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Exports are due to several important reasons.

Exports are due to several important reasons.

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International export activity. Abstract

International activities of firms often begin with the establishment of exports of their products. Even firms that have significant contracts in other countries and have made large investments in foreign companies tend to continue to export their products to achieve certain goals.

Exports are due to several important reasons. Raw materials must be exported to the manufacturer, components – to the assembly line and finished products – to foreign wholesalers and consumers. Sometimes the whole process takes place within a vertically integrated company, so the exporter sells its products to the next level, drawing up an appropriate in-house agreement.

However, in the case of a sale to an external buyer, the exporter can decide whether to sell the product directly or through an intermediary.

The main reason for the participation of firms in export activities is the desire to increase profits from sales. Capital- and knowledge-intensive firms specializing, for example, in biotechnology and pharmaceuticals, need exports to divide their investments into larger sales.

Export sales can also be a means of mitigating the problem of overcapacity in the domestic market. Some firms prefer to export products to other countries rather than investing in capacity there due to the high level of risk associated with direct investment.

Finally, there are firms that view export deliveries to multiple markets as a strategy to diversify sales. Because the rate of economic growth for each market is individual, such diversification of developed markets allows firms to compensate for the low rate of sales growth in some markets due to high growth rates in others.

Many companies start exporting by accident. When they start exporting, they face unexpected difficulties. That is why it is necessary to develop an export strategy before starting export activities. However, before developing it, the company should understand some of the main problems associated with exports.

Potential traps. In addition to the difficulties inherent in international business in general, and not just in export activities, such as language and cultural differences, newcomers to exports often face challenges that result in the errors listed below:

inability to attract qualified export experts and develop a basic international marketing plan before export activities; insufficient readiness of the top management to overcome the initial difficulties and adjust the need for financial resources for export activities; insufficient diligence in choosing foreign agents and wholesalers; the pursuit of orders from any country in the world, rather than creating a base for the deployment of profitable operations and orderly growth; neglect of export activities during periods of market booms; inability to do business with foreign wholesalers on the same basis as with their competitors in the domestic market; unwillingness to modify products in accordance with state regulation or cultural preferences in other countries; inability to issue official, commercial and warranty documentation in languages ​​understood by the company’s trading partners abroad; inability to engage a company specializing in the management of export activities or another intermediary in the field of marketing, when the firm does not have people who know how to perform specialized export functions; inability to actively use licensing agreements or joint venture agreements. This point is especially important in countries that restrict imports.

Another problem faced by exporters is the variability of the policies of the countries to which exports go.

The state can offer firms certain incentives and refuse them at any time.

Choice of foreign markets and strategies for entering them. Firms that are starting their international business often prefer markets that require minimal effort to adapt the product and adjust the marketing strategy.

In general, the process of choosing foreign markets is carried out, as a rule, on the basis of increasing in detail analysis, the main essence of which is schematically presented in Fig. one.

The “four filters” model, the concept of which was first proposed by R. Walward, allows you to choose from a large number of countries some of the most promising not only in terms of general market potential, but also specific features of the company and its foreign activities.

Finally, the firm needs to determine how it will deliver the goods to the selected market. The basis of the export plan is the active organization of exports, not expectations with the hope that everything will happen by itself.

Export functions and intermediaries then facilitate export activities. A company engaged in or planning to engage in export activities should decide who will perform some important functions in this regard – the company’s employees or other contracted firms. We are talking about the following functions:

sales promotion, receiving orders, market research; credit research, making payments and collecting revenues; organization of cargo transportation abroad; support for the staff of the company engaged in sales, distribution and advertising.

Virtually any firm from time to time can obviously benefit from the use of the services of an intermediary organization that assumes all or some of these functions.

Various intermediaries can facilitate export activities. Some of them act as agents representing the interests of the exporter, others acquire ownership of the goods and sell them to other countries. There are also intermediaries dealing with highly specialized aspects of the export process, such as freight forwarding organizations, responsible for moving goods from domestic to foreign markets.

Fig. 1. Analysis of foreign markets.

Given the high cost of wages, such experts of the firm, as a rule, at the initial stage of export activities involve foreign specialists. Any company can later create the appropriate units, but initially third-party specialists are very useful for such functions as preparation of export documents, filling out customs documents in the importing country, identifying the best option for transporting export goods, etc.

When deciding what is better – to sell products yourself or to involve a third party, it is necessary to take into account the size of the exporting company, the nature of products, previous practice and export experience, business conditions in selected foreign markets.

Direct sale. The direct sales option is chosen by the exporter in order to establish tighter control over the marketing function and obtain higher profits. With this approach, the manufacturer usually sells its products directly in foreign markets. He may sell it to a representative of his sales firm or a sales agent working on a commission basis to a foreign wholesaler who obtains ownership of the products and makes a profit at the final stage of the whole process, ie by selling the goods to consumers …

Foreign retailers are primarily engaged in consumer goods; the company can send them catalogs, invite them to trade fairs or send their sales agents to them. The sale of goods manufactured in accordance with the application-specification is addressed directly to end consumers. This practice is more widely used in the marketing of industrial rather than consumer goods.

If a firm chooses a direct sale option rather than through an intermediary, it needs to set up a functioning export service. This can be done in several ways – from the creation of a special international department to the formation of independent international activities related to exports. Sales professionals in international markets tend to work independently of marketers in the domestic market.

Indirect sale. Indirect sales mean that the manufacturer acts through another firm in the home country, directing its products to the international market. The intermediary firm may act as a commission agent in relation to the manufacturer and not acquire ownership of the goods. The commission agent usually works on behalf of a foreign buyer and tries to find export products at the lowest prices. The commission agent receives commissions from a foreign purchasing agent. The exporter can also buy products from the manufacturer and sell the goods abroad. In this case, the exporter is usually an Export Management Company (EQS).

Although the CSUs initially worked for commissions and did not assume any risk, they now generally operate on a buy-sell basis and provide financing for consignments of goods shipped for export. The main function of KUED is to receive orders for their customers’ products through the selection of suitable markets, distribution channels and campaigns to promote goods in markets.

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