introduction to export business

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INTRODUCTION TOINTRODUCTION TO

EXPORT BUSINESSEXPORT BUSINESS


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TWO BASIC COMPONENTSTWO BASIC COMPONENTS

FOREIGN TRADE

EXPORTS IMPORTS


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CONDITIONS FOR EXPORTCONDITIONS FOR EXPORT

TRANSACTIONTRANSACTION

Goods/Services must be sent acrossGoods/Services must be sent across

national boarder to another country.national boarder to another country.

Payment of goods so dispatchedPayment of goods so dispatchedmust be realized in exportersmust be realized in exporters

country.country.

HOME COUNTRY(EXPORTER)

FORRIGN COUNTRY(IMPORTER)

GOODS

PAYMENT


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CONDITIONS FOR IMPORTCONDITIONS FOR IMPORT

TRANSACTIONTRANSACTION

Import transaction involves buyingImport transaction involves buying

and physically transporting goodsand physically transporting goods

from a foreign country to onesfrom a foreign country to ones

country.country.

Dispatching of payment to foreignDispatching of payment to foreign

country.country.

HOME COUNTRY(IMPORTER)

FORRIGN COUNTRY(EXPORTER)

GOODS

PAYMENT


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CLASSIFICATION OFCLASSIFICATION OF

EXPORTERSEXPORTERS

Active & Passive exporterActive & Passive exporter

Manufacturer exporterManufacturer exporter

Merchant exporterMerchant exporter Service exporterService exporter

Project exporterProject exporter


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BENEFITS OF EXPORTSBENEFITS OF EXPORTS

A.A. To Home (Exporting Country)To Home (

Exporting Country) Foreign exchange earningForeign exchange earning

Improved quality productsImproved quality products

Skill developmentSkill development Technological advancementTechnological advancement

Access to new marketsAccess to new markets

Reducing unemploymentReducing unemployment


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B.B. Benefits to ExporterBenefits to Exporter

(Businessman)(Businessman) Increased sales and profitIncreased sales and profit

Gain global market shareGain global market share Reduced dependence on domestic marketsReduced dependence on domestic markets

Make use of excess production capacityMake use of excess production capacity

Enhance competitivenessEnhance competitiveness

More stabilityMore stability

Access to foreign exchangeAccess to foreign exchange


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IMPACT OF IMPORTSIMPACT OF IMPORTS

Foreign exchange outlayForeign exchange outlay

Makes available scarce/unavailableMakes available scarce/unavailable

inputsinputs

Technical know-howTechnical know-how

Aid to exportsAid to exports

Better relationsBetter relations


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WAY TO SUCCESSFULWAY TO SUCCESSFUL

EXPORTINGEXPORTING

A.A. BASIC RULESBASIC RULES Target one market at a time.Target one market at a time.

Overseas design and product requirements mustOverseas design and product requirements must

be carefully consideredbe carefully considered Exporter must try to reach as close as possible toExporter must try to reach as close as possible to

the market for selling his productthe market for selling his product

The fewer intermediaries one has the betterThe fewer intermediaries one has the better

The goods for exports must be efficientlyThe goods for exports must be efficientlyproducedproduced


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B.B. OTHER RULESOTHER RULES Selling in export is toughSelling in export is tough

Deliveries must be on timeDeliveries must be on time

Goods must be properly servicedGoods must be properly serviced Speedy communicationSpeedy communication

Product testingProduct testing

Initial attackInitial attack

AttitudeAttitude


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BASICS FOR SETTING EXPORTBASICS FOR SETTING EXPORT

BUSINESSBUSINESS

1.1. Setting up an appropriate businessSetting up an appropriate businessorganizationorganization

sole proprietary firmsole proprietary firm

partnership firmpartnership firm

CompanyCompany

The proper selection of an organizationThe proper selection of an organizationdepends upondepends upon

The ability of exporter to raise financeThe ability of exporter to raise finance

Risk bearing capacity of exporterRisk bearing capacity of exporter The extent of control over businessThe extent of control over business

Nature of regulatory framework applicable onNature of regulatory framework applicable onbusiness.business.


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2.2. Choosing appropriate mode ofChoosing appropriate mode ofoperationoperation

Merchant exporterMerchant exporter Manufacturer exporterManufacturer exporter

Sales/commission agentSales/commission agent

Buying agentBuying agent


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3.3. Naming the businessNaming the business

Name and style of business should be:Name and style of business should be: SoftSoft AttractiveAttractive

Short and meaningfulShort and meaningful

Simple and attractive name indicating theSimple and attractive name indicating the

nature of business is idealnature of business is ideal


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4.4. Selection of productSelection of product

Trends of different export items from Trends of different export items from

exporting countryexporting country The selected product should be in demand inThe selected product should be in demand in

countries where it is to be exportedcountries where it is to be exported

Produced economically to developProduced economically to develop

competitivenesscompetitiveness

Produced in sufficient quantityProduced in sufficient quantity


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5.5. Effective business communicationEffective business communicationFor creating favorable and excellent impression theFor creating favorable and excellent impression the

exporter must useexporter must use

Decent letter head on superior quality paperDecent letter head on superior quality paper

Good envelop, nicely printed, giving full detailsGood envelop, nicely printed, giving full details

of firms name, telephone, fax number andof firms name, telephone, fax number and

email address etc.email address etc. Language should be polite, soft, brief and toLanguage should be polite, soft, brief and to

the point giving a very clear picture of thethe point giving a very clear picture of the

subject to be put before the customer.subject to be put before the customer.

