Q1. Discuss briefly the steps involved in processing of an export order.
Answer : Golden Rule: In order to be successful in exporting one must fully research its markets. No one should ever try to tackle every market at once. Many enthusiastic persons bitten by the export bug, fail because they bite off more than they can chew. Overseas design and product requirements must be carefully considered.
Always sell as close to the market as possible. The fewer intermediaries one has the better, because every intermediary needs some percentage for his share in his business, which means less profit for the exporter and higher prices for the customer. All goods for export must be efficiently produced. They must be produced with due regard to the needs of export markets. It is no use trying to sell windows which open outwards in a country where, traditionally, windows open inwards.
Sell Experience: If a person cannot easily export his goods, may be he can sell his experience. Alternatively, he can concentrate on supplying goods and materials to exporters’ who already have established an export trade. He can concentrate on making what are termed ‘own brand’ products, much demanded by buyers in overseas markets which have the manufacturing know-how or facilities.
Selling in Export: In today’s competitive world, everyone has to be sold. The customer always has a choice of suppliers. Selling is an honorable profession, and you have to be an expert salesman.
On-Time Deliveries: Late deliveries are not always an exporters fault. Dock strikes, go-slows, etc. occur almost everywhere in the world. If one enters into export for the first time, he must ensure of fast and efficient delivery of the promised consignment.
Communication: Communication internal and external must be comprehensive and immediate. Good communication is vital in export. When you are in doubt, pick up the phone or email for immediate clarification.
Testing Product: The risk of failure in export markets can be minimized by intelligent use of research. Before committing to a large-scale operation overseas, try out on a small scale. Use the a sample test, and any mistakes can then be corrected without much harm having been done. While the test campaign may appear to cost more initially, remember that some of the cost will be repaid by sales, so that test marketing often turns out to be cheaper.
Approach: If possible some indication of the attitudes towards the product should be established, like any sales operation. Even if the product is successful, to obtain reactions from the customer.
- Preliminaries for Starting Export Business
- Setting up an appropriate business organization.
- Choosing appropriate mode of operations
- Naming the Business
- Selecting the company
- Making effective business correspondence
- Selecting the markets
- Selecting prospective buyers
- Selecting channels of distribution
- Negotiating with prospective buyers
- Processing an export order
- Entering into export contract
- Export pricing and costing
- Understanding risks in international trade
- Setting up an appropriate business organization
The first and the foremost question you as a prospective exporter has to decide is about the kind of business organisation needed for the purpose. You have to take a crucial decision as to whether a business will be run as a sole proprietary concern or a partnership firm or a company. The proper selection of organisation will depend upon
- Your ability to raise finance
- Your capacity to bear the risk
- Your desire to exercise control over the business
- Nature of regulatory framework applicable to you
If the size of the business is small, it would be advantageous to form a sole proprietary business organisation. It can be set up easily without much expenses and legal formalities. It is subject to only a few governmental regulations. However, the biggest disadvantage of #138;sole proprietary business is limited liability to raise funds which restricts its growth. Besides, the owner has unlimited personal liability. In order to avoid this disadvantage, it is advisable to form a partnership firm. The partnership firm can also be set up with ease and economy. Business can take benefit of the varied experiences and expertise of the partners. The liability of the partner though joint and several, is practically distributed amongst the various partners, despite the fact that the personal liability of the partner is unlimited. The major disadvantage of partnership form of business organisation is that conflict amongst the partners is a potential threat to the business. It will not be out of place to mention here that partnership firms are governed by the Indian Partnership Act,1932 and, therefore they should be form within the parameters laid down by the Act.
Exporters Manual and Documentation
Company is another form of business organisation,which has the advantage of distinct legal identity and limited liability to the shareholders. It can be a private limited company or a public limited company. A private limited company can be formed by just two persons subscribing to its share capital. However, the number of its shareholders cannot exceed fifty, public cannot be invited to subscribe to its capital and the member’s right to transfer shares is restricted. On the other hand, a public limited company has a minimum of seven members. There is no limit to maximum number of its members. It can invite the public to subscribe to its capital and permit the transfer of shares. A public limited company offers enormous potential for growth because of access to substantial funds. The liquidity of investment is high because of easiness of transfer of shares. However, its formation can be recommended only when the size of the business is large. For small business, a sole proprietary concern or a partnership firm will be the most suitable form of business organisation.In case it is decided to incorporate a private limited company, the same is to be registered with the Registrar of Companies.
