MODES OF ENTRY INTO FOREIGN

MARKETSEXPORTING

ANGELA MARIA ÑUSTES ALVAREZ

KAREM ANDREA GALVIS FORERO

The process of exporting is sending a firm’s products or services to international destinations.

CONCEPT

The company may choose various ways to export its products:

1. sometimes the company does nothing more than supply the products for export.

2. sells abroad through its own affiliates or branches.

3. could sell through an export commision house or through an export buyer acting as a purchasing agent for various foreign buyers

METHODS OF EXPORT MANAGEMENT

INDIRECT EXPORTING DIRECT EXPORTING

Indirectly involvement: the firm participates through an intermediary and does not deal with foreign customers or firm.

Direct involvement: the firm works with and develops a relationship with foreign customers, suppliers or markets.

FIRM’S CAN BE INVOLVED IN EXPORTING EITHER INDIRECTLY OR DIRECTLY

CHARACTERISTICS: Firms don’t have the cost efficiencies, scale economies, or foreign knowledge to export directly.

This firms may contract with another enterprise that having the experience and knowledge in the export such as combination export manager or a manufacturer’s export agent.

INDIRECT EXPORTING

We can find a combination export manager (CEM), is an independent firm that acts as the export department of the company.

A manufacturer’s export agent, unlike the CEM, doesn’t make sales in the name of each manufacturer it represents but retains its own identity by operating in its own name

Direct exports are goods and services that are sold to an independent party outside of the exporter’s home country

The direct approach involves more expense and detail than the indirect method

The company takes responsibility to sell its products without intermediary, to an importer or buyer located in a market abroad.

The company creates an export department to enable its own staff to concentrate on developing new markets abroad.

DIRECT EXPORTING CHARACTERISTICS

Companies that want to separate international marketing from its domestic counterpart may form a separate sales subsidiary.

Companies that feel the need for closer supervision over the sales of their products in a certain market may choose to establish their own selling offices abroad functioning as foreign sales branches of the home company.

In time, the foreign sales branch may be incorporated by the company as a foreign sales subsidiary.

Both direct and indirect exporters frequently make use of intermediaries who can assist with troublesome such as

DOCUMENTATION FINANCING TRANSPORTATION

INTERNATIONAL INTERMEDIARIES

Intermediary (Export

management companies/

trading companies )

Personal contract with

potencial customers

Assistence in obtaining financing

Documentation and

administrative assistence

Market and competitive knowledge

Transportation and logistics

expertise

Local sales

network

Evaluacion of credit

worthiness of buyers

Firm

Exporting requires significantly lower level of investment than other modes of international expansion, such as FDI.

International experience and the ability to develop either low-cost or differentiated products within the contacts of its value chain.

Increasing sales Increasing profits Diversifying income streams

ADVANTAGES OF EXPORTING

For Small-and-Medium Enterprises (SME) with less than 250 employees, selling goods and services to foreign markets seems to be more difficult than serving the domestic market.

The lack of knowledge for trade regulations, cultural differences, different languages and foreign-exchange situations as well as the strain of resources and staff interact like a block for exporting

DISADVANTAGES OF EXPORTING

EXAMPLE

Colombia exported 500 million flowers for valentine’s day.

for the past few months, more than 200,000 Colombians directly or indirectly in the flower industry worked diligently to get ready for the most important season of the year, which generated approximately 12% of sales.

Colombia sent more than 500 million flowers on 28 daily flights, destined for many international markets, particulary U.S.A, CANADA and some EUROPEAN countries