Selection of Products &

Markets for Exports

3.1Introduction.

3.2 Selection of Export Products.

3.3 Focus Product Scheme (FPS).

3.4 Selection of Export Markets.

3.5 International Market Selection Process.

3.6 Focus Market Scheme (FMS).

3.7 Selection of Overseas Buyers.

3.8 Questions Bank.

Selection of Products and Markets. 45.

3.1 Introduction:
Selectivity is the key to success in all spheres of life including export market. An
exporter may wish to deal in all kind of products and to sell them everywhere in
the world. However, it is not possible for him to do so due to the wide expanse
and demand variations in different markets of the world. Therefore, an exporter
has to select proper product(s) and proper market(s) in order to operate at the
international level.

3.2 Selection of Export Products:

An exporter has to consider the following factors while selecting product(s) for the
export market: ,
(a) Export Trends: An exporter should analyse trends in export of different
items to the overseas market(s) for proper selection of the product. Such
information can be gathered from the following sources:
Monthly statistics of foreign trade of India.
Export Promotion Council (EPC) Bulletins.
Export Import Times.
The final selection of the product, however, depends upon one's own ability
and experience relating to the product.

(b) Supply Base: Along with demand of product in the international market, it is
also necessary to analyse its supply base in the domestic market. Most of the
agricultural products defy this criterion as their supply depends upon a number
of factors, which are based on nature. Seasonal commodities like onions, fruits
or even sugar, wheat or rice have not proved to be good items for sustained
export business. Even manufactured products may not have a good supply base
due to factors like strike, power shortage, lockouts, transport problems, etc.

(c) Production Capacity and Product Availability: Sky is the limit for selling a
product in international markets. Hence, a manufacturer exporter must
consider his production capacity and a merchant exporter must take into
consideration the availability of the product selected for export before
entering into an export contract. If the production capacity or availability is
limited, then the exporter should focus on smaller markets. However, if the
product can be made availably easily, a sustained export drive is worthwhile.

(d) Product Adaptability: Associated with the production capacity and

availability is the possibility of adapting the product as per the requirements
46. ------------------------------------------ Export Import Procedures & Documentation-

of the foreign markets. The needs and requirements of buyers differ from
market to market and country to country. What sells well in one market may
not sell at all in other markets. This calls for product adaptability. Product
adaptability is not an easy task, as it requires large amount of investment in
adjusting production process as per the needs of the different markets.

(e) Servicing Facilities: If the product selected for export is such that it requires
servicing after sales, then the exporter should see to it that he can avail such
facilities to the overseas buyers. It is not always easy and within one's means
to open servicing centres abroad. At the same time, it is difficult to find a
distributor or agent having servicing facilities. If it is not possible for the
exporters to provide such servicing facilities then the exporter should not
venture to export such products.

(f) Target Markets: Selection of a product also depends upon the markets
which have been identified for sales abroad. All products may not have
equally good markets everywhere. Therefore, selection of the product
depends upon the market requirements. It is always better to concentrate on
one or two markets at least to start with. One should study the target markets
closely, with regard to market requirements in terms of product specification,
continuity of demand, change in fashion, credit requirement, if any, etc.

(g) Demand Stability: Product(s) selected for selling whether overseas or in the
domestic market should not only have stable but a rising demand. Seasonal
products should be avoided unless the exporter has necessary infrastructure
for selling them. Products depending upon fashion trends, though comparatively
more profitable, may not always prove to be good for those exporters who
cannot cope with such trends. Therefore, the exporter should select such
products, which provide a large and stable market.

(h) Trade Restrictions: While selecting product(s) for exports, it must be

ensured that such product(s) should not be subject to the country's export
control regulations or import control regulations of the concerned target
markets. Although, export restrictions in all the countries are minimum as
there is a tendency to promote exports of all products, still there are a
number of items where controls do exist. Therefore, the exporter should try to
avoid export of such product(s).

(i) Profitability: Last but not the least; profitability is the prime objective of all
marketing activities. The product selected for exports must fetch a fair profit
to the exporter. Moreover, profitability should as far as possible be direct, i.e.,
arising from the sale price itself. Though export benefits like duty drawback,
Selection of Products and Markets- 47.

excise refund, etc., are necessarily to be taken into consideration while

calculating the export price, it is always better if the product sells in
the overseas markets even if such assistance is not available.

