iv. Exporters that purchase for foreign users and middlemen – including
large foreign firms which use the goods in their overseas operations,
and export resident buyers.
c. Drawbacks of indirect exporting – a simple method as compared to direct
exporting but that simplicity comes at a price.
I. Indirect exporters pay a commission to the first three kinds of
exporters mentioned earlier.
II. Foreign business can be lost if exporters agents decide to change their
sources of supply.
III. Indirect exporters gain little experience from these transactions. It is
important to note that the indirect export loses some control over the
marketing mix when the international manager employs the services
of an exporting agent.
4. Direct Exporting
a. To engage in direct exporting, someone within the firm handles the export
b. Its simplest form is to give someone in the business the responsibility for
exporting. Domestic employees may handle billing, credit, and shipping initially,
and if business expands, a separate export department may be established.
c. If a firm that has been exporting to wholesaler importers in an area and servicing
them from the home country, business managers may decide to set up a sales
company once business will support this arrangement.
i. Sales company is an arrangement in which a company will import in its
own name from the parent and will invoice in the local currency.
ii. A sales company may employ the same channels of distribution but the
new organization may permit the use of a more profitable arrangement.
iii. Internet has made direct exporting much easier.
5. Distribution options for direct exporters
a. If a firm chooses to do its own exporting but not directly handle distribution in
the market it is exporting to, it has four basic options for overseas middlemen
I. Manufacturers agents – independent sales representatives that combine
functions of agent and wholesale distributor but do not assume financial
responsibility for the imported product
II. Distributors (wholesale importers) – independent importers that buy for
their own account for resale
III. Retailers – frequently act as direct importers, especially for consumer
IV. Trading companies – firms that develop international trade and serve as
intermediaries between foreign buyers and domestic sellers
6. Turnkey Projects
a. Involve exporting technology, management expertise, or capital equipment.
b. Contractor designs and builds plant and supplies process technology, raw
materials, and trained personnel.
c. After trial run, facility ownership goes to purchaser.
d. Another turnkey project supplier is a manufacturer of a factory.
a. Licensing is an agreement in which the licensor grants the licensee the right to
use any kind of expertise, such as manufacturing processes, marketing
procedures, and trademarks for one or more of the licensor’s products.
b. For a fixed sum and annual 2%-5% percentage of sales (royalty).