...Exporting[edit] Exporting is the process of selling of goods and services produced in one country to other countries.[4] There are two types of exporting: direct and indirect. Direct Exports[edit] Direct exports represent the most basic mode of exporting made by a (holding) company, capitalizing on economies of scale in production concentrated in the home country and affording better control over distribution. Direct export works the best if the volumes are small. Large volumes of export may trigger protectionism. The main characteristic of direct exports entry model is that there are no intermediaries. Types[edit] Sales representatives Sales representatives represent foreign suppliers/manufacturers in their local markets for an established commission on sales. Provide support services to a manufacturer regarding local advertising, local sales presentations, customs clearance formalities, legal requirements. Manufacturers of highly technical services or products such as production machinery, benefit the most form sales representation. Importing distributors Importing distributors purchase product in their own right and resell it in their local markets to wholesalers, retailers, or both. Importing distributors are a good market entry strategy for products that are carried in inventory, such as toys, appliances, prepared food.[5] Advantages[edit] * Control over selection of foreign markets and choice of foreign representative companies * Good information feedback from target...
Words: 1329 - Pages: 6
...into exporting, its definitions and other international business transactions, it goes on discussing the different strategies available to a firm internationalizing for the first time, and these include both direct and indirect strategies available, and provides examples of firms that use export strategies. It also gives the advantages and disadvantages of such strategies. At the end of the report it provides a conclusion and recommendations to what strategies a firm can adopt depending on the situation. 2.0 INTRODUCTION AND BACKGROUND The most conventional forms of international business transactions are international trade and investment. International trade refers to an exchange of products and services across borders. Exchange can be through exporting, importing or countertrade. Exporting is an entry strategy involving the sale of products and services to customers located abroad from the home base or third country. Importing is the buying of products abroad and bringing them to the home market. Countertrade is a business transaction where all or partial payments are made in kind rather than cash. Both finished and intermediate goods, such as raw materials and components are subject to trade. While on the other hand international investment refers to the transfer of assets to another country, or acquisition of assets in that country through foreign direct investment and contractual agreements, Cavusgil (2008). Among the organizations arrangements for exporting are Indirect...
Words: 3014 - Pages: 13
...5 percent of its production of industrial machine, of which, the most sophisticated industrial machines go to German & Swiss textile firms, whiles its earlier models are sent to India, Pakistan & Brazil. There is currently some concern about the US Textile industry which has been slowly declining. In this case, the objective is to increase the company’s turnover, which means SEWTEX has to exports more & be the main actor on foreign market. Major commercial advantages for SEWTEX to be active in the international market: * First, it is an opportunity to dramatically increase their sales. * Increase profitability, the extent of the export price which can generate sufficient margin and the profits will grow. * Gain of notoriety worldwide * Better understanding of the competition * Better using of their production capacity. For example if SEWTEX is not working at full capacity and if its facilities are under-utilized, it will increase its production through exports * Boost business * Exporting can bring a breath of fresh air in the business and allow to leave behind any bad habits and improve on new strategies, thus, positive consequences will be saved in the working methods of the company. Arguments she can offer to explain why SEWTEX should make a commitment with foreign companies: * Easier and faster market penetration for a company limited in financial and human resources, while profiting from distribution channels already well established...
Words: 2294 - Pages: 10
...EXPORTING Exporting is one of several methods an international firm can use to penetrate into a foreign market. It is the function of international trade where goods and services alike are sold beyond national borders. There are two types of exporting: 1. Direct Exporting 2. Indirect Exporting Direct Exporting Direct exporting refers to the act of an international firm involving itself directly to the exporting process of foreign market research, distributing the product to the foreign market, establishing market contact and setting up pricing/promotional strategies among other marketing activities. Usually such a firm sets up an exporting department within its organization to perform these tasks. Advantages of this type of export are: 1. Unified Control: As the firm is performing all the exporting tasks; all the authority in regards to exporting is centered in one organization and is not subject to any external pressure such as international marketing intermediaries. 2. Cost and Profit Control: Owing to the fact that there is an export department situated in the organization managing the cost of exports and the profits obtained as a result is easily achieved, this way an organization can increase its efficiency in terms of how it runs its internal affairs. 3. Customer Identification: The international firm is in direct contact with the foreign market that is buying its products, this way it is easier for the firm to identify what its market requires be...
