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MCOM 2nd Year Direct Exporting Study Material Notes

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MCOM 2nd Year Direct Exporting Study Material Notes
MCOM 2nd Year Direct Exporting Study Material Notes


MCOM 2nd Year Direct Exporting Study Material Notes | Index

MCOM 2nd Year Direct Exporting Study Material Notes Page. 1

MCOM 2nd Year Direct Exporting Study Material Notes Page. 2

Direct Exporting hereby means the sale in the foreign market directly by the producer. The producer may sale the goods by his own to the foreign buyers or to the middleman or middlemen located in the overseas market. In both these cases, the export is direct, i.e., producer does not use any independent middleman in the channel between the home country and the overseas market.

This way is adopted by the firms having considerable export business but the investment and risk involved in direct exporting are great, however, the returns are potential.


The following organisational arrangement are done by the direct exporting firm:

1. Domestic Based Export Department. The export may be done by a domestic export department or division. The following types of domestic based organisations involved in direct exporting:

(i) Build-in export Division/department; 

(ii) Separate export division/department; 

(iii) Export sales subsidiary; and 

(iv) Co-operative export firm or Export combination.

2. Domestic Company Setup Overseas Sales Branches. The companyi firm may set up overseas sales branches or subsidiaries, instead of or in addition to, a domestic marketing department. An overseas sales branch helps a company/ firm to carry out the marketing activities in the foreign market very effectively and efficiently. Apart from that, a firm should also establish storage and warehousing facilities in order to wide the market.

3. Employing Travelling Salesmen. A company may also recruit Travelling salespersons for overseas market. These travelling salesmen may be home based or may be attached with the foreign branches or subsidiaries.

4. Contacting with Foreign Based Distributions. Direct exporting may also be carried out by establishing contacts with foreign based distributors gents. These distr. butors would purchases the goods from producers and sell hem in the overseas market. Whereas the agents would sell on the producer’s ehalf on commission basis.

The chart below shows the Direct exporting channels as follows:


1. Importers. Importer means one who imports the products in large pa quantities either as an agent for a foreign buyer or for resale. These include cu Targe import houses and trading houses. Usually importers buy on their own account and may sell the goods to distributions or industrial buyers, or institutional buyers or wholesalers, etc.

2. Distributors. Those who buy directly from the exporters and hold huge stocks or a product have an exclusive right to sell the product in a particular area or to a particular type of customers. They may resell the product to the Wholesalers, retailers or consumers.

3. Wholesalers. Though they often buy goods from the importers or distributors, however, these are also wholesalers who purchases directly from the exporters.

4. Retailers. Big retailers may purchase directly from export houses Departmental stores, supermarkets or other types of chain stores are among the most popularly known retailers. Other retailers may depend on wholesalers or distributors.

5. Government Departments. In some countries, government department v buy huge quantities of certain goods on a long-term basis. These goods arer essential commodities for mass consumption or goods required in government a departments.

6. State Buying Organisations. In many countries the imports of goods are done by the government organisations, like state trading organisations. In India, imports of several goods are channalised, i.e., only designated government agencies can import these goods.

7. Customers. Customers can also play a role of intermediaries in the foreign markets.

8. Joint Venture/Licensing. Joint ventures (enterprises in which both ownership and management are shared by firm two or more countries) are very common between firms developed and developing countries. Firms from developed countries may supply technology and participate in the equity in joint ventures in developing countries. Joint ventures are very common in food processing industry. International collaboration like licensing or franchising is also very popular now-a-days.


EPZs, are industrial estates form enclaves from the national customs territory of a country and are usually situated near seaport or airport. The entire production of such zone is normally intended for exports. Such zones are provided with well developed infrastructural facilities. Industrial plotes/sheds are normally made available at concessional rates. Units in these zones are allowed foreign equity even upto 100 per cent. EPZ units can import capital goods, raw materials, etc. for export production without payment of duty. Domestically procured items are also eligible for duty exemption.

A Free Trade Zone (FTZ) is different from an EPZ. Goods imported to a free trade zone may be re-exported without any processing in the same for But, good exported by units in an EPZ are expected to have undergone sou value addition by manufacturing or other processing. A Free port is one which imports from which exports are free from trade barriers. A FTZ may be a Part of a adjacent toa port; the rest of the port being subject to the national customs regulation.

The main objective of EPZ are as follows: 

(i) To earn foreign exchange,

(ii) To facilitate transfer of technology by foreign investment and other means, 

(iv) To contribute to the overall development of the economy. Examples of EPZ

(i) The Kandla Free Trade Zone (set up in 1965 10 km away from Kandla Port, Gujrat State). 

(ii) Santa Cruz Electronics Exports Processing Zone (SEEPZ) (set up in 1974 near Santa Cruz Air Port, Mumbai). (iii) Five more free trade zones were set up in Chennai, Chochin Noida, (U.P.), Falta (W. Bengal), Vizag (A.P.). Hundred per cent export-oriented unit (EOU) refers to an industrial unit which offers for exports its entire production, excluding permitted levels of rejects. EOU were allowed in industries in respect of which the export-potential and export targets were considered by the relevant Export Promotion Council. EOUS were not normally encouraged in respect of products subject to export control quota ceilings which can be reached by existing units in the industry.

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