Direct exporting
Direct exports are characterized by the exportation of goods by the exporter or an entity authorized by him outside the territory of the Community. These entities will also submit applications to the Customs Office and all customs documents will be issued for them. This means that the Seller (exporter) himself exports the goods or authorizes another entity to do so, who exports on his behalf and declares goods for customs clearance[1].
Characteristics
An enterprise deciding to export directly should have adequate financial and employee capital. Direct export works well in companies that already have experience in activities on foreign markets in indirect sales. An investment in direct exporting requires a greater financial outlay. It is connected with the need to invest in advertising and marketing. In addition, a special export sales department should be separated in the company. The staff of such a department should be trained and demonstrate knowledge of issues related to foreign trade and marketing as well as foreign languages.
Direct exporting can be carried out in several ways, including[2]:
- through its own specialized export cell,
- by a foreign distributor,
- through its own representative office and creating its own sales network,
- directly to the final recipient of the goods / services.
Thorough analysis of the company's situation
The financial situation of the company is another important factor determining its readiness for direct exporting. Therefore, it is necessary to thoroughly analyze and evaluate the company's finances in order to get an answer to the question whether the company can afford to launch direct export sales.
When deciding on foreign expansion, the company must take into account the costs of entering foreign markets, for example related to adapting the product to the market or obtaining the necessary certificates. A detailed calculation of the export price should be made, taking into account currency risk.
Direct exporting carry many different expenses that may involve financial risks. These expenses include:
- market research
- development and improvement of staff
- advertising
- marketing
- sales promotions
- participation in fairs
- costs of translations
- insurance
- certificates
- approvals
A common mistake of enterprises in the initial stage of development of direct exporting sales is reliance on their own expected profits and export revenues, which are intended to finance export operations and enter new foreign markets. It may turn out that the predictions were wrong and the company does not have sufficient financial resources for further export activities, which in turn may lead to losses leading to the closing of direct exporting[3].
Advantages and disadvantages
In direct export, the following advantages can be distinguished:
- contact between the producer and the client, and thus better tailored offers to individual needs,
- certainty associated with shaping and planning
- easiness in reaching the rules that are binding on the buyer's market.
Nevertheless, defects can also be distinguished[4]:
- increasing the producer's risk related to operating on foreign markets,
- the producer must gain knowledge about the markets on which his products are located,
- the producer bears the costs associated with the promotion and acquisition,
- it is necessary for the manufacturer to have an export department,
Examples of Direct exporting
- Selling a product directly to a foreign customer. The exporter can ship the goods directly to the customer, and the customer can be responsible for the customs clearance.
- Selling a product to a foreign distributor or agent. The exporter can ship the goods to a foreign distributor or agent, who can then be responsible for the customs clearance and delivery to the final customer.
- Selling a product to an offshore manufacturer. The exporter can ship the goods to an offshore manufacturer, who can then be responsible for the customs clearance and delivery of the finished products to the destination country.
- Selling a product to an overseas subsidiary or branch. The exporter can ship the goods to their overseas subsidiary or branch, who can then be responsible for the customs clearance and delivery of the goods to the final customer.
Direct exporting is a method of exporting goods from one country to another without the involvement of an intermediary. It is a common practice for companies to take advantage of this approach in order to reduce costs and time. Below are some of the other approaches related to Direct exporting:
- Selling to a Distributor - Companies often use distributors to market and distribute their products in other countries. Distributors will have a good knowledge of the local market, so companies can make sure their products reach the right people.
- Selling to an Importer - Companies sometimes export their products to an importer, who then distributes the products to local retailers. This can be beneficial as it reduces the cost and complexity of exporting and also allows companies to work with reputable partners.
- Selling to a Retailer - Companies can also export their products directly to a retailer in the target country. This may be more expensive in the short-term, but can be beneficial in the long-term as it allows companies to build relationships with retailers.
In summary, Direct exporting is a common approach for exporting goods from one country to another without the involvement of an intermediary. Other approaches related to Direct exporting include Selling to a Distributor, Selling to an Importer, and Selling to a Retailer. Each approach has its own set of advantages and disadvantages that companies should consider before deciding which method to use.
Footnotes
| Direct exporting — recommended articles |
| Direct export — Sales agent — Trade house — Turnkey business — Commercial agent — Media house — Placement fee — Internationalization — Indirect marketing channel |
References
- Carbaugh R., (2008), International Economics, Cengage Learning, p. 309-311
- Dana L. P. and others, (2011), World Encyclopedia of Entrepreneurship, Edward Elgar Publishing, p. 261
- International Trade Andministration of the US, (2012),Basic Guide to Exporting: The Official Government Resource for Small and Medium-Sized Businesses: The Official Government Resource for Small and Medium-Sized Businesses, Government Printing Office, p. 57-60
- Kerr W. and others, (2014), A Guide to the Global Business Environment: The Economics of International Commerce, Edward Elgar Publishing, p. 207-208
Author: Kristina Tyshchenko
