Describe the different Types of Exporting.
Exporting mainly be of two types: Direct exporting and Indirect exporting.
Direct exporting means sale of goods abroad without involving middlemen. In case of direct exporting a firm itself undertakes selling its products overseas and is responsible for dealing with foreign firms directly. A firm may carry on direct exporting by any one of the following modes:
- By establishing company’s own corporate export provision.
- By appointing foreign sales representative and agent.
- Through foreign based distributors and retailers/agents.
- Through foreign based state trading corporation.
- Through overseas sales branches.
In-direct exporting means sale of goods abroad through middle men. Indirect exporting, involves using the help of independent middle men and sales intermediaries that take the responsibility of sending the products to foreign countries. Some major types of intermediaries of indirect exporting are as under:
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- Commission agents.
- Domestic based export merchants or export trade companies.
- Buying or purchasing agents.
- Export agents.
- Export management companies.
- Cooperative organizations.
There are two types of indirect exporting:
- Occasional exporting.
- Active exporting.
Occasional exporting or passive exporting takes place when company exports from time to time either on its own initiative or in response to unsolicited orders from abroad. Active exporting takes place when the company makes a commitment to expand its exports to a particular market.
The main difference between direct and indirect exporting is that the manufacturer performs the export task himself in case of direct exporting while the manufacturer delegates the export task to others (middle men) in case and indirect exporting. As a result, the costs and risks involved in indirect exporting are less than those involved in direct exporting.
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Advantages of indirect exporting over direct exporting.
Indirect exporting involves less investment: The firm does not have to develop an export department, an overseas sales force or a set of foreign contacts.
Indirect exporting involves less risk: Because international marketing intermediaries bring know how and services to the relationship, the seller will normally make fewer mistakes.