Direct export

From CEOpedia | Management online

Direct export is selling by the manufacturer own products abroad without an intermediary. It requires a certain knowledge of commercial contracts, outlets and foreign trade techniques. As it develops, these contacts usually become more intense, which affects the possibility of transition to other forms of internationalization that require greater involvement.

In the recent period, direct exports have been growing, especially when it comes to trade in investment goods. Sales of this type of goods are often related to the provision of additional services, e.g. in the area of ​​consulting, maintenance and repairs, which requires close contact between the producer and the recipient. This contact is also necessary due to the fact that trade in investment goods usually takes place on a loan. The choice of this distribution route may be determined by lower costs in relation to the sale with the intermediary.

Export item

The subject of direct export is the majority of investment equipment (from small electric motors to large turbines, cranes, seagoing vessels or machine tools), as well as mechanized household appliances, electroacoustic, audiovisual, passenger cars, etc. Direct export is also used in the fields of production and trade, in which the wholesaler can not be an exporter, e.g. in the case of export of machines manufactured for individual orders. Direct export is carried out where it is justified to create their own sales channels abroad. The following areas can be counted here:

  1. among consumer goods:
  • export of passenger cars
  • export of audio and video equipment
  1. among industrial goods:
  • export of mechanical farm equipment (tractors, combines)
  • truck export
  • bus exports
  • export of pharmaceuticals
  • export of some chemical products.

The export process

Direct export is used when the products of a given manufacturer are marked with its brand name and are known and recognized in the countries to which they are addressed.

Direct export requires the creation of appropriate organizational bases in the enterprise. With its larger dimensions it is necessary to create in the company its own export department, employ specialists in the field of advertising, marketing, acquisition and conducting research on foreign markets.

With this form of export is associated with a greater commercial risk than in the case of indirect export. Additional capital involvement is required due to the longer cash flow from the sale of raw materials to receiving receivables and due to the need to have its own mailing warehouses, spare parts stores and even the opening of a company branch abroad. Direct long-term loan guarantees for the supplier are connected with direct export.

Organization of export

The company can conduct direct export in several ways, for example:

  1. An organized sales or branch: a sales department deals in sales and distribution. It can also deal with storage and promotion. Also fulfills the function of the exhibition center and customer service center,
  2. Domestic office or export department: it may take the form of a separate export department constituting a profit center,
  3. Traveling agent: an enterprise may send its representative abroad to establish business contacts,
  4. Foreign distributors or agents: an enterprise may give them exclusive rights or limited authorizations to represent their interests in a particular country.

Examples of Direct export

  • One example of direct export is when a company manufactures a product in one country and then sells it directly to customers in another country. This type of export can be done through online platforms, such as e-commerce websites, or through traditional brick-and-mortar stores. An example of this type of export is when a company in the United States manufactures shoes and sells them directly to customers in Japan.
  • Another example of direct export is when a company manufactures a product in one country and then sells it directly to wholesalers in another country. This type of export is typically done through trade shows, business-to-business websites, or other types of marketing campaigns. An example of this type of export is when a furniture manufacturer in Canada manufactures furniture and sells it directly to wholesalers in the United Kingdom.
  • A third example of direct export is when a company manufactures a product in one country and then sells it directly to distributors or resellers in another country. This type of export is typically done through trade shows, business-to-business websites, or other types of marketing campaigns. An example of this type of export is when an electronics manufacturer in China manufactures electronics and sells them directly to distributors or resellers in the United States.

Advantages of Direct export

Direct export offers many advantages compared to other forms of internationalization. These include:

  • Increased control over the marketing of the product, as the manufacturer is in direct contact with the customer. This allows for better customization of the product to the customer's needs and a more effective marketing strategy.
  • Lower costs and greater profits, as the manufacturer is not paying an intermediary, allowing them to offer more competitive prices and more attractive discounts.
  • The possibility of developing a direct relationship with the customer, as the manufacturer can provide more personalized service and support.
  • Direct access to foreign markets, as the manufacturer can quickly identify potential new customers and reach them directly.
  • The ability to identify new opportunities and trends in the foreign market, as the manufacturer can respond quickly to changing conditions.

Limitations of Direct export

  • One of the main limitations of direct export is the lack of an established presence in the target market. Without a presence in the market, it is difficult to gain market access and build trust with customers, meaning it can be hard to make sales and build relationships.
  • Another limitation is the lack of local knowledge. Without an established presence in the market, it is difficult to understand the local laws and regulations, as well as the cultural and business norms of each potential customer.
  • Additionally, direct export requires a lot of resources and time. It is a long-term process that requires the manufacturer to commit to it in order to see results.
  • Finally, there is the risk of not being able to compete with local companies. Without a local presence, it can be difficult to understand the local market and compete with established companies.

Other approaches related to Direct export

Direct export is not the only approach to internationalization available to companies. Other approaches related to direct export include:

  • Licensing: This method allows companies to grant the right to use their patents, trademarks, copyrights or other proprietary information or technology to another company. The licensee pays for the right to use the license and generally pays a royalty for the ongoing use of the licensed information.
  • Franchising: This approach involves granting a company the right to use a trademark, logo and business model in order to establish a business in another country. The franchisor provides the business model, training and assistance and the franchisee pays a fee for the rights to operate the business.
  • Joint Venture: This approach involves forming a partnership between two or more companies for the purpose of entering a foreign market. The joint venture company combines the resources of the partners to create a new company that operates in the foreign market.

In summary, Direct export is one of several approaches to internationalization available to companies. Other approaches include Licensing, Franchising, and Joint Venturing. Each approach has its own advantages and disadvantages, and companies must carefully evaluate each option to determine which is best suited to their needs and goals.


Direct export — recommended articles
Sales agent — Direct exporting — Business format franchising — Direct distribution — Local agent — Lateral integration — Reintermediation — Distribution policy — Sole distributor

References

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