Introduction to Export Business
Transcript of Introduction to Export Business
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INTRODUCTION TOINTRODUCTION TO
EXPORT BUSINESSEXPORT BUSINESS
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TWO BASIC COMPONENTSTWO BASIC COMPONENTS
FOREIGN TRADE
EXPORTS IMPORTS
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CONDITIONS FOR EXPORTCONDITIONS FOR EXPORT
TRANSACTIONTRANSACTION
Goods/Services must be sent acrossGoods/Services must be sent across
national boarder to another country.national boarder to another country.
Payment of goods so dispatchedPayment of goods so dispatchedmust be realized in exportersmust be realized in exporters
country.country.
HOME COUNTRY(EXPORTER)
FORRIGN COUNTRY(IMPORTER)
GOODS
PAYMENT
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CONDITIONS FOR IMPORTCONDITIONS FOR IMPORT
TRANSACTIONTRANSACTION
Import transaction involves buyingImport transaction involves buying
and physically transporting goodsand physically transporting goods
from a foreign country to onesfrom a foreign country to ones
country.country.
Dispatching of payment to foreignDispatching of payment to foreign
country.country.
HOME COUNTRY(IMPORTER)
FORRIGN COUNTRY(EXPORTER)
GOODS
PAYMENT
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CLASSIFICATION OFCLASSIFICATION OF
EXPORTERSEXPORTERS
Active & Passive exporterActive & Passive exporter
Manufacturer exporterManufacturer exporter
Merchant exporterMerchant exporter Service exporterService exporter
Project exporterProject exporter
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BENEFITS OF EXPORTSBENEFITS OF EXPORTS
A.A. To Home (Exporting Country)To Home (
Exporting Country) Foreign exchange earningForeign exchange earning
Improved quality productsImproved quality products
Skill developmentSkill development Technological advancementTechnological advancement
Access to new marketsAccess to new markets
Reducing unemploymentReducing unemployment
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B.B. Benefits to ExporterBenefits to Exporter
(Businessman)(Businessman) Increased sales and profitIncreased sales and profit
Gain global market shareGain global market share Reduced dependence on domestic marketsReduced dependence on domestic markets
Make use of excess production capacityMake use of excess production capacity
Enhance competitivenessEnhance competitiveness
More stabilityMore stability
Access to foreign exchangeAccess to foreign exchange
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IMPACT OF IMPORTSIMPACT OF IMPORTS
Foreign exchange outlayForeign exchange outlay
Makes available scarce/unavailableMakes available scarce/unavailable
inputsinputs
Technical know-howTechnical know-how
Aid to exportsAid to exports
Better relationsBetter relations
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WAY TO SUCCESSFULWAY TO SUCCESSFUL
EXPORTINGEXPORTING
A.A. BASIC RULESBASIC RULES Target one market at a time.Target one market at a time.
Overseas design and product requirements mustOverseas design and product requirements must
be carefully consideredbe carefully considered Exporter must try to reach as close as possible toExporter must try to reach as close as possible to
the market for selling his productthe market for selling his product
The fewer intermediaries one has the betterThe fewer intermediaries one has the better
The goods for exports must be efficientlyThe goods for exports must be efficientlyproducedproduced
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B.B. OTHER RULESOTHER RULES Selling in export is toughSelling in export is tough
Deliveries must be on timeDeliveries must be on time
Goods must be properly servicedGoods must be properly serviced Speedy communicationSpeedy communication
Product testingProduct testing
Initial attackInitial attack
AttitudeAttitude
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BASICS FOR SETTING EXPORTBASICS FOR SETTING EXPORT
BUSINESSBUSINESS
1.1. Setting up an appropriate businessSetting up an appropriate businessorganizationorganization
sole proprietary firmsole proprietary firm
partnership firmpartnership firm
CompanyCompany
The proper selection of an organizationThe proper selection of an organizationdepends upondepends upon
The ability of exporter to raise financeThe ability of exporter to raise finance
Risk bearing capacity of exporterRisk bearing capacity of exporter The extent of control over businessThe extent of control over business
Nature of regulatory framework applicable onNature of regulatory framework applicable onbusiness.business.
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2.2. Choosing appropriate mode ofChoosing appropriate mode ofoperationoperation
Merchant exporterMerchant exporter Manufacturer exporterManufacturer exporter
Sales/commission agentSales/commission agent
Buying agentBuying agent
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3.3. Naming the businessNaming the business
Name and style of business should be:Name and style of business should be: SoftSoft AttractiveAttractive
Short and meaningfulShort and meaningful
Simple and attractive name indicating theSimple and attractive name indicating the
nature of business is idealnature of business is ideal
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4.4. Selection of productSelection of product
Trends of different export items from Trends of different export items from
exporting countryexporting country The selected product should be in demand inThe selected product should be in demand in
countries where it is to be exportedcountries where it is to be exported
Produced economically to developProduced economically to develop
competitivenesscompetitiveness
Produced in sufficient quantityProduced in sufficient quantity
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5.5. Effective business communicationEffective business communicationFor creating favorable and excellent impression theFor creating favorable and excellent impression the
exporter must useexporter must use
Decent letter head on superior quality paperDecent letter head on superior quality paper
Good envelop, nicely printed, giving full detailsGood envelop, nicely printed, giving full details
of firms name, telephone, fax number andof firms name, telephone, fax number and
email address etc.email address etc. Language should be polite, soft, brief and toLanguage should be polite, soft, brief and to
the point giving a very clear picture of thethe point giving a very clear picture of the
subject to be put before the customer.subject to be put before the customer.
