MCom 2nd Year Indirect Exporting Study Material Notes
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The difference between direct exporting as well as indirect exporting is how the exporter carries out by firms that 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 to build up overseas marketing the transactions flow between themselves and the foreign importer or buyer. As far as indirect, export is concerned, the producer utilizes the services of various types of independent international/global marketing middlemen or cooperative organizations. (MCom 2nd Year Indirect Exporting Study Material Notes)
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 the overseas market depends to a very large extent on agents/middlemen and not on the firm producing the export goods.
CHANNELS AVAILABLE FOR INDIRECT EXPORTING
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 them abroad on their own. If this channel is used in a global marketing channel, and except for a few modifications in the product mix which are needed to fulfill the need of the 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 a country like Japan. The general trading companies are called ‘sago shoba’. These include well-known MNCs suck as Mitubishi, Mitsui, and Itoehu. Roughly half of Japan’s exports and imports are handled by the 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 that export products got from different producers. Several companies have developed and set up their own export marketing subsidiaries such as HMT International Ltd., etc. (MCom 2nd Year Indirect Exporting Study Material Notes)
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 the producer to deliver the product directly to the foreign buyer. The payment is collected by manufacturers from the export shippers. The export shipper collects the payment from a 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 domestic-based agents. 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 organization 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 exports 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 markets. In addition. EMC usually comes to specialize by product. Hence a company that deals in diverse products may use several EMCs. (MCom 2nd Year Indirect Exporting Study Material Notes)
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 missions in the U.S. with a number of officers who are entrusted with the task of procuring different goods for their countries. (MCom 2nd Year Indirect Exporting Study Material Notes)
(II) Co-operative Organisations
These organizations represent a cross between indirect and direct-export carry on exporting activities on behalf of several producers and are partly under the administrative control of the manufacturer.
In the market, there are two distinct types of cooperative internal marketing organizations. These are:
(a) Piggyback marketing, and
(b) Exporting combinations.
Piggyback marketing is also known as ‘mother henning’ or ‘allied company management. Under this marketing, one manufacturer uses its overseas distribution facilities to sell the products of one or more other companies and its own.
On the other hand, exporting combination is less a formal association of independent and competitive business firms which are organized for the purpose of export marketing for mutual benefit.