3.
2 Direct Export
Manufacturer
or exporter sells
directly to an importer or buyer
located in the foreign market area.
This proactive approach gives the
company greater controls on issues
such as the finished product, the
selling and marketing methods
Continued
The
actual transaction flow
between nations is handled
directly by a dependent
organization of the manufacturer
or a foreign-based marketing
organization or customer.
Continued
Seven Ps of marketing mix:
i. Product
ii. Place
iii. Promotion
iv. Price
v. Process
vi. People
vii. Physical aspects
Continued
Involve capital commitment &
resource allocation of mgmt &
production, adaptation of products
overseas buyers needs
Continued
Example: agents (475), distributor
(475), joint ventures (490),
licensing (491-492), consortia
(484), franchising (485), Free
Trade Zone (487), government
procurement (488), leasing (489),
strategic alliance (497), mergers
and acquisitions (482),
management contracts (495-496),
wholly owned subsidiaries (482),
B2B & B2C (482)
Direct Export Alternatives
3.2
DIRECT
EXPORT
3.2.1
HOMECOUNTRY
BASED
DEPARTMENT
3.2.2
FOREIGN
SALES
BRANCH
3.2.3
STORAGE OR
WAREHOUSE
FACILITIES
3.2.4
FOREIGN
SALES
SUBSIDIARY
3.2.5
TRAVELING
SELASPERSON
3.2.6
FOREIGN-BASED
DISTRIBUTORS
&
AGENTS
(REPRESENTATVES)
3.2.1 Home-Country Based Department
Export department or division in the home
country.
Also known as dependent organization.
Involved directly in making export sales.
Serve as the home-based export marketing
department to coordinate and control the
activities of other dependent organizations
located in foreign markets.
Continued
Three different types of homecountry based export
organizations:
Separate or self-contained export
department
Export sales subsidiary
Built-in export departments
3.2.2
Home-country Based Department
3.2.1
HOME-COUNTRY
BASED DEPARTMENT
(i)
Built-in
Department
(ii)
Separate
Export
Department
(iii)
Export Sales
Subsidiary
(i) Built-in Export Department
The simplest form of export organization.
Consist of an export sales manager with
some clerical help.
Primary job of the sales manager is to do
the actual selling or directing of selling.
Continued
All functions connected with
export transactions.
May have problems getting
support from other units and in
carrying out technical functions.
Built-in form is best suited for direct
export for the manufacturer who
operating under any of the following
conditions:
Small in size;
New or relatively new to export
marketing;
Expected foreign sales volume is
moderate to small;
Management philosophy not oriented
toward growth of foreign business;
Company resources are limited.
(ii) Separate Export Department
As overseas business increases, separate export
department may be established to take care of it.
Essentially self-sufficient unit and well equipped to
handle export activities.
Structured internally upon the basic of functions,
geographic region, product, or a combination of these.
Characteristics of separate export
department (SED):
No inherent possibility for clash between
the international and domestic sides of
the firm regarding the time to be spent by
domestic marketing personnel on foreign
business matters.
Export operations can be conducted on a
full-time basis by knowledgeable and
trained personnel; specifically committed
to exporting.
Continued
Has a fairly high degree of
flexibility in terms of where it
is located.
(iii) Export Sales Subsidiary
(ESS)
Much more complex and almost completely
independent organization.
Wholly owned and controlled by the parent
company.
Functions same as SED but differs
significantly in financially and
organizationally.
ESS purchase goods from parent company
and resell in foreign countries.
Advantages:
provides unified control;
profit center;
can more easily allocate orders and
supervise traffic management;
ease of financing;
wider product line; and
tax advantages in some countries.
COMPARISON
Built-in
department
Organizations
structure
simplest
Separate
export
department
complex
Export sales
subsidiaries
Conflicting
pressures
high
high
low
Independent
degree
dependent
independent
quasiindependent
profitability
low
medium
high
Ease of
financing
difficult
easy
easiest
Financial
control
none
moderate
high
much more
complex
Advantages
Disadvantages
Built in
Department
simple in structure
easy to establish
flexible and economical
use
problems in getting
support
from other units and in
carried out technical
functions.
Separate Export
Department
most of the export
activities
are handle within
department
chance for conflict
regarding allocation of
resources between
international and
domestic
side of the firm
conditions that cause
trouble
in built-in form are
eliminated
Export Sales
Subsidiary
unified control
profit center
ease of financing
wider products line
high cost to establish
3.2.3 Foreign Sales Branch
Serious involvement in
international trade.
a. Primary purpose:
Closer supervision of foreign
sales by manufacturer in home
country.
b. Secondary purpose:
A foreign facility for
manufacturer to display its
product line (Display center).
Responsibility:
Provides control, service, dedicated staff for your
products; costly.
Handles all of sales distribution and promotion in a
designated market area.
Storage or warehouse facilities
Used when inventory in foreign markets is necessary or
profitable.
May be for one country or regional.
3.3 MARKET ENVIRONMENT
i.
ii.
Overseas Market Environment Key
Areas
Who are the main players in the global market &
profiles market share/position, financial
resources, current situation, future plan &
nature of business
Accessibility to the market & legal environment
market stability, infrastructure,
logistics/transports, communication, facilities
Continued
iii. Product quality
(national/international)
standard, development stage
(first/second generation,
low/high tech.)
iv. Computer & logistically literate,
importer/exporter adaptability &
flexibility
Continued
v. Exchange rate stability, importation cost
(Import duty, sea/port charges & sales
tax)
vi. Membership of regional economic/
trading bloc (regulations, procedures,
policies)
vii. Stages of market development
less/developing/develop, and country
status in term of skill/unskilled workforce,
technology in used, currency.
Continued
viii. Investment inward (joint
ventures, franchising, licensing,
M & A, etc)
ix. Local government & financial
environment (employment law,
taxation, incentives, trade zones)
x. Perceived benefits of the market
3.4 Market Entry Strategy
Strategic focus in decision-making
process of selecting and entering
market/overseas.
i. Customer portfolio with international
base
ii. Increase production by lowering unit
cost lead to competitive pricing
iii. Market risk more market served,
spread risk, then lower risk
iv. Raise firm profile technology
advancement, capital, funds for R & D
Continued
v. Fully utilization of company resources
& infrastructure
vi. Increase market share & dominance,
being a marketing led company
vii. Increase companys competitiveness,
wide range of products offer
locally/internationally
viii. Long-term plan, develop a proactive
company that globally focused &
market driven environment
Continued
ix. Develop an international brand image
personnel, product, commitment
x. Use available techniques in all areas of
company operations
xi. Membership of trade associations and
accreditation
xii. Increase profit and ROI
Independent Local Distributors
Three objectives:
i. Desire to control business at a
strategic stage
ii. Partnering with local distributors at
least for the first years to benefit from
local expertise
iii. Minimizing cost and risks in new
ventures
Life-cycle of the Intl. Distributors
Select and choose the distributors (at
trade fair/exhibition)
ii. Capability of distributors develop
market and serve long-term
relationship
iii. Treat as local distributor and willing to
share info & knowledge in marketing,
etc
iv. Support market entry if necessary
money, workers, marketing ideas,
info of prospect country
i.
Continued
v. Maintain control over marketing
strategy
vi. Detailed market and financial
performance data
vii. Networks with national
distributors
viii. Assess how it performs relative
to customers expectations