Letters should be typed/computer typed,Letters should be typed/computer typed,
preferably in the language of importingpreferably in the language of importing
countrycountry..
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6.6. Selecting the marketSelecting the market
Factors to be considered:Factors to be considered: Political embargoPolitical embargo
Scope of exporters selected productScope of exporters selected product
Demand stabilityDemand stability Preferential treatment to products fromPreferential treatment to products from
developing countriesdeveloping countries
Distance of potential productDistance of potential product
Transport problemsTransport problems
Tariff and non-tariff barriersTariff and non-tariff barriers Size of demand in marketSize of demand in market
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7.7. Selecting channels ofSelecting channels of
distributiondistribution
The following channels of distribution are The following channels of distribution aregenerally utilized while exporting togenerally utilized while exporting to
overseas markets:overseas markets:
Exporting through canalizing agenciesExporting through canalizing agencies
Export through merchant exporters, exportExport through merchant exporters, export
houses or trading houseshouses or trading houses
Direct exportsDirect exports
Export through overseas sales agentExport through overseas sales agent Export through ecommerceExport through ecommerce
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8.8. Negotiating with prospective buyersNegotiating with prospective buyers
While conducting business negotiations, theWhile conducting business negotiations, the
prospective exporter should avoidprospective exporter should avoid ConflictConflict
ControversiesControversies
Criticism of other partyCriticism of other party
During conversation the attitude should be toDuring conversation the attitude should be to
communicate effectively so as to grab thecommunicate effectively so as to grab the
export order from prospective buyer.export order from prospective buyer.
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9.9. Processing an export orderProcessing an export order
OneOneshould not be happy merely on receiving an export order,should not be happy merely on receiving an export order,rather he should first acknowledge the export order, and thenrather he should first acknowledge the export order, and thenproceed to examine carefully in respect of:proceed to examine carefully in respect of:
ItemsItems
SpecificationsSpecifications
Pre shipment inspectionPre shipment inspection
Payment conditionsPayment conditions
Special packagingSpecial packaging
LabelingLabeling Shipment and delivery dateShipment and delivery date
Marine insurance documentation etc.Marine insurance documentation etc.
If satisfied a formal confirmation should be sent to the buyer.If satisfied a formal confirmation should be sent to the buyer.
Otherwise clarification should be sought from buyer beforeOtherwise clarification should be sought from buyer beforeconfirming the order.confirming the order.
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10.10. Entering into export contractEntering into export contractIn order to avoid disputes it is necessary to enter into an exportIn order to avoid disputes it is necessary to enter into an exportcontract with the overseas buyer.contract with the overseas buyer.
The following points are generally included in export contract:The following points are generally included in export contract:
Product standard and specificationsProduct standard and specifications QuantityQuantity InspectionInspection Total value of contractTotal value of contract Terms of deliveryTerms of delivery Taxes, duties, and chargesTaxes, duties, and charges
Period of delivery/shipmentPeriod of delivery/shipment Packaging, labeling and markingPackaging, labeling and marking Terms of payment-amount/mode and currencyTerms of payment-amount/mode and currency Discounts and concessionsDiscounts and concessions InsuranceInsurance Documentary requirementsDocumentary requirements GuaranteeGuarantee
Force Majeure of excuse for non-performance of contractForce Majeure of excuse for non-performance of contract RemediesRemedies arbitrationarbitration
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11.11. Export PricingExport PricingExport pricing is the most important tool for promotingExport pricing is the most important tool for promotingsales and facing international competitionsales and facing international competition
However, there is no fixed formula for successful exportHowever, there is no fixed formula for successful exportpricing. It will differ from exporter to exporter dependingpricing. It will differ from exporter to exporter dependingupon whether the exporter is a merchant exporter,upon whether the exporter is a merchant exporter,manufacturer exporter, or exporting through canalisingmanufacturer exporter, or exporting through canalisingagency.agency.
As regards the quoting of price to the overseas buyer, theAs regards the quoting of price to the overseas buyer, thesame are quoted in the following internationally terms:same are quoted in the following internationally terms: Ex-Works (EXW)Ex-Works (EXW) Free Carrier (FCA)Free Carrier (FCA) Free Alongside Ship (FAS)Free Alongside Ship (FAS) Free on Board (FOB)Free on Board (FOB) Cost & Freight (C&F)Cost & Freight (C&F)
Cost Insurance Freight (CIF)Cost Insurance Freight (CIF)
Carriage Paid To (CPT)Carriage Paid To (CPT) Carriage & Insurance Paid to (CIP)Carriage & Insurance Paid to (CIP) Delivered to Frontier (DAF)Delivered to Frontier (DAF) Delivered Ex-Ship (DES)Delivered Ex-Ship (DES) Delivered Ex-Quay (DEQ)Delivered Ex-Quay (DEQ) Delivered Duty Unpaid (DDU)Delivered Duty Unpaid (DDU) Delivered Duty Paid (DDP)Delivered Duty Paid (DDP)
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12.12. Undertaking risk inUndertaking risk in
international tradeinternational trade
WhileWhile selling abroad the exporterselling abroad the exporterundergoes the following risks:undergoes the following risks:
Currency riskCurrency risk
Credit riskCredit risk
Carriage/Cargo riskCarriage/Cargo risk
Country riskCountry risk