Unit 5 Exports Initial Stages

OTHER FORMS OF INDIRECT EXPORTING

*Export comission house (export buying agent)*: represents a foreign buyer, and is paid a commission by the buyer - Emphasis in dealing best price - Products are very specific. *Resident buyer:* represents foreign companies that need close and continous contact with suppliers. More emphasis in continous business. Very common in markets which are the source of supply for an industry. OEM buyers for private labels (i.e: Textiles in India; Electronics in China...)

Tenders (direct sales)

*Tenders (Request for Tender or RFT)* Formal, structured invitation to suppliers, to bid, to supply products or services. Tenders are also an example of direct sales, although they also involve experienced exporters Many public agencies, as well as international organizations and some companies in the infrastructure and utilities sectors, buy overseas through tenders. Tenders are an answer to a buyer's proposition. The buyer obtains many offers from diferent exporters (bidders), and will choose the one that better covers his requests *Key facts to succeed in a tender:* 1. Try to detect a tender before its publication - be aware of market trends, check specialized magazines 2. Demonstrate the competence of your company 3. Understand your customer's needs 4. Offer the best possible price from the start of the process *Example of a Tender *: Vinmonopolet, the state agency that distributes alcohol in Norway

Other facts about direct sales

- Direct sales also involve B2B Internet: there are sites where companies can offer and demand products on an international basis - Direct sales to final consumers has been radically modified by Internet: B2C in Internet is now a major issue for cultural products (Amazon, Alibaba) or tourism (Booking, Kayak, Travelocity, Expedia)

Risks of the Export Consortia

1. Agreeing for a Common Marketing Strategy with members 2. Finding partners who: - are motivated for exports - are complementary - are not competitive 3.Too much control on the activity of the Export Consortium can lead to paralysis

Conditions for an export consorttium

1. Companies must have a similar size 2. Complementary and non-competitive products 3. Commitment from all partners 4. A "neutral" Export Manager

Initial Stages

1. Trading companies 2. Piggyback 3. Direct Sales 4. Export Consortia

Advantages of Export Consortia

Advantages: 1. Sharing an export department is less costly than maintaining our own export department è better return on investment 2. Risk reduction 3. A better offer from a commercial point of view è increase of bargaining power, access to larger markets and orders 4. The possibility of hiring a more professional export team 5. All export procedures are left to the shared export department 6. A good way to accumulate export experience

Export Consortia

An export consortium is a group of companies that decides to create a common structure for exports.

Direct Exporting

Direct Exporting takes place when the Exporting Company sells directly abroad, with or without foreign intermediaries, and with or without the cooperation of other companies • Direct Sales is an example of Direct Exporting • Unlike Indirect Exporting, the Exporter must deal with all export procedures

Piggyback

In *piggyback*, our products are exported through another company from our country, who: 1. already has a strong position abroad, and 2. offers a complementary product It is also an example of *indirect exporting* For the *carrier*, it has two *advantages*: 1. Extended portfolio offer to customers (the product has to be complementary and non competitive) 2. Carrier earns a compensation from the initial exporter For the *initial exporter*, it is an opportunity to gain inmediate access to a distribution network in a foreign market, with both the expertise and the structure of a consolidated exporter company *Compensation of carrier*: 1. Discount from supplier's domestic price list 2. Commission Although piggyback has many advantages for the initial exporter, it is *unknown for many companies*. *Why it is not implemented?* 1. Lack of control and feedback from the market 2. Exclusivity agreements may affect future growth *What are the risks for the carrier?* 1. Quality assurance from supplier 2. Risks of competition

Indirect Exporting

Indirect exporting takes place when the Exporting company uses independent organizations located in its own country Exporting through trading companies is an example of Indirect Exporting

Trading Company

International Trading Houses or Trading Companies are commercial intermediaries specialized in the long term development of trade in goods and services supplied by other parties. They focus on exporting, importing and third country trading as their core activity and use overseas marketing organization and infrastructure as well as procurement networks to service suppliers and customers. A Trading Company purchases a merchandise at the exporters' country and resales it at the country of destination It is also known as *Export Merchant * - Usually a trading company has an expertise in some products and/or markets - They are very extended in some markets like Japan and China - The trading company handles all the export procedures è for the export company, it is a "domestic sale" - The trading company also handles those tasks related to marketing and distribution of the product in the foreign market *Main advantage for the initial exporter:* - access to a foreign market through a "domestic" sale Some consolidated export companies are still working with trading companies, because of their expertise in a range of products and/or in a foreign market *Keep in mind:* 1. Trading companies make a severe selection of their suppliers 2. They are usually interested in commodities or raw materials 3. Low margins for the exporter

Facts about export consortia

Many National Institutes of Foreign Trade, such as ICEX, have programs to support the Export Consortia Also UU.NN. is supporting the creation of Export Consortia in Developing Countries.

Direct Sales

We refer to *DIRECT SALES* when the exporter sells directly to a company or to a consumer: - located in a foreign market, - and without having any presence there - Without : agent, distributor, subsidiary or branch *How do Direct Sales come?* 1. Most usually, by "accident": it is a "reactive sale" 2. The interest shown by foreign buyers to import goods manufactured by the exporter