introduction to export business_2

8/3/2019 Introduction to Export Business_2

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INTRODUCTION TOINTRODUCTION TO

EXPORT BUSINESSEXPORT BUSINESS



TWO BASIC COMPONENTSTWO BASIC COMPONENTS

FOREIGN TRADE

EXPORTS IMPORTS



CONDITIONS FOR EXPORTCONDITIONS FOR EXPORT

TRANSACTIONTRANSACTION Goods/ServicesGoods/Services must must bebe sent sent acrossacross

nationalnational boarderboarder toto anotheranother countrycountry..

Payment Payment of of goodsgoods soso dispatcheddispatched must must beberealizedrealized inin exportersexporters countrycountry..

HOME COUNTRY(EXPORTER)

FORRIGN COUNTRY(IMPORTER)

GOODS

PAYMENT



CONDITIONS FOR IMPORTCONDITIONS FOR IMPORT

TRANSACTIONTRANSACTION Import Import transactiontransaction involvesinvolves buyingbuying andand

physicallyphysically transportingtransporting goodsgoods fromfrom aa

foreignforeign countrycountry toto onesones countrycountry.. DispatchingDispatching of of payment payment toto foreignforeign

countrycountry..

HOME COUNTRY(IMPORTER)

FORRIGN COUNTRY(EXPORTER)

GOODS

PAYMENT



CLASSIFICATION OF EXPORTERSCLASSIFICATION OF EXPORTERS

Active & Passive exporter Active & Passive exporter

Manufacturer exporterManufacturer exporter

Merchant exporterMerchant exporter Service exporterService exporter

Project exporterProject exporter



BENEFITS OF EXPORTSBENEFITS OF EXPORTS

A. A. To Home (Exporting Country)To Home (Exporting Country) Foreign exchange earningForeign exchange earning

Improved quality productsImproved quality products

Skill development Skill development

Technological advancement Technological advancement

Access to new markets Access to new markets

Reducing unemployment Reducing unemployment



B.B. Benefits to ExporterBenefits to Exporter(Businessman)(Businessman)

Increased sales and profitIncreased sales and profit

Gain global market shareGain global market share

Reduced dependence on domestic marketsReduced dependence on domestic markets

Make use of excess production capacityMake use of excess production capacity

Enhance competitivenessEnhance competitiveness More stabilityMore stability

Access to foreign exchange Access to foreign exchange



IMPACT OF IMPORTSIMPACT OF IMPORTS

Foreign exchange outlayForeign exchange outlay

Makes available scarce/unavailable inputsMakes available scarce/unavailable inputs

Technical knowTechnical know--howhow Aid to exports Aid to exports

Better relationsBetter relations



WAY TO SUCCESSFUL EXPORTINGWAY TO SUCCESSFUL EXPORTING

A. A. B ASIC RULESB ASIC RULES Target one market at a time.Target one market at a time.

Overseas design and product requirements must beOverseas design and product requirements must be

carefully consideredcarefully considered

Exporter must try to reach as close as possible to theExporter must try to reach as close as possible to themarket for selling his product market for selling his product

The fewer intermediaries one has the betterThe fewer intermediaries one has the better

The goods for exports must be efficiently produced andThe goods for exports must be efficiently produced andshould meet the needs of customers.should meet the needs of customers.



B.B. OTHER RULESOTHER RULES

Selling in export is toughSelling in export is tough

Deliveries must be on timeDeliveries must be on time Goods must be properly servicedGoods must be properly serviced

Speedy communicationSpeedy communication

Product testingProduct testing

Initial attackInitial attack

Attitude Attitude



BASICS FOR SETTING EXPORTBASICS FOR SETTING EXPORT

BUSINESSBUSINESS1.1. SettingSetting upup anan appropriateappropriate businessbusiness

organizationorganization sole proprietary firmsole proprietary firm

partnership firmpartnership firm

CompanyCompany

TheThe properproper selectionselection of of anan organizationorganizationdependsdepends uponupon

The ability of exporter to raise financeThe ability of exporter to raise finance

Risk bearing capacity of exporterRisk bearing capacity of exporter The extent of control over businessThe extent of control over business

Nature of regulatory framework applicable onNature of regulatory framework applicable onbusiness.business.



2.2. Choosing appropriate mode of operationChoosing appropriate mode of operation

Merchant exporterMerchant exporter

Manufacturer exporterManufacturer exporter

Sales/commission agentSales/commission agent

Buying agentBuying agent



3.3. Naming the businessNaming the business

Name and style of business should be:Name and style of business should be: SoftSoft

Attractive Attractive

Short and meaningfulShort and meaningful

Simple and attractive name indicating the natureSimple and attractive name indicating the natureof business is idealof business is ideal



4.4. Selection of productSelection of product

TrendsTrends of of different different export export itemsitems fromfrom exportingexportingcountrycountry

TheThe selectedselected product product shouldshould bebe inin demanddemand inincountriescountries wherewhere it it isis toto bebe exportedexported

ProducedProduced economicallyeconomically toto developdevelop competitivenesscompetitiveness

ProducedProduced inin sufficient sufficient quantityquantity



5.5. Effective business communicationEffective business communicationFor creating favorable and excellent impression theFor creating favorable and excellent impression theexporter must useexporter must use

DecentDecent letterletter headhead onon superiorsuperior qualityquality paperpaper

GoodGood envelop,envelop, nicelynicely printed,printed, givinggiving fullfull detailsdetails

ofof firmsfirms name,name, telephone,telephone, faxfax numbernumber andandemailemail addressaddress etcetc..

LanguageLanguage shouldshould bebe polite,polite, soft,soft, briefbrief andand totothethe pointpoint givinggiving aa veryvery clearclear picturepicture ofof thethesubjectsubject toto bebe putput beforebefore thethe customercustomer..

