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MCOM 2nd Year Indirect Exporting Study Material Notes

MCOM 2nd Year Indirect Exporting Study Material Notes Unit Wise Chapter Wise Study Material Notes Question Answer In Our Site a2znotes.com

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


The difference between direct exporting as well as indirect exporting is how the exporter carries out

by firms which are just beginning their exporting activities and by those whose export is not considerable. The benefit of this method is to those firms which do not have build up overseas marketing the transactions flow between himself and the foreign importer or buyer. So far as indirect, export is concerned, the producer utilises the services of various types of independent international/global marketing middlemen or co-operative organisation.

The indirect method is widely adopted. The risk involved is also very less. Thus, indirect exporting is advantageous for firms those are having small means and whose limited export – business does not justify large investments in developing their own international marketing infrastructure. However, the main disadvantage of this method of exporting is that the development of overseas market depends to a very large extent on agents/middlemen and not on the firm producing the export goods.


There are two major alternative channels available for indirect exporting. These are as follows:

(I) International Marketing Middlemen, and

(II) Co-operative Organisation. 

(I) Marketing Middlemen

These are as follows:

1. Export Merchant. The domestic export merchants purchase the manufacturer’s goods and sell it abroad by his own. If this channel is used in global marketing channel, and except for few modifications in the product mix which are needed to fulfil the need of international market, all aspects of international tasks are handled by these export merchants.

2. Trading Companies. Trading companies are very important middlemen/intermediaries in the global trading market. A trading company is

active both in imports and exports in country like Japan. The general tradin companies are called ‘sago shoba’. These include such well-known MNCs suck as Mitubishi, Mitsui and Itoehu. Roughly half of the Japan’s exports and import are handled by nine largest firms. Even large Japanese domestic companies buy through trading companies.

3. Export/Trading Homes. In our country, there are a number of exporters including export houses and different types of trading houses who export products got from different producers. Several companies have developed and set up their own export marketing subsidiaries such as HMT International Ltd., etc.

4. Export Drop Shipper. Some countries have a special type of export merchants known by different names such as export drop shipper, desk jobber or cable merchant. On receiving an order from overseas, the export drops shipper in turn places an order with a producer, directing producer to deliver the product directly to the foreign buyer. The payment is collected by manufactures from export shipper. The export shipper collect the payment from foreign buyer. These middlemen are common in the global marketing of bulky products of low unit value like coal, cement, sand, steel, etc.

5. Agents/Brokers. These are the domestic based agent. Unlike the merchant middlemen, the agent does not take the title of good. He simply seeks overseas buyers for a commission. In this case the manufacturer has to assume all the financial risks.

6. Export Management Companies (EMCs). EMC is an independent export organisation that serves different companies in their export endeavors. EMCs are especially helpful to small companies that are unable to afford experienced and skilled export managers. They are up-to-date on international politics, logistics, taxation and legal problems. They provide a viable alternative for small firms to launch themselves in the export business. There are about 1,200 EMCs in U.S. Most are located in the larger seaport cities.

EMCs are used by both large and small companies, simply because they can undertake exporting more effectively and generally at a lower cost than other channels. Further, it is quite common for exporters to use multiple EMCs, A single EMC may not be able to reach all world market. In addition. EMC usually come to specialize by product. Hence a company that deals in diverse products may use several EMCs.

7. Country-controlled Buying Agent. It is an official buyer of a foreign government, seeking to buy designated goods for his or her country. Man developing countries, for example, maintain supply mission in the U.S. with a number of officers who are entrusted with the task of procuring different good for their countries.

(II) Co-operative Organisations

These organisation represent a cross between indirect and direct-expor carries on exporting activities on behalf of several producers, and is partly unde the administrative control of the manufacturer.

In market, there are two distinct types of co-operative interna marketing organisation. These are :

(a) Piggyback marketing, and 

(b) Exporting combinations.

Pigryback marketing is also known as ‘mother henning’ or ‘allied company rangement. Under this marketing, one manufacturer uses its overseas distribution facilities to sell the products of one or more other company/companies and his own

On the other hand, exporting combination is more less a formal association of independent and competitive business firms which are organised for the purpose of export marketing for the mutual benefit.

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