Words: 1002 - Pages: 5
...Name: 馮光合 Student ID: M0414102 Foreign market entry modes 1. Exporting: Exporting is the process of selling of goods and services produced in one country to other countries. There are two types of exporting: direct and indirect. * Direct Exports The most basic mode of exporting made by a (holding) company, capitalizing on economies of scale in production concentrated in the home country and affording better control over distribution. Direct export works the best if the volumes are small. Large volumes of export may trigger protectionism. The main characteristic of direct exports entry model is that there are no intermediaries. Advantages: * Control over selection of foreign markets and choice of foreign representative companies * Good information feedback from target market, developing better relationships with the buyers * Better protection of trademarks, patents, goodwill, and other intangible property * Potentially greater sales, and therefore greater profit, than with indirect exporting. Disadvantages: * Higher start-up costs and higher risks as opposed to indirect exporting * Requires higher investments of time, resources and personnel and also organizational changes * Greater information requirements * Longer time-to-market as opposed to indirect exporting * Indirect exports Indirect export is the process of exporting through domestically based export intermediaries. The exporter has no control over its products in the...
Words: 1200 - Pages: 5
...Foreign Market Entry Modes Expansion into foreign markets can be achieved via the following mechanisms: Exporting is the process of selling of goods and services produced in one country to other countries. There are two types of exporting: direct and indirect. Direct exports Direct exports represent the most basic mode of exporting made by a (holding) company, capitalizing on economies of scale in production concentrated in the home country and affording better control over distribution. Direct export works the best if the volumes are small. Large volumes of export may trigger protectionism. Types Sales representatives Sales representatives represent foreign suppliers/manufacturers in their local markets for an established commission on sales. Provide support services to a manufacturer regarding local advertising, local sales presentations, customs clearance formalities, legal requirements. Manufacturers of highly technical services or products such as production machinery, benefit the most form sales representation. Importing distributors Importing distributors purchase product in their own right and resell it in their local markets to wholesalers, retailers, or both. Importing distributors are a good market entry strategy for products that are carried in inventory, such as toys, appliances, prepared food. Advantages • Control over selection of foreign markets and choice of foreign representative companies • Good information feedback from target market • Better...
Words: 533 - Pages: 3
...Business Entry 4 1.4 Basic Issues an Organisation Faces 5 1.5 Strategies used by Firms 5 ENTRY STRATEGIES 6 2.0 EXPORTING 6 2.1 Advantages and Disadvantages of Exporting 7 2.2 Passive exports Vs Aggressive exports 7 2.3 Direct and Indirect Export 8 2.4 Case Study 9 3.0 PIGGYBANKING…………………………………………………………………………………….10 4.0COUNTERTRADE……………………………………………………………………………………10 4.1 Forms of Countertrade…………………………………………………………………………….10 4.2 Examples of Countertrade…………………………………………………………………………11 4.3 Disadvantages of Countertrade……………………………………………………………………11 5.0 BARTER………………………………………………………………………………………………11 5.1 Forms of Barter Trade…………………………………………………………………………….11 6.0 FOREIGN PRODUCTION……………………………………………………………………………14 6.1 Licensing…………………………………………………………………………………………..14 6.2 Joint Ventures……………………………………………………………………………………..15 6.3Ownership………………………………………………………………………………………….16 6.4 Exports Processing zones………………………………………………………………………….17 7.0 ANALYSIS AND CONCLUSION…………………………………………………………………...17 7.1 Conclusion and Recommendation………………………………………………………………..17 8.0 REFERENCES………………………………………………………………………………………...19 EXECUTIVE SUMMARY. There are a variety of ways in which a company can enter a foreign market. No one market entry strategy works for all international markets. Direct exporting may be the most appropriate strategy in one market while in another you may need to set up a joint venture and in another...
