RISK AND CONTROL IN FOREIGN MARKET ENTRY STRATEGIES

HIGH RISK
COUNTRY INSTABILITY

FOREIGN PRODUCTION DIRECT INVESTMENT

FOREIGN PRODUCTION DIRECT INVESTMENT

HIGH CONTROL OVER STRATEGY

POTENTIAL CONFLICT POTENTIAL COMPETITORS

JOINT VENTURE
What is Going to Happen to your Product in the Foreign Market

JOINT VENTURE

MARKET ACCEPTANCE Of PRODUCT LOSS OF FREIGHT LOW RISK

LICENSING FRANCHISING

LICENSING/ FRANCHISING

EXPORTING

EXPORTING

LOW CONTROL OVER STRATEGY

FOREIGN MARKET ENTRY STRATEGIES

COMPANY

The Company Can

THE FOUR BASIC STRUCTURES OF OPERATION IN A FOREIGN MARKET

EXPORTING AS A FOREIGN MARKET ENTRY STRATEGY

NATURE OF PRODUCT CATEGORY

The Physical Movement of Goods may preclude export marketing as a feasible strategy. Undertaking Manufacture in the Foreign country market may be a more feasible alternative.

METHODS OF EXPORTING
INDIRECT EXPORT MARKETING

DOMESTIC MARKET
INTERMEDIARIES

FOREIGN COUNTRY MARKET

INTERMEDIARIES

COMPANY COMPANY COMPANY

E
Glory House Apparels Export House

C I D I C C
INDIRECT EXPORT

Importers Buying Agent based E in the Domestic Market

DIRECT EXPORT MARKETING

COMPANY COMPANY COMPANY

Rajdeep Metals

C I I D C C
DIRECT EXPORT

Importer Based in the U.S. Foreign Market

EXPORT MARKETING STRATEGIES

INDIRECT EXPORT MARKETING
INTERMEDIARY BASED IN THE EXPORTERS HOME MARKET
MEA RESIDENT BUYER (Importing Companys Buying Agent Resident in

the Foreign Market)

EXPORT HOUSE EXPORT MANAGEMENT COMPANY TRADING COMPANY PIGGY BACK EXPORTING

DIRECT EXPORT MARKETING

INTERMEDIARY BASED IN OVERSEAS BUYERS MARKET
IMPORT AGENT FOREIGN DISTRIBUTOR TRADING COMPANY

EXPORT MARKETING INTERMEDIARIES

HOME COUNTRY MARKET
MANUFACTURERS EXPORT AGENT (MEA) Represents the Domestic Exporter

FOREIGN MARKET
WHOLESALER

P R O D U C E R

TRADING COMPANY RESIDENT BUYER Represents the Foreign Buyer

IMPORT AGENT TRADING COMPANY

WHOLESALER W R

What is the Difference in these Intermediaries

EXPORT MANAGEMENT COMPANY WHOLESALER RETAILER

EXPORT COMMISSION HOUSE Represents the Foreign Buyer COMPANY EXPORT DEPARTMENT/ SALES FORCE

IMPORTER

C O N S U M E R / U S E R

DIFFERENT TYPES OF INTERMEDIARIES ARE PREVALENT IN DIFFERENT COUNTRY MARKETS. AGENTS VARY IN TERMS OF:

Functions Performed by the Agent.

Commissions taken from Whom they Represent
Whom do they represent: Buyer or Seller and from whom do they get their commission ?

Which Country Market are they Based in. Their Loyalty to Clients.

FUNCTIONS PERFORMED BY INTERMEDIARIES

An Intermediary may perform one or more of the functions:

CONTACTING NEGOTIATING BUYING/SELLING DOCUMENTATION/ INSURANCE SHIPPING/ TRANSPORTATION FINANCING/CREDIT

NOTE

An Agent performs fewer functions and is paid a Commission by the Exporter or the Foreign Buyer. An Export-Import Trading Company will perform more functions and make higher profits.

TYPES OF EXPORT INTERMEDIARIES

PREVALENCE
EXPORT COMMISSION HOUSES
They are popular in the U.K. : Responsible for 20% of U.K. Exports. Estimated at around 800 in number.

EXPORT MANAGEMENT COMPANIES

Popular in the U.S.A: Account for 30% of U.S. Exports. Estimated Approx. 1000 EMCs in USA

TRADING COMPANIES
Popular in Japan, South East Asian Countries: Account for 50%-60% of Japanese Exports/Imports.

Estimated Approx. 10,000 in Number

They May Be: General Trading Companies Specialist Trading Companies

MANUFACTURERS EXPORT AGENTS

CHARACTERISTICS of MEAs

They represent more than one manufacturer at a time and may have a short term relationship. They work on a commission basis. They contact sellers directly and aid in the Transfer of title to goods.

EXPORT MANAGEMENT COMPANIES (EMCs)

CHARACTERISTICS

They generally work for one manufacturer at a time and have a closer relationship than MEAs. They use the exporting companys letterhead. EMCs work like the manufacturers export department.
THEY PROVIDE SEVERAL SERVICES Contact foreign customers Market research and information Negotiate on behalf of the manufacturer Credit arrangements Promotion of goods Physical handling/shipping/insurance documentation

EXPORT MANAGEMENT COMPANY

EXPORTER (Sells) EXPORT MANAGEMENT COMPANY FOREIGN BUYER (Buys

Agent representing the Exporter Sells on behalf of the Exporter

Contacts Negotiates terms of Sale Documentation Insurance Transport Shipping

EXPORT MANAGEMENT COMPANIES:

Have a Closer Relationship than that of an Export Agent. They represent one company at a time and use the exporters letterhead.

RESIDENT BUYERS
CHARACTERISTICS

They are BUYING AGENTS for overseas companies BASED in THE EXPORTERS HOME COUNTRY. They buy from the manufacturer and make export shipments on behalf of the importing company. They represent and get commission from the foreign buyer in the overseas country. Attempt to develop long term relationships.

EXPORT HOUSES
DOMESTIC MARKET MARKET EXPORTER (Sells) Contacts Advertises for Product Negotiates terms of Sale Pays Cash on behalf of Foreign Buyer Documentation Insurance Transport Shipping EXPORT HOUSES:

(EXPORT COMMISSION HOUSES)

FOREIGN

EXPORT HOUSE
(EXPORT COMMISSION HOUSES)

FOREIGN BUYER (Buys

Agent representing the Foreign Buyer or Domestic Seller. Buys on behalf of The Foreign Buyer

More Formal than Resident Buyers. Buy on basis of cost/quality specifications for overseas buyer.

EXPORT HOUSE CATEGORIES IN INDIA

EXPORT HOUSES IN INDIA

CATEGORY VALUE OF EXPORTS
AVERAGE SALES REVENUE OF PRECEDING THREE YEARS FOB Rupee Value

EXPORT HOUSE TRADING HOUSE STAR TRADING HOUSE

10 Crores 50 Crores 250 Crores

SUPER STAR TRADING HOUSE 750 Crores

TRADING COMPANIES They perform all the functions of merchant middlemen: They buy, accumulate, transport, distribute, extend credit Large degree of Vertical integration.

What is their Biggest Asset

?
--- THE FINANCING ABILITY OF TRADING COMPANIES IS EXTREMELY HIGH Debt is 10 times the equity They take loans from banks which have shares in them.
END