3.3 Focus Product Scheme (FPS):

The Government of India has launched a special scheme called "Focus
Product Scheme (FPS)" with an objective to incentivise export of such
 products which have high export intensity and employment potential, so as
to offset infrastructure inefficiencies and other associated costs involved in
marketing of these products.

Eligibility for Scheme:

Exports of notified products as specified in the Appendix 37D of Hand Book
of Procedures Volume - I to all countries (including SEZ units) shall be
entitled for Duty Credit scrip equivalent to 2% of FOB value of exports (in
free foreign exchange) for exports made from 27.8.2009 onwards. Some of
these products belong to the following categories of ITC (HS) Classification:
(a) Value added leather products and leather footware.
(b) Fire works and stationary items.
(c) Handloom products.
(d) Value added coir products.
(e) Silk.
(f) Other products.

However, Special Focus Product(s)/sector(s) which have been covered

under Table 2 and Table 5 of Appendix 37D, shall be granted Duty Credit
Scrip equivalent to 5 % of FOB value of exports (in free foreign exchange)
for exports made from 27.8.2009 onwards. Some of these products belong
to the following categories of ITC (HS) Classification:
(a) Toys and sports goods.
(b) Handmade carpets.
(c) Handicraft products.
(d) New handicraft products.

Market Linked Focus Products Scrip (MLFPS):

Export of Products/Sectors of high export intensity or employment
potential (which are not covered under present FPS List) would be
incentivized at 2% of FOB value of exports (in free foreign exchange) under
Focus Product Scheme (FPS) when exported to the Linked Markets
(countries), which are not covered in the present Focus Market Scheme
(FMS) list, as notified in Appendix 37D of
 48. ------------------------------------------ Export Import Procedures & Documentation-

hand book of Procedures volume - I, for exports made from 27.8.2009 onwards.
Some of the products covered under MLFPS belong to the following categories of
ITC (HS) Classification:
(a) Bicycle and bicycle parts.
(b) Auto components.
(c) Motorcars.
(d) Chassis for motor vehicles.
(e) Motorcycles.
(f) Apparel and clothing accessories.

Status Holders Incentive Scrip:

With an objective to promote investment in upgradation of technology of some
specified sectors as listed below, Status Holders shall be entitled to incentive
scrip @1% of FOB value of exports made during 2009-10 and during 2010-11, of
these specified sectors, in the form of duty credit. This shall be over and above
any duty credit scrip claimed/availed under this chapter.
(a) Leather Sector (excluding finished leather);
(b) Textiles and Jute Sector;
(c) Handicrafts;
(d) Engineering Sector (excluding iron & steel, nonferrous metals in primary or
intermediate forms, automobiles and two wheelers, nuclear reactors and
parts and ships, boats and floating structures);
(e) Plastics; and
(f) Basic Chemicals (excluding pharma products).
Status Holders availing Technology Upgradation Fund Scheme (TUFS) benefits
(under Ministry of Textiles) during a particular year shall not be eligible for Status
Holders Incentive Scrip for exports of that year.
The Status Holders Incentive Scrip shall be with Actual User Condition and shall
be used for imports of capital goods (as defined in FTP) relating to the sectors
specified in Para 3.16.4 below.

Common Provisions of Duty Credit Scrips:

(a) Government reserves the right in public interest, to specify export products or
services or exports to such countries, which shall not be eligible for
computation of entitlement.
(b) Further Government reserves the right to impose/change the rate/ceiling on
Duty Credit Scrip under this chapter.
(c) Similarly, Government may also notify goods which shall not be allowed for
import under Duty Credit Scrips.
 Selection of Products and Markets------------------------------------------------------------ 49.

Ineligible Exports Categories/Sectors:

For Vishesh Krishi and Gramin Udyog (VKGUY), Focus market Scheme (FMS),
Focus Product Scheme (FPS) including Market Linked Focus Product Scrip
(MLFPS) and Status Holders Incentive Scrip, the following exports
categories/sectors shall be ineligible for Duty Credit Scrip entitlement:
(a) Export Oriented Units (EOUs)/Electronic hardware Technology Parks (EHTPs)/
Bio-technology Parks (BTPs) who are availing direct tax benefits/exemption;
(b) Export of imported goods covered under Para 2.35 of Foreign Trade Policy;
(c) Exports through trans-shipment, meaning- thereby that exports originating in
third country but transshipped through India;
(d) Deemed Exports;
(e) Exports made by SEZ units or SEZ products exported through DTA units; and
(f) Items, which are restricted or prohibited for export under Schedule - 2 of
Export Policy in ITC (HS).

