In direct exporting, the manufacturer takes upon him self the task of managing the export sales. This will naturally mean greater involvement on his part in the export business. The advantages of directness are not only greater sales, but also greater control, better market information and development of in-house expertise in international marketing. The costs of going direct are high because the direct exporter bears them alone.
Let us now analyze the various advantages of direct exporting:
1. Due to personal contacts with the end users and/or retailers the manufacturer is in a position to get better knowledge of the requirements of the buyer and can adapt his product accordingly.
2. He has complete control over the prices charged for his product. He can also determine the credit terms.
3. He can take care of the after sale service requirements in a much better way.
4. Intensive cultivation of the market is made possible by direct exporting.
5. The chain of distribution is shortened, leading to a lower price for the ultimate consumer.
6. If his product is successful in foreign market, he builds up name reputation and goodwill
7. By exporting directly the manufacturer acquires greater expertise in international marketing.
8. Information on marketing opportunities and tends is made available, competitors observed, product acceptance evaluated and other invaluable intelligence collected.
In the case of direct exporting, manufacturers’ own staff works with greater dedication because their own prosperity depends upon the success of the export effort. And there are specific advantages of employing one’s own staff for this purpose. The employees are more knowledge about the company’s specific sales methods. They can be compensated in accordance with the long term overall interests of the whole enterprise.
There are two specific reasons why Indian manufactures are taking more and more to direct exporting:
(a) Success in owing markets can boost the manufacturer’s image in the domestic market.
(b) Availability of export incentive on a fairly liberal scale.
(c) Growing competition in the domestic market
(d) Export houses usually to deal in products which provide them with higher margins.
Forms of Direct Exporting:
The manufacturer will have to decide upon the kind of organization he will adopt for direct exporting both inside the country and in the various foreign markets. Let us first discuss the forms of organization inside the country. There may be five possibilities:
Built in Export Department:
This is the least expensive method. This is also the simplest. There is an export manager assisted by a few clerks. The export manger is mainly responsible for procuring orders. After the order is procured the rest of the work involved in fulfilling it is handled by other regular department.
Self contained Export department:
Here the export department is a self contained unit having its own staff. The export department can function independently and there is no friction with the other departments of the company It is very often located in the port towns to take advantage of the shipping and forwarding facilities readily available Often demand is also concentrated in port towns because of the frequent visits of buyers and buying delegations.
Separate Export Company:
If the business grows satisfactorily, the firm may decide to have a separate company to handle export business. This will make it possible to have a unified control over export business. It is also possible to calculate the cost and profits of the export operations more precisely. The export company can also avail itself easily of the concessional export financing facilities. If it is considered necessary and desirable, the export company can purchase products from outside and thus can handle more complete line of products.
Combination Export Managers:
Small manufacturers can take advantage of the services of the Combination Export managers who work for several principals at the same time. Two or three firms can join together to appoint a CEM. The CEM uses the letter heads and signs as an export manager of the firm he seeks to represent while handling particular transaction the foreign customers feels that he is directly dealing with the producer.
Joint Marketing Groups:
A group of companies manufacturing similar or closely related products may pool their resources and cultivate foreign markets jointly. They may co-operate at first by participating together in an overseas trade fair and sharing the expenses, or by publishing jointly a catalogue of products and distributing it abroad. Or they may share an agent in one or in several areas. This co-operation can be completely informal and ad hoc. Later a joint enterprise formally organized can be set up.