In today's marketplace, the ability to expand beyond the borders of one's own country and sell products worldwide is almost a necessity. For many companies, exporting is part of the overall marketing plan. Exporting into selected international markets takes money, especially when intermediaries get involved. So companies that export need to decide when it's more feasible to do direct exporting.
Direct Exports Defined
Direct exporting means that a producer or supplier directly sells its product to an international market, either through intermediaries – such as sales representatives, distributors, or foreign retailers – or directly selling the product to the end user. An example of this would be directly selling computer parts to a computer manufacturing plant. Direct exporting requires market research to locate markets for the product, international distribution of the product, creating a link to the consumers, and collections.
Whether direct exporting is feasible depends on the company's size and marketing ability, previous exporting experience, business conditions in chosen markets and the nature of the product – be it wine, produce, books, cars or computer parts.
Direct Vs. Indirect Exporting
Direct exporting may or may not need intermediaries. But indirect exporting always requires intermediaries, with the chief intermediary an export company that handles all aspects of the exporting process – from locating markets to uncovering marketplace competitors to dealing with retailers and distributors. Direct exporting requires more time and management resources but maximizes profits for the producer or supplier. Indirect exporting costs money, taking away from the bottom line, but it frees up time and management resources and makes them available for creating more and better products.
Advantages of Direct Exporting
Direct exports eliminate the export companies and most intermediaries, allowing for direct marketing and maximum profit. The domestic producer or supplier can send its own employees on sales calls to the end-market retailers and re-sellers, or to companies with a direct need for the product. Direct exports offer more control over marketing, more protection for intellectual property and timelier feedback from foreign markets.
Disadvantages of Direct Exporting
Direct export disadvantages include the cost of creating an exporting department – as well as the needs for educating employees about export documentation, establishing shipping procedures and the ability to make and receive international payments. Direct exports are costly for companies lacking the human resources for field sales and the financial resources to promote their products internationally. Other concerns affecting direct exporting include drops in exchange rates and unpredictable orders from foreign markets.
In addition, some products may not be appropriate for export. These include products with a short shelf life or work life, such as milk; electronic gadgets with updated versions coming out in six to 12 months; products that would cost more to transport than to produce, and products requiring extensive after-sale service due to poor quality or delivery problems.
- Thinkstock/Comstock/Getty Images