1. Indirect exports
2. Direct exports
3. Management contract
4. Licensing
5. Manufacturing contract
6. Joint venture
7. Direct investment
1. Indirect exports
Meaning:
When the company is indirectly involved in the activities of
exporting and does exporting with the help of export agents and other middle
men.
Types of indirect market
1.
Domestic based export merchants
The
export merchants purchased the product in bulk quantity from the manufacturer
and export the product to the international markets at their own price. These
merchants are based in the domestic market and specialized in exporting
products.
2. Domestic based export agents
These
agents are based domestically and exports on behalf of the company at the price
the company has said and the agents charged commission on the sale of the
product as their reward. It is the responsibility of the agent to deliver the
product in the destination market according to the instructions given by the
company.
3. Cooperative organizations
It is an
institution formed with the collaboration of manufacturers of a same product
and this institution collects the supply of products from the member
manufacturer and exports the product to the international market under the
institution’s brand and prices. The manufacturers will get the share of profit
apart from the cost price.
4.
Export management companies
These
companies are specialized in the trait of exporting products and they make
contacts with the manufacturers and exports according to their specifications,
destination and prices said by the manufacturers and they charge a fee on the
export of the products.
Advantages of indirect exports
-
It is economical and cost effective .
-
Eliminate the differences and burden of
exporting activities.
-
Reduces transportation cost as bulk can be
exported after collecting the bulk product’s and comparing many exporters.
-
The risk factors can be reduced.
-
Helps in maintaining international standards.
Disadvantages of indirect exports
-
Price fluctuations can be very unpredictable
-
Reduces the efficiency as the company is not
involved in exporting activities.
-
The inter dependency is increased and this many
issues.
-
Miss communication and miss concepts may arise.
-
Have low or no control over the foreign
markets.
2. Direct exports
Meaning
When the companies are engaged in the activities of exporting
directly without taking the help from exporting agents or middle menthe it is
said to be direct exports.
Types of direct exports
1.
Domestic based exports department or
division
Here the
companies have their own exporting department or division which handles all the
exports of the company and processes these transactions.
2.
Subsidiary or overseas sales branch
The company
establishes their branches in foreign markets and exports the products to these
branches and from these branches the product are finally distributed to the
customers in foreign markets.
3. Traveling export
sales representatives
The sales
representatives of the company travel to foreign markets with sample or
prototype of the products and try to capture on expand the market for the
company
4. Foreign based
distributors or agents
The
company hand over the product to their authorized dealers, distributors and franchisees
located in foreign markets who intern reach the market.
Advantages of direct exports
1. The company have the full control of
exporting activities
2. Direct exports helping maintaining a
better corporate culture
3. The company can expand its international
operations easily and find compatible markets
4. The company have better control over the
foreign market
5. Direct exports helps in reducing
misunderstanding in-between the customer and company
6. Through direct exports the company can
earn more return on exports
Disadvantages of direct exports
1. The overheads and expenses will increase
as the company have to maintain its export division
2. The company may face communication,
cultural, and language issues it they are meaning all the exporting activities
3. There is more risk involve as all the
process of exporting is to be carried out by the company itself
4. Selection of wrong markets can bring loss
to the company.
3. Management contracts
Meaning
Management contracts are agreements upon which the management of a
company is handed over to a foreign company to manage the business in a modern
and systematic order.
Advantages of management contract
-
Management contract helps in standardization of
the product or service
-
It helps in overall development and expansion
of the business
-
It brings technological advancement in the
business
-
It helps in managing competition
-
Professional will increase in the business
practices.
Disadvantages of management contract
-
Conflicts may arise between employees and the
management due to new policies
-
The policy changes may not suite the local
employees and they may not accept them
-
Due to management contract the working environment
and business because very strict.
4.Licensing
Meaning
In this method the companies issue licenses or permits to other
foreign companies located in foreign markets to do the business on their
behalf. The main company will charge a fee or royalty from the licensed
companies as they are using the main companies product and its brand
Advantages
-
It is easy to expand the business in foreign
markets
-
The goodwill of the brand will increase
automatically
-
The advertising and marketing cost will be
reduced
-
It brings high rate of returns of profit
-
The brand awareness will increase globally
Disadvantages
-
It can be risky as the brand name is on the
line
-
Have less or no control over the licenses
company
-
Conflicts may arise between the main company and
the licensed company
-
It is hard to find good company to give licese
-
Operational activities may become disturbed as
pattern of working is entired different in both the companies
-
There is a probably that the product may be
manipulated
5. Manufacturing contract
Meaning
In this method the companies offer the right to manufacture the
products of the company ti manufacturing business or companies located in the foreign
market. It used in the production or manufacturing industries and in most cases
the contracted parties will only manufacture and assemble the products and will
not involve in the marketing and sales activities
Advantages
-
Manufacturing cost will decrease for the main
company
-
The contracted manufactures will gain more
knowledge through the assistance provided by the main company
-
The risk of manufacturing faults will below to
the main company
-
It is easy and cost effective to produce in
bulk for main company
Disadvantages
-
The contracted manufactures have high risk
-
The main company have less or no control over
the manufacturing process
-
The contracted manufactures get very less
return or low profit
-
It is hard to find good or suitable
manufactures
6. Joint ventures
When two different companies merge together to performed their
business then it is called as a joint venture. In other words the merge of two
different business is known as joint ventures
Advantages
-
Easy to finance the business or to raise
capital
-
Creates pool of knowledge , skills, equipment
and reasources
-
Helps to maintain better understanding
proffessionism
-
Easy to establish the brand name and the trade
mark
-
Easy to compete witrh the competitors
Disadvantages
-
Conflicts may arise between the two companies
-
Customers may get confused about the brand name
-
The total profit needs to be shared between two
companies
-
Long term strategic plans of the business is
difficult to develop or implement
-
There are more complications and formalities
for creating a joint venture
7. Direct investment
When the company itself starts investing on their own and have 100%
ownership of the business in foreign markets then it is called as direct
investment
Advantages
-
The company have full control over the full
business
-
The company can aqua good resources in low cost
-
Direct investment have the highest return
-
The company and expand its market share and
have control over the market
-
The Employeement opportunities in the invested
nation will increase
Disadvantages
-
The company should need huge amount of capital
to invest in foreign maukets
-
It will be very complicated and hard to manage
the company
-
Delay in getting the returns will result in
reaching break even point
-
It is very difficult to aqua 100% ownership in
some countries and regions
