Question

What are the export strategies regarding product direct or indirect?Explain

international business subject and please i need in details

Answer 1

Answer: Exporting is when a company sends its products in a foreign market for sale. Seller is the Exporter and the buyer is an importer. There are two Exporting startegies namely Direct Exporting and Indirect Exporting.

Direct Exporting: It refers to seller selling goods directly to the buyer in international market. Exporter can directly sell to the customers or to the intermediary in the foreign market. Selling to an intermediary is direct Exporting provided the intermediary is based in a foreign country. This method allows manufacturer in one country to sell its products in a foreign country without opening a plant there.

Advantages:

• Exporter has the full control on manufacturing processes. As they produce goods in their own country so they need not worry about quality standards of their products.
• It is easier to withdraw from the market as there is not much investment made.
• Can get deep knowledge about the foreign country market to decide about the future plans.

Disadvantages:

• Foreign currency risks
• Can commit errors if exporter doesn't have sufficient knowledge about exporting.

Suitability of Direct Exporting:

Direct Exporting is a very easy way to enter foreign market. Any company who wants to increase it's market share or wants to maximize its profits can choose this option. But you must have sufficient finance, knowledge and skills used in Exporting. Direct exporters have to do all the documentation like preparing all paperworks, arranging for permits, licenses, shipping and insurance. Direct exporters need to do heavy research so as to find good target market. Political, Economical and cultural environment must be researched. But Direct Exporters can become very successful once they pass all these hurdles successfully and choose a gold market. As they have control over production and marketing they can establish their brand in foreign market according to their terms.

Indirect Exporting

Indirect Exporting is when the company sells goods to an intermediary in its own country. Here the company sells its Goods to an intermediary in its own country who in turn exports these goods to international market. These intermediary can be Export houses. These intermediary arrange all the paperwork, permits, shipping and insurance. And they arrange marketing as well.

Advantages:

• Inexpensive: It is the most inexpensive entry mode to foreign market.
• No Exporting knowledge or skills required.
• Can stop Exporting anytime.
• All paperwork and responsibilities are taken by the intermediary
• No risk

Disadvantages:

• No control over the overseas activities as marketing, pricing , is done by intermediary. They can charge any price and can market the product in any way they see fit.
• No knowledge about the foreign market and how it functions.

Suitability of Indirect Exporting

This strategy can be adopted by organisation who wants to increase their profits. But the company who wants to increase their market share won't benefit much from this strategy. It is suitable for organisations who don't want to take risks and don't have knowledge about Exporting and its paperwork. The organisation must make changes to the product as directed by the buying intermediary. And intermediary has overall control over how to sell, at what price to sell and how to market them. So the organisation which must have the control over its operations won't find it attractive.

So the both strategies have their own advantage and disadvantage and an organisation needs to assess its needs and choose the strategy it find best.