One of the major advantages of turnkey projects is the possibility for a company to establish a plant and earn profits in a foreign country especially in which foreign direct investment opportunities are limited and lack of expertise in a specific area exists. As an agent for the exporter, the forwarder becomes its port representative. For optimal results, a company that uses direct mail to reach foreign retailers should support it with other marketing activities. Depending on the market selected, the distance goods must be transported and the , direct exporting can make goods too expensive for customers to purchase. Well-qualified representatives will gladly answer questions that help distinguish them from less-qualified competitors. The equity modes category includes: and.
Commercial Service can provide the market research you need and introduce you to buyers in more than 125 countries. There are two main methods for international market entry — indirect and direct exporting. However, segmentation is sometimes a less efficient use of company resources. Whenever the danger of piracy is significant, the exporter should guard against sending product samples that could be easily copied. Selling to export house in India: Merchant exporters buy goods from Indian manufacturers and sell them abroad. Depending on the length of the relationship, the added value of the market the representative has created for the exporter, and whether termination is for just cause as defined by the foreign country, the exporter may be required to compensate the representative for losses. That means it is more difficult for them to acquire the needed experience in entry into the foreign market.
This is a situation where one partner makes and keeps control of critical resources. Advantages of Indirect exporting Generally, small companies lack adequate financial and managerial resources required for making a successful entry into a foreign market. A specific example of piggyback exporting could be the following: Let's say that John C. An English-language text should be the official language of the contract in most cases. Services of middlemen in indirect exporting: In indirect exporting, the manufacturer utilities the services of various types of independent middlemen or cooperative organizations. The website sates that in direct exporting, the company is in charge of establishing contact with overseas clients and of the logistics and overall processing of the transaction. Direct exporting means setting up expensive subsidiaries or establishing contractual relationship with foreign companies.
The most common piggybacking situation is when a domestic company has a contract with an overseas buyer to provide a wide range of products or services. Direct exporting requires the manufacturers to deal with these foreign entities themselves. Indirect exporting offers small manufacturers the advantages of entering foreign markets without being subjected to the risks and complexities of direct exporting. Are its interests compatible with your product line? Territorial analysis What territory does it now cover? Perhaps the biggest is that the indirect exporter has very little contact with the foreign agents or distributors, let alone with end users and customers. Will you be expected to contribute funds for promotional purposes? If the cost of providing these services is not built into the export price, you could have a smaller profit than you had anticipated. Selling to visiting buyers: In India, there are resident buying representatives who represent big foreign companies.
For each listed company, take note of how long they have been in business, the number of employees, the products in which they specialize, and the countries to which they export. These are some of the legal questions to consider: How far in advance must the representative be notified of the exporter's intention to terminate the agreement? For example, a company may ask for regular reports on efforts to market its products and may require approval of certain types of efforts, such as advertising programs or service arrangements. Your company should also consider other private-sector and U. Often, companies test the waters of a foreign market with indirect exporting and shift to direct exporting if the endeavor is profitable. By doing so, you may have the advantage of learning first hand potentials of the market through appointments with prospective customers.
These factors might also seriously impact profits made in the market. Good marketing skills can help your company operate in an unfamiliar market. For more insightful videos visit our. Indirect market entry means turning over international sales to a third party. So, it cannot spend more money on market research. It is vital to include an escape clause in the agreement, allowing the exporter to end the relationship safely and cleanly if the representative does not work out. Market research will help you to identify the right target market, competitors in the market, customers, distribution channels and the best way to promote your product.
PromPeru specifies that distributors rarely reach the final consumer and generally serve the retail market. In this foreign market entry mode, a licensor in the home country makes limited rights or resources available to the licensee in the host country. Negotiating an agreement with a foreign representative When the company has found a prospective representative that meets its requirements, the next step is to negotiate a foreign sales agreement. When a company chooses to export directly to foreign markets, it usually makes internal organizational changes to support more complex functions. The sales representative may operate on either an exclusive or a nonexclusive basis.
Indirect exporting means selling to an intermediary, who in turn sells your products either directly to customers or to importing wholesalers. Reduce risk - each partner risks only its own contribution 2. Larger companies at advanced stages of exporting may choose to retain the international division or to organize along product or geographic lines. The differences in strategy produces more conflicts of interest in the later partnership Lilley and Willianms, 1991. If you have no intention of ever selling direct, this process works fabulously.
The terms and length of association between your company and the foreign distributor are established by contract. Licensing is a relatively flexible work agreement that can be customized to fit the needs and interests of both, licensor and licensee. Once the company has qualified some foreign representatives, it may wish to travel to the foreign country to observe the size, condition, and location of offices and warehouses. Since the survival of a business hinges on sales, it is important to negotiate and follow-up with your customers to get orders secured. The exporter can possibly realize greater sales volumes since the foreign export agent often represents several different related products or product lines and thus can deliver on economies of scale. Alliance as an alternative to merger Some industry sectors have constraints to cross-border mergers and acquisitions, strategic alliances prove to be an excellent alternative to bypass these constraints. Indirect export Indirect exporting refers to selling to an intermediary, who later sells the goods or services either directly to importing wholesalers or to customers.