/2019 Export Entry Modes Direct Export

1/19

Manufacturer or exporter sells directly to animporter or buyer located in the foreign marketarea.

Exporter take a more direct approach to exportingmay choose to transport the goods into a foreignmarket themselves.

This proactive approach gives the company greatercontrols on issues such as the finished product, theselling and marketing methods

The actual transaction flow between nations ishandled directly by a dependent organization ofthe manufacturer or a foreign-based marketingorganization or customer.


2/19

5.2

DIRECT

EXPORT

5.2.1

HOME-COUNTRYBASED

DEPARTMENT

5.2.2

FOREIGNSALES

BRANCH

5.2.3

STORAGE ORWAREHOUSE

FACILITIES

5.2.4

FOREIGNSALES

SUBSIDIARY

5.2.5

TRAVELINGSELASPERSON

5.2.6

FOREIGN-BASEDDISTRIBUTORS

&

AGENTS

(REPRESENTATVES)


3/19

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.


4/19

Three different types of home-country based

export organizations:

(i) Built-in export departments

(ii) Separate or self-contained export department

(iii) Export sales subsidiary


5/19

5.2.1

HOME-COUNTRYBASED DEPARTMENT

(i)

BUILT-INDEPARTMENT

(ii)

SEPARATE EXPORTDEPARTMENT

(iii)

EXPORT SALESSUBSIDIARY


6/19

The simplestform of export organization. Easiest to establish.

Consist of an export sales manager with someclericalhelp.

Primary job of the sales manager is to do the actualselling or directing of selling.

All functions connected with export transactionse.g. advertising, logistics, credit, shipping done byappropriate domestic department.

May have problems getting support from otherunits and in carrying out technical functions.


7/19

Built-in form is best suited for direct export for the

manufacturer who operating under any of thefollowing 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.


8/19

As overseas business increases, separate exportdepartment may be established to take care of it.

Essentially self-sufficient unit and well equippedto handle export activities (advertising, logistics,

etc.). In other words - complete export marketing

department.

Structured internally upon the basic of functions,

geographic region, product, or a combination ofthese.


9/19

Characteristics of separate export department:

No inherent possibility for clash between theinternational and domestic sides of the firmregarding the time to be spent by domesticmarketing personnel on foreign business matters.

Export operations can be conducted on a full-timebasis by personnel knowledgeable and trained;specifically committed to exporting.

Has a fairly high degree of flexibility in terms of

where it is located.


10/19

Much more complex and almost completelyindependent organization.

Wholly owned and controlled by the parentcompany.

Functions same as SED but differs significantly infinancially and organizationally.

ESS purchase goods from parent company andresell in foreign countries.

Benefit: total and independent control of theiractivities.


11/19

Advantages:

provides unified control; profit center; can more easily allocate orders and supervise

traffic management; ease of financing; wider product line; tax advantages in some countries.


12/19

Serious involvement in international trade.

Primary purpose:

Closer supervision of foreign sales by manufacturer

in home country.

Secondary purpose:

A foreign facility for manufacturer to display its

product line (Display center).


13/19

Responsibility:

Provides control, service, dedicated staff for yourproducts; costly.

Handles all of sales distribution and promotion in adesignated market area.

Storage or warehouse facilities

Used when inventory in foreign markets isnecessary or profitable.

May be for one country or regional.


14/19

May be the complementary action to the set up ofESS and may be part of a sales branch.

Due to the exporter decisions to invest in foreigncountry.

Operates as a separate entity and set up to fillorders made by foreign distributors.

Reasons:

Faster and more secure flows of goods;

Create consumer trust and satisfaction;

Facilitates easier trading with wholesalers andretailers.

Best set up in a free port or trade zone.


15/19

Similar in operation to the ESS and FSB.

Differences: greater autonomy in decision making.

Has its own organizational structure, separatefinancial accounts and marketing division.

They purchase goods from parent-company andresell it to foreign buyer.

Using transfer pricing.

Why establish foreign sales subsidiary?

Potential tax advantages Business practices


16/19

Functions: selling activities, customer relations,information gathering.

May act as a chain between manufacturer and endusers.

Traveling export salesperson:

A person who lives in one country, often the homecountry of the employer, and travels abroad to performthe sales duties.

Resident sales person:

A person who is sent out of the home country tolive and work in a foreign market.


17/19

Basic functions of traveling sales personnel:

(i) Communication of product information to

customers, and obtaining orders.

(ii) Customer relations: maintaining and improving

the companys position with customers andgeneral public.

(iii) Gathering and communicating information.

(iv) Arranging the delivery of products.


18/19

A distributoris a customer of the manufacturer,who purchases the goods and earns their profitthrough a profit margin when its resold.

An agent is a representative of the manufacturer

who earns commission for finding foreignpurchasers of the manufacturers goods.

Unfortunately, terms are often used interchanged. In direct exporting, use of exclusive agents or

distributors is easiest and least costly; also has

potential for development.


19/19

Conditions required the uses of

distributors/agents:

Little knowledge of foreign market;

Do not wish to make greater investments; notsure the product will be successful or not;

Do not have personnel capable of being atraveling salesperson;

Order small in quantities or size.

More importantly, the uses ofdistributor/agent is less risks and less costs.

export entry modes direct export

Documents