For details as to be procedures for registration with the registrar of Companies, kindly refer to Nabhi’s FORMATION AND MANAGEMENT OF A PRIVATE COMPANY ALONG WITH PRACTICAL PROCEDURES.
Choosing appropriate mode of operation
You can chose any of the following modes of operations:
Merchant Exporter i.e. buying the goods from the market or from a manufacturer and then selling them to foreign buyers.
Manufacturer Exporter i.e. manufacturing the goods yourself for export Sales Agent/Commission Agent/Indenting Agent i.e. acting on behalf of the seller and charging commission Buying Agent i.e. acting on behalf of the buyer and charging commission
Naming the Business
Whatever form of business organisation has been finally decided, naming the business is an essential task for every exporter. The name and style should be attractive, short and meaningful. Simple and attractive name indicating the nature of business is ideal. The office should be located preferably in a commercial complex, in clean and workable surroundings. The letter head should be simple and superb providing information concerning H.O., branches, cable address, telephone number, fax number, banker’s name and address etc. Pick up a beautiful trade name and logo which reinforces your organisation’s name and image.
Open a current account in the name of the organisation in whose name you intend to export. It is advisable to open the account with a bank which is authorised to deal in Foreign Exchange
Selecting the Company
Carefully select the product to be exported. For proper selection of product, study the trends of export of different items from India. The selected product must be in demand in the countries where it is to be exported. It should be possible to procure or manufacture the selected product at most economic cost so that it can be competitively priced. It should also be available in sufficient quantity and it should be possible to supply it repeatedly and regularly. Besides, while selecting the product, it has to be ensured that you are conversant with government policy and regulations in respect of product selected for export. You should also know import regulations in respect of such commodities by the importing countries. It would be preferable if you have previous knowledge and experience of commodities selected by you for export. A non-technical person should avoid in dealing in high tech products.
Making effective Business Correspondence
You should recognise the importance of business correspondence as it is an introduction with the buyer in proxy which may clinch his response according to the impression created by the correspondence. For creating a very favorable and excellent impression, you must use a beautiful letter head on airmail paper and a good envelope, nicely printed, giving fully particulars of your firm’s name, telephone, telex and fax number etc. Your language should be polite, soft, brief and to the point, giving a very clear picture of the subject to be put before the customer. Letters should be typed/ computer typed set, preferably in the language of the importing country. Also make sure that the full and correct address is written and the envelope is duly stamped. It should also be borne in mind that the aim of your business correspondence is not only to clinch the buyer’s order but also to obtain the information on the following:
The specifications of the products already in use in the importing country. Whether your product meets the above specifications. If not, Whether your specifications offer any distinct advantages in terms of prices, quality, after-sales service, etc. The import policy prevailing in the buyer’s country (e.g. whether there is any import licensing, any restrictions on remittances, any pre-qualification for product/supplier, etc.)
The trade practices in the buyers’ country with special reference to your product, information like whether importers import and distribute the product/high sea sales, whether agent is required to book orders from actual users etc. In case your item requires after sales service, the manner in which it can be offered. The prices at which your product sells in the retail/wholesale market, the duty structure and any other cost element to arrive at the landed cost. Information on the margins at which the product is sold. This information will help you in evolving a pricing strategy.
Study of various market segments viz. Importers, Supermarkets, Government Suppliers, Institutional Sales, Tenders, Suppliers, etc.
The various factors that rule the market viz. Quality, Price, Delivery, Brand Name, Credit Terms, etc. Role of advertising and publicity and reference to the product and the country.
Q2. Discuss briefly the various techniques to assess country risk. Give examples to illustrate your answer.
Q3. Discuss fundamental methods of exchange rate forecasting. What are the problems in forecasting exchange rates?
Q4. What is the role and elements of culture?
Q5. Write a short note on International Advertising.How is it important for international marketing?
Q6. Describe the various modes of entries in international market.