Words: 5355 - Pages: 22
...References Bibliography When an organization has made a decision to enter an overseas market, there are a variety of options open to it. These options vary with cost, risk and the degree of control which can be exercised over them. The simplest form of entry strategy is exporting using either a direct or indirect method such as an agent, in the case of the former, or countertrade, in the case of the latter. More complex forms include truly global operations which may involve joint ventures, or export processing zones. Having decided on the form of export strategy, decisions have to be made on the specific channels. Many agricultural products of a raw or commodity nature use agents, distributors or involve Government, whereas processed materials, whilst not excluding these, rely more heavily on more sophisticated forms of access. These will be expanded on later. Chapter Objectives The objectives of the chapter are: Structure of the Chapter The chapter begins by looking at the concept of market entry strategies within the control of a chosen marketing mix. It then goes on to describe the different forms of entry strategy, both direct and indirect exporting and foreign production, and the advantages and disadvantages connected with each method. The chapter gives specific details on "countertrade", which is very prevalent in global marketing, and then concludes by looking at the special features of commodity trading with its "close coupling" between production and marketing. Basic...
Words: 7175 - Pages: 29
...1. What are the major differences between capitalism, communism, and socialism? The mayor differences between these type of economies are that, capitalism is a free market system, were most of the factor of production and distribution are privately owned. Although government get involved into some issues and decide minimum wages and such. “People under free-market capitalism have four basic rights: 1) The right to private property, 2) the right to own a business and to keep all of that business’s profits, 3) the right to freedom of competition and 4) the right to freedom of choice (Nickels, pg. 35, 36)”. Socialism is an economic system where basic business should be owned by the government, in that way profits are distributed evenly on society. Even though the socialist system has more equality, taxes are higher, so usually bright and hard work people leave that society for a capitalistic one. Taxes are so high that most of the times is hardly any profit left. Communism is a politic and economic system where the government has control of the economy and the factors of productions. Basically, communism control almost every single aspect of people life. People, under this kind of system, is not motivated to work hard because government take almost all of their profits. 2. Discuss the three major economic indicators and how they are indicative of our current economic climate. The three major economic indicators are: Gross domestic product is the total value of final goods...
Words: 927 - Pages: 4
...A market entry strategy is to plan the a method of delivering goods or services to a target market and distributing them there. when importing or exporting services, it refers to establishing and managing contracts in a foreign country.Market entry is more than examining a set of economic data. Successful market entry begins with assessing feasibility, factors such as the trends, the culture, the nature of the competition and the opportunity. There are a variety of ways in which organizations can enter foreign markets. The three main ways are by direct or indirect export or production in a foreign country. Exporting methods include direct or indirect export. In direct exporting the organization may use an agent, distributor, or overseas subsidiary, or act via a Government agency. In effect, the Grain Marketing Board in Zimbabwe, being commercialized but still having Government control, is a Government agency. The Government, via the Board, are the only permitted maize exporters. Bodies like the Horticultural Crops Development Authority (HCDA) in Kenya may be merely a promotional body, dealing with advertising, information flows and so on, or it may be active in exporting itself, particularly giving approval (like HCDA does) to all export documents. In direct exporting the major problem is that of market information. The exporter's task is to choose a market, find a representative or agent, set up the physical distribution and documentation, promote and price the product. Control...
Words: 429 - Pages: 2
...political factors which influence foreign markets.-Long run benefits of doing business in a country depends on following factors:- Size of market (in terms of demographics)- The present wealth of consumer markets (purchasing power)- Nature of competition. By considering such factors firm can rank countries in terms of their attractiveness andlong-run profit. The time of entry is an important factor to be considered. Entry is early when an international business enters a foreign market before other foreign firms and late when it enters after other international businesses. The advantage is when firms enter early in the foreign market commonly known as first-mover advantages which include; it’s the ability to prevent rivals and capture demand by establishing a strong brand name; Ability to build sales volume in that country.so that they can drive them out of market; Ability to create customer relationship The disadvantages are that thefirm hasto devote...