Letters should be typed/computer typed,Letters should be typed/computer typed,

preferably in the language of importingpreferably in the language of importing

countrycountry..


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6.6. Selecting the marketSelecting the market

Factors to be considered:Factors to be considered: Political embargoPolitical embargo

Scope of exporters selected productScope of exporters selected product

Demand stabilityDemand stability Preferential treatment to products fromPreferential treatment to products from

developing countriesdeveloping countries

Distance of potential productDistance of potential product

Transport problemsTransport problems

Tariff and non-tariff barriersTariff and non-tariff barriers Size of demand in marketSize of demand in market


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7.7. Selecting channels ofSelecting channels of

distributiondistribution

The following channels of distribution are The following channels of distribution aregenerally utilized while exporting togenerally utilized while exporting to

overseas markets:overseas markets:

Exporting through canalizing agenciesExporting through canalizing agencies

Export through merchant exporters, exportExport through merchant exporters, export

houses or trading houseshouses or trading houses

Direct exportsDirect exports

Export through overseas sales agentExport through overseas sales agent Export through ecommerceExport through ecommerce


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8.8. Negotiating with prospective buyersNegotiating with prospective buyers

While conducting business negotiations, theWhile conducting business negotiations, the

prospective exporter should avoidprospective exporter should avoid ConflictConflict

ControversiesControversies

Criticism of other partyCriticism of other party

During conversation the attitude should be toDuring conversation the attitude should be to

communicate effectively so as to grab thecommunicate effectively so as to grab the

export order from prospective buyer.export order from prospective buyer.


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9.9. Processing an export orderProcessing an export order

OneOneshould not be happy merely on receiving an export order,should not be happy merely on receiving an export order,rather he should first acknowledge the export order, and thenrather he should first acknowledge the export order, and thenproceed to examine carefully in respect of:proceed to examine carefully in respect of:

ItemsItems

SpecificationsSpecifications

Pre shipment inspectionPre shipment inspection

Payment conditionsPayment conditions

Special packagingSpecial packaging

LabelingLabeling Shipment and delivery dateShipment and delivery date

Marine insurance documentation etc.Marine insurance documentation etc.

If satisfied a formal confirmation should be sent to the buyer.If satisfied a formal confirmation should be sent to the buyer.

Otherwise clarification should be sought from buyer beforeOtherwise clarification should be sought from buyer beforeconfirming the order.confirming the order.


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10.10. Entering into export contractEntering into export contractIn order to avoid disputes it is necessary to enter into an exportIn order to avoid disputes it is necessary to enter into an exportcontract with the overseas buyer.contract with the overseas buyer.

The following points are generally included in export contract:The following points are generally included in export contract:

Product standard and specificationsProduct standard and specifications QuantityQuantity InspectionInspection Total value of contractTotal value of contract Terms of deliveryTerms of delivery Taxes, duties, and chargesTaxes, duties, and charges

Period of delivery/shipmentPeriod of delivery/shipment Packaging, labeling and markingPackaging, labeling and marking Terms of payment-amount/mode and currencyTerms of payment-amount/mode and currency Discounts and concessionsDiscounts and concessions InsuranceInsurance Documentary requirementsDocumentary requirements GuaranteeGuarantee

Force Majeure of excuse for non-performance of contractForce Majeure of excuse for non-performance of contract RemediesRemedies arbitrationarbitration


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11.11. Export PricingExport PricingExport pricing is the most important tool for promotingExport pricing is the most important tool for promotingsales and facing international competitionsales and facing international competition

However, there is no fixed formula for successful exportHowever, there is no fixed formula for successful exportpricing. It will differ from exporter to exporter dependingpricing. It will differ from exporter to exporter dependingupon whether the exporter is a merchant exporter,upon whether the exporter is a merchant exporter,manufacturer exporter, or exporting through canalisingmanufacturer exporter, or exporting through canalisingagency.agency.

As regards the quoting of price to the overseas buyer, theAs regards the quoting of price to the overseas buyer, thesame are quoted in the following internationally terms:same are quoted in the following internationally terms: Ex-Works (EXW)Ex-Works (EXW) Free Carrier (FCA)Free Carrier (FCA) Free Alongside Ship (FAS)Free Alongside Ship (FAS) Free on Board (FOB)Free on Board (FOB) Cost & Freight (C&F)Cost & Freight (C&F)

Cost Insurance Freight (CIF)Cost Insurance Freight (CIF)

Carriage Paid To (CPT)Carriage Paid To (CPT) Carriage & Insurance Paid to (CIP)Carriage & Insurance Paid to (CIP) Delivered to Frontier (DAF)Delivered to Frontier (DAF) Delivered Ex-Ship (DES)Delivered Ex-Ship (DES) Delivered Ex-Quay (DEQ)Delivered Ex-Quay (DEQ) Delivered Duty Unpaid (DDU)Delivered Duty Unpaid (DDU) Delivered Duty Paid (DDP)Delivered Duty Paid (DDP)


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12.12. Undertaking risk inUndertaking risk in

international tradeinternational trade

WhileWhile selling abroad the exporterselling abroad the exporterundergoes the following risks:undergoes the following risks:

Currency riskCurrency risk

Credit riskCredit risk

Carriage/Cargo riskCarriage/Cargo risk

Country riskCountry risk

introduction to export business

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