Direct And Indirect Exporting. Mba 6570. Ashley C. Brown.

Exporting has become a very important business strategy nowadays. In order for firms to expand to the international market, and also to maintain and grow their share of market in whatever industry they are in, depending on their goals and objectives, any company must at least explore this possibility. A few and important advantages might come into place, in that they can extend their sales potential of their existing products, increasing margins through a larger customer base. Also, these small to large businesses can consolidate by gaining global share of market, they can reduce their dependence on their existing markets,

At the time of development of globalization there were many concerns about its benefits. However, it has brought significant changes in all segments of human life and International business is one area in which it contributed heavily (Reich, 1998). Companies all over the world are currently formulating their business strategies mainly after considering the trends in global market instead of domestic market. Outsourcing and offshoring are some of the new business principles emerged in this world after the implementation of globalization (Samimi and Jentabad, 2014). The core of these new business concepts is to exploit the business opportunities in overseas countries as much as possible (Samimi and Jentabad, 2014).

There are opportunities to outsourcing. The economy of the countries we go to will play a role in prices and products we are able to receive. It is typically cheaper to buy and manufacture products overseas because they have less government regulations and standards. There are lower pay wages and material cost and the laws from their countries don’t put as many restrictions on products like the US does.

There are a large number of activities (for example, doing research on the network, finding potential customers, selecting appropriate emerging markets, summarizing advantages of the product in the domestic market and so on) need to be involved in, and all of them are very important for the company at the pre-export stage. In other words, the pre-export behavior of the company should include the following points. Jansson and Soderman (2012) suggest that firms should focus on their domestic markets and accumulate enough experience, which are the cornerstone and quite useful for the firms to expand the international markets. Then, the firms need to select suitable markets by talking to local people or face-to-face communication. Furthermore,

International sell and purchase has provided tremendous growth for countries. There are advantages and disadvantages to sourcing overseas. Some of the common advantages to out sourcing overseas are low manufacturing cost and expertise of products (importcrashcourse.com). The disadvantages are language barriers, shipping time, as well as quality of products in some cases. Americans have found comfort in everyday life regarding products that were made in other countries. If Americans were to suddenly not be able to purchase products overseas they may find themselves at a lost for living a typical lifestyle.

Direct exporting is more expensive than indirect exporting. The entry cost & ongoing cost are high for direct exporting. In direct exporting a company have greater chances to build up good relationship. Direct exporting is used by many famous companies in toady’s competitive world as a source of entering new international market. SAMSUNG is also one of the companies who uses direct exporting as a source of Marketing Strategy. Direct exporting is cheaper as compared to other ways of market entering strategy and biggest benefit of direct exporting is it helps in acquiring the information of local market. Potential conflicts with distributors is one of the biggest disadvantage which a company can face in Direct

The process of globalization has numerous significant effects on countries, organizations, and individuals. These effects can be observed in the quality of products, in their prices, but also in their availability. Because of globalization, numerous companies prefer to expand their business on international level. Some of them outsource some of their processes and activities to cheaper destinations that allow them to reduce their investments.

This can be seen from Fig 3 that the export and import during 2005 and 2006 have significantly increased and it is foreseen that the future global trend would be increasing. Also, in order to lower the production costs, lots of international companies will transfer part of work in some countries with lower labor and material costs. This kind of out-sourcing activity enhances the global cooperation as well.

The forces of globalization are generally credited with the major role played in increasing the access of organizations to countless resources. Due to market liberalization for instance, large corporations are able to import cheap resources from various global regions and as such patronize the market through price leadership strategies. Nevertheless, another crucial characteristic of globalization is that it allows economic agents an incremental access to larger customer markets. This virtually means that manufacturers get to sell their products to numerous global regions and exponentially increase their revenues.

As we all know, global trade is no easy, companies cannot just ship their products to another country and sell it in the foreign market, there are many factors need to be considered and analysis. In my point of view, the factor can be separate into internal and external factors.

As mentioned before, Mühlbacher, Dahringer and Leihs (1999) assessed that using indirect exports reduces the risk for the exporting producer but it also takes control over the marketing mix from the producer. Additionally to this, the exporter does not receive insight to the market information of the export market as the EMC retains its value if it does not share its assets with the exporting client. Utilizing the services of an EMC also reduces the margins for producers meaning low returns for the company.

A final reason for the company to offshore part of their operations is access new markets. Since the company is not restricted to just the domestic market, offshoring gives the company global presence and the ability to access developing markets in Third World countries. By streamlining the company’s production processes and supply chains globally, companies can lower their prices increase demand for their products, thereby attracting new customers and entering new markets.

But of course, there is also some kind of disadvantages compared to the exports. The major of disadvantage is a conflict of interest which cannot be found in the modes exports. For instance, issues such as profit shares amount invested, management of the business and marketing strategy can occur if there is no well-structured agreement. The thing is to be careful about the selection of the partner so that the risks are minimized. As said the formulation of the contract is the key

Global companies source their raw materials and outsource manufacturing of their products to many countries to take advantage of lower costs or high quality production, and/or lower costs of

• Exporting requires significantly lower level of investment than other modes of international expansion, such as FDI. As you might expect, the lower risk of export typically results in a lower rate of return on sales than possible though other modes of international business. In other words, the usual return on export sales may not be tremendous, but neither is the risk.