Words: 2080 - Pages: 9
...Formulation of national trade policies Present the major arguments in favor of and against governmental intervention in international trade Free trade: implies that national government exerts minimal influence on the exporting and importing decisions of private firms and individuals. Fair trade: suggests that the national government should actively intervene to ensure that domestic firms’ exports receive an equitable share of foreign markets and that imports are controlled to minimize losses of domestic jobs and market share in specific industries. Discuss industry-level arguments and national trade policies * Industry-level arguments a) The national defense argument: used as a reason to support government protection of specific industry Country must be self-sufficient in critical raw materials, machinery, and technology or else be vulnerable to foreign threats Eg: Japan banned the imports of rice as a mean of promoting its self-sufficiency of dietary staple. b) The infant industry argument * Give firms temporary protection from foreign competition until firms are fully established * Powerful economic development strategy. * Infant industry protection is often done on a political basis * Once an industry is granted protection, it may be reluctant to give it up Eg: Japan has developed thriving metal fabrication industries by eliminating tariffs of row ores, and imposing high tariffs on processed ores. c) Maintenance of existing jobs ...
Words: 1048 - Pages: 5
...market. The phase model starts with exporting and develops through the stages of cooperative contracts and strategic alliances to wholly owned affiliates. The simplest stage of the model is exporting and it is the least costly way for a company to initially take its product to a world market. The exporting stage of the phase model is when companies make something in their home country and sell it overseas. One of the advantages for exporting is that the company becomes less dependent on its home market for sales. By selling overseas the potential market is bigger. One disadvantage especially for a country like Australia is that shipping costs add to the price that a company has to change for its products overseas. Another potential disadvantage is that foreign governments might charge tariffs on imports which can also make them more expensive. The cooperative contracts stage of the phase model is when a company makes a deal with a similar business in a foreign country that gives them the right to make their products. Two types of cooperative contracts are licensing and franchising. One advantage of this stage is that the company does not have to pay shipping or face tariff barriers. Strategic alliances are formed when companies combine to share resources. The most common form of strategic alliance is the joint venture company. This is where two or more companies combine to form a new company. Joint venture companies have the advantage of avoiding the cost of shipping and...
Words: 410 - Pages: 2
...can be used by companies to enter foreign markets 1. Exporting: Exporting is the process of selling of goods and services produced in one country to other countries * Direct Exports * Indirect Exports A brief discussion on the advantages and disadvantages and the legalities involved in the export process. 2. Licensing: An international licensing agreement allows foreign firms, either exclusively or non-exclusively to manufacture a proprietor’s product for a fixed term in a specific market. A brief discussion on the advantages and disadvantages and the legalities involved in the process to acquire or grant a license. 3. Franchising: A system in which semi-independent business owners (franchisees) pay fees and royalties to a parent company (franchiser) in return for the right to become identified with its trademark, to sell its products or services, and often to use its business format and system A brief discussion on the advantages and disadvantages and the legalities involved in the process of becoming or appointing a franchisor / franchisee. 4. Turnkey Projects: A turnkey project refers to a project when clients pay contractors to design and construct new facilities and train personnel. A turnkey project is way for a foreign company to export its process and technology to other countries by building a plant in that country. A brief discussion on the advantages and disadvantages and the legalities involved in the completion of a turnkey project ...
Words: 332 - Pages: 2
...Methods; 2) Exporting; 3) Joint Venture; 4) Direct Investment; 5) Advantages and Disadvantages First method includes: 1)Direct Export - the organization produces their product in their home market and then sells them to customers overseas 2)Indirect Export - the organizations sells their product to a third party who then sells it on within the foreign market Another less risky market entry method is licensing. Here the Licensor will grant an organization in the foreign market a license to produce the product, use the brand name etc in return that they will receive a royalty payment. ( ex. Coca-Cola) Another of form on market entry in an overseas market which involves the exchange of ideas is contracting. The manufacturer of the product will contract out the production of the product to another organization to produce the product on their behalf. Clearly contracting out saves the organization exporting to the foreign market. (example: hotel chain “Hilton”) The ultimate decision to sell abroad is the decision to establish a manufacturing plant in the host country. The government of the host country may give the organization some form of tax advantage because they wish to attract inward investment to help create employment for their economy. Joint Venture Ownership is a cooperation of foreign and local investors of the capital in order to create a local business that they own and manage jointly. And the third method is Direct Investment. It is the direct ownership of...
Words: 334 - Pages: 2
