What are the criteria for choosing an entry strategy?
- Foreign market knowledge.
- Product & service e=to be offered.
- Market/niche potential.
- Export expertise.
- Sale & profit objectives.
- Long term planning (possible evolution.
- Human & financial resources.
- Desire level of control.
What is indirect export?
When your product is consumed in a foreign market by contracting with an intermediary in the firm’s home country to perform export functions.
What are examples of indirect export?
- Export Trading Companies (ETCs)
ETCs purchase goods from a manufacturer and sell them in foreign markets. - Export Management Companies (EMCs)
EMCs handle the entire export process on behalf of the manufacturer, including marketing, logistics, and documentation. - Agents or Brokers
Independent agents or brokers connect manufacturers with international buyers and facilitate the sale for a commission. - Foreign Distributors
Distributors purchase goods and resell them in foreign markets, handling local marketing and sales. - Freight Forwarders
Although primarily involved in logistics, some freight forwarders can facilitate export by connecting businesses to buyers or handling documentation and shipping.
What are the advantages of indirect exporting?
- Low Risk
Less financial exposure and international experience needed. - Simplicity
The intermediary handles complex tasks like logistics and compliance. - Cost-Effective
Reduces the need for international marketing or sales infrastructure.
What are the disadvantages of indirect exporting?
- Lower Profit Margins
Intermediaries take a portion of the profit. - Less Control
Limited oversight of the marketing and distribution process. - Dependency
Success is tied to the performance and reliability of intermediaries.
What is Direct Export Channels?
Exporter that sells to the buyer abroad through sales department, manufacturer’s agent, brand office abroad, subsidiary, foreign distributor.
What are the 3 component of Direct Exports?
- Direct Export Channels.
- Manufacturer’s sales agent.
- Foreign Distributor.
What are examples of direct export?
- Selling to Foreign Retailers or Wholesalers
A company establishes direct relationships with retailers or wholesalers in foreign markets. - Online Sales Through E-commerce Platforms
Companies sell their products directly to international consumers via their own websites or global platforms like Amazon, eBay, or Shopify. - Participating in Trade Shows or Expos
Companies attend international trade fairs to showcase products and connect with potential buyers. - Foreign Branch or Sales Office
Establishing a physical presence in another country to manage sales and distribution. - Direct Sales via Agents or Representatives Abroad
Companies hire their own sales agents or representatives who work on commission but remain under the company’s control. - Contracting with Foreign Governments or Institutions
Selling products or services directly to foreign public entities or institutions. - Joint Ventures or Partnerships Abroad
Entering partnerships where both parties collaborate on the sale and distribution of products.
What are the advantages of direct exporting?
- Higher Profit Margins
No intermediaries taking a share of the profits. - Greater Control
Full control over pricing, marketing, and customer service. - Stronger Customer Relationships
Direct interaction with foreign customers enhances trust and feedback. - Brand Building
Increased visibility and recognition in the target market.
What are the disadvantages of direct exporting?
- Higher Costs
Managing logistics, marketing, and distribution can be costly. - Complexity
Requires knowledge of international trade regulations and procedures. - Risk Exposure
Greater exposure to foreign market risks (e.g., political, economic, legal).
What are the characteristics of a Manufacturer’s Sale Agent (Representative)?
- Independent.
- Situated in the target market.
- Locates customers & gets orders.
- Works in a limited territory.
- Paid by commission at a fixed rate.
- May sell on an exclusive basis.
What are the advantages of a sales agent?
- Potential for faster sales through existing customer base.
- Minimal risks.
Minimal and variable costs compared to in-house sales. - Obtains competitive data, market knowledge.
- Exporter controls the marketing mix.
- “Halo effect” from other products in the agent’s portfolio.
What are the disadvantages of a sales agent?
- Exporter far from the target market and the agent.
- Difficult to control agent’s effort level.
- Possible conflict with other products in the agent’s portfolio.
How do you find a sales agent?
- Visiting trade shows.
- Trade associations and directories.
- Survey of potential customers.
- Referrals from other agents.
- Research on complementary product lines.
- Foreign trade delegations. (physical institutions, helps with associating companies find and associating you with companies, agents, legal firms or give you their contact to do the linkage on your own).
What is a Foreign Distributor?
- Buys merchandise from exporter and resells it in the foreign market.
- May also keep merchandise in stock for quick deliveries or reorders.
- May provide after sales service or installation services.
What are the advantages of a Foreign Distributor?
- Potential for immediate sales.
- Simplicity for the exporter.
- Infrastructure.
- May take control of marketing mix.
What are the disadvantages of a Foreign Distributor?
- Middleman can cause price to increase.
- Exporter usually has less access to final customers.
- Less control over marketing mix (4P’s).
What is the difference of contracting between a sale agent and a foreign distributor.
The method of payment.
Agent are payed by commission, whereas the foreign distributor is payed in a more “stable/direct” way.
What are the 2 types of Contractual Relationships?
Licensing & Franchising
What is licensing?
Arrangement where the owner of IP grants another firm the right to use that IP for a specified period of time in exchange for royalties.
What are the advantages of licensing?
- Low Investment and Risk
- Rapid Market Entry
- Access to Local Expertise
- Revenue Generation
- Brand Expansion
- Reduced Barriers to Entry
- Focus on Core Competencies
What are the disadvantage of licensing?
- Loss of Control
- Lower Profit Potential
- Risk of Intellectual Property (IP) Theft
- Limited Long-Term Presence (Licensing may not create a permanent presence in the foreign market, which can limit long-term growth opportunities.)
- Difficulty in Maintaining Standards (Ensuring consistent product quality or service standards across different markets can be challenging.)
What is Franchising?
Arrangement where the firm allows another the right to use an entire business system in exchange for fees or royalties.
What are the advantages of franchising?
- Rapid Expansion (Franchising allows a company to grow quickly by leveraging the resources and investments of franchisees rather than the franchisor’s own capital.)
- Reduced Financial Risk
- Local Market Knowledge
- Brand Recognition
- Economies of Scale
- Streamlined Operations
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International Trade Overview16
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Trade Agreements and their Impact on Importers and Exporters12
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Export planning process and Entry Strategies18
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Entry Strategies (Continuity)26
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International Sourcing14
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International logistics & transportation14
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Terms of Sale and International Pricing24
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Methods of Payment7
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Risk Management, Legal Aspect, and Cultural Aspect11
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Recap & Sample exam11