LettersLetters shouldshould bebe typed/computertyped/computer typed,typed,preferablypreferably inin thethe languagelanguage ofof importingimportingcountrycountry..



6.6. Selecting the marketSelecting the market

Factors to be considered:Factors to be considered: Political embargoPolitical embargo

Scope of exporters selected productScope of exporters selected product

Demand stabilityDemand stability Preferential treatment to products fromPreferential treatment to products from

developing countriesdeveloping countries

Distance of potential productDistance of potential product

Transport problemsTransport problems

Tariff and nonTariff and non--tariff barrierstariff barriers

Size of demand in marketSize of demand in market



7.7. Selecting channels of distributionSelecting channels of distribution

TheThe followingfollowing channelschannels of of distributiondistribution areare

generallygenerally utilisedutilised whilewhile exportingexporting toto overseasoverseasmarketsmarkets::

Exporting through canalising agenciesExporting through canalising agencies

Export through merchant exporters, exportExport through merchant exporters, exporthouses or trading houseshouses or trading houses

Direct exportsDirect exports

Export through overseas sales agentExport through overseas sales agent

Export through ecommerceExport through ecommerce



8.8. Negotiating with prospective buyersNegotiating with prospective buyers

WhileWhile conductingconducting businessbusiness negotiations,negotiations, thetheprospectiveprospective exporterexporter shouldshould avoidavoid

ConflictConflict

ControversiesControversies

CriticismCriticism ofof otherother partyparty

DuringDuring conversationconversation thethe attitudeattitude shouldshould bebe toto

communicatecommunicate effectivelyeffectively soso asas toto grabgrab thethe export export orderorder fromfrom prospectiveprospective buyerbuyer..



9.9. Processing an export orderProcessing an export order

OneOne shouldshould not not bebe happyhappy merelymerely onon receivingreceiving anan export export order,order,

ratherrather hehe shouldshould first first acknowledgeacknowledge thethe export export order,order, andand thenthenproceedproceed toto examineexamine carefullycarefully inin respect respect of of::

ItemsItems

SpecificationsSpecifications

PrePre shipmentshipment inspectioninspection

PaymentPayment conditionsconditions

SpecialSpecial packagingpackaging LabelingLabeling

ShipmentShipment andand deliverydelivery datedate

MarineMarine insuranceinsurance documentationdocumentation etcetc..

If If satisfiedsatisfied aa formalformal confirmationconfirmation shouldshould bebe sent sent toto thethe buyerbuyer..

OtherwiseOtherwise clarificationclarification shouldshould bebe sought sought fromfrom buyerbuyer beforebeforeconfirmingconfirming thethe orderorder..



10.10. Entering into export contractEntering into export contractInIn orderorder toto avoidavoid disputesdisputes it it isis necessarynecessary toto enterenter intointo anan export export contract contract withwith thethe overseasoverseas buyerbuyer..

TheThe followingfollowing pointspoints areare generallygenerally includedincluded inin export export contract contract::

Product standard and specificationsProduct standard and specifications QuantityQuantity InspectionInspection Total value of contractTotal value of contract Terms of deliveryTerms of delivery Taxes, duties, and chargesTaxes, duties, and charges Period of delivery/shipmentPeriod of delivery/shipment Packaging, labeling and markingPackaging, labeling and marking Terms of paymentTerms of payment--amount/mode and currencyamount/mode and currency Discounts and concessionsDiscounts and concessions InsuranceInsurance D

ocumentary requirementsD

ocumentary requirements GuaranteeGuarantee Force Majeure of excuse for nonForce Majeure of excuse for non--performance of contractperformance of contract RemediesRemedies Arbitration Arbitration



11.11. Export PricingExport PricingExport Export pricingpricing isis thethe most most important important tooltool forfor promotingpromoting salessales andandfacingfacing internationalinternational competitioncompetition

However,However, therethere isis nono fixedfixed formulaformula forfor successfulsuccessful export export pricingpricing.. It It willwill differdiffer fromfrom exporterexporter toto exporterexporter dependingdepending uponupon whetherwhether thetheexporterexporter isis aa merchant merchant exporter,exporter, manufacturermanufacturer exporter,exporter, ororexportingexporting throughthrough canalisingcanalising agencyagency..

As As regardsregards thethe quotingquoting of of priceprice toto thethe overseasoverseas buyer,buyer, thethe samesame arearequotedquoted inin thethe followingfollowing internationallyinternationally termsterms::

ExEx--Works (EXW)Works (EXW) Free Carrier (FCA)Free Carrier (FCA) Free Alongside Ship (FAS)Free Alongside Ship (FAS) Free on Board (FOB)Free on Board (FOB) Cost & Freight (C&F)Cost & Freight (C&F) Cost Insurance Freight (CIF)Cost Insurance Freight (CIF) Carriage Paid To (CPT)Carriage Paid To (CPT) Carriage & Insurance Paid to (CIP)Carriage & Insurance Paid to (CIP) Delivered to Frontier (D AF)Delivered to Frontier (D AF) Delivered ExDelivered Ex--Ship (DES)Ship (DES) Delivered ExDelivered Ex--Quay (DEQ)Quay (DEQ) Delivered Duty Unpaid (DDU)Delivered Duty Unpaid (DDU) Delivered Duty Paid (DDP)Delivered Duty Paid (DDP)



12.12. Undertaking risk in internationalUndertaking risk in internationaltradetrade

WhileWhile sellingselling abroadabroad thethe exporterexporter undergoesundergoes thethefollowingfollowing risksrisks:: Currency riskCurrency risk

Credit riskCredit risk

Carriage/Cargo riskCarriage/Cargo risk

Country riskCountry risk

introduction to export business_2

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