Duty Credit Scrip may be used for import of inputs or goods including capital
goods provided the same is freely importable and/or restricted under ITC (HS).
However, import of items listed in Appendix 37B of HBPvi shall not be permitted
to be debited.
(a) Garlic, Peas and all other Vegetables with a Duty of more than 30% under
Chapter 7 of ITC (HS) Classification of Export and Import items.
(b) Coconut, Areca Nut, Oranges, Lemon, Fresh Grapes, Apple and Pears and
all other fruits with a Duty of more than 30% under Chapter 8 of ITC (HS)
Classification of Export and Import items.
(c) All Spices with a Duty of more than 30% under Chapter 9 of ITC (HS)
Classification of Export and Import items (except Cloves).
(d) Tea, Coffee and Pepper as per Chapter 9 of ITC (HS) Classification of Export
and Import items.
(e) All Oil Seeds under Chapter 12 of ITC (HS) Classification of Export and
Import items.
(f) Natural Rubber as per Chapter 40 of ITC (HS) Classification of Export and
Import items.
(g) Capital Goods:
General-purpose agricultural tractors above 25 HP and upto 75 HP.
Stationary Diesel Engines.
Irrigation pumps.
Threshers for cereals.
Combine harvesters suitable only for wheat and paddy crops.
Animal driven implements.
50. Export Import Procedures & Documentation-

Duty Credit Scrips under Chapter 3 of FTP can also be utilized for payment of
duty against imports under EPCG scheme provided the item is importable against
the scrip.

3.4 Selection of Export Markets:

One of the most important decisions in international marketing is market selection.

The global market, made up of well over 200 independent nations with their own
distinctive characteristics, is very vast. It would be very difficult for a company to
operate in all these markets. There are barriers, which make entry to a number of
markets impossible or very difficult. There may be markets, which are not profitable
or may be very risky due to political or other reasons. Moreover, the company
resources may not permit the operation in a large number of countries.

The factors to be taken into account in export market selection process are:
(a) Political Embargo: The countries to which there is a political embargo on
exports should be straight away excluded from the list of potential markets.
For example, there are restrictions on export of certain items from India to
certain countries. Similarly, there are countries, which do not allow import of
certain items from certain countries of the world.
(b) Special Requirements: Every market has a special requirement in terms of
product specifications, quality and a different price edge. The very fact that a
product has found a niche in some market does not necessarily mean that
the same niche exists in the other market of the world or that the attitudes
affecting buying decisions are similar all over the world.

(c) Product Specification: Product specifications differ from market to market.

For example, many countries require electrical goods with 110 voltage
current as against 220 voltage in India. An exporter should avoid exporting to
such market, where product specification is different from the national ones.
This is because the cost of product adaptation may be very high.
(d) Distant Location: Markets which are comparatively at a longer distance and
for which regular shipping services are mot available, not only make
adherence to delivery schedules more difficult, but also render the goods
uncompetitive on account of higher incidence of freight. Hence, while
selecting markets, long distance markets should be avoided.
(e) Market Accessibility: Certain markets are comparatively less accessible due
to import regulations and quota restrictions. Similarly, Indian products may not
receive preferential treatment under the MFN clause or there may be

82-O-O,
Selection of Products and Markets-

restrictions on remittances and convertibility of currency in some countries.All

such markets should be avoided as they render marketing uncompetitive.
(f) Business Community: In several countries, the business community mainly
comprises of Indians, Pakistanis, Sri Lankans, Bangla Deshis, etc. Such
people are more familiar with the trade practices in India and thereby more
receptive to our goods. It also helps in breaking the communication barriers.
Hence, it is better to exploit such markets for initial exploration.
(g) Preferential Treatment: While accessibility to certain markets is difficult,
there are a few countries which accord preferential treatment to the products
from developing countries. For example, EU, Australia, USA, etc., have
instituted the scheme of Generalised System of Preferences (GSP) for
imports from developing countries. Such markets may be selected for
immediate exploitation for export.

3.5 international Market Selection Process:

Market selection plays a crucial role at the international level. Market selection is
based on a thorough evaluation of the different markets with reference to certain
well-defined criteria, given the company resources and objectives.

The following are the steps involved in the market selection process:
(a) International Marketing Objectives: The first step in market selection
process is to determine or ascertain the export marketing objectives of the
organisation. The market selected to serve a particular international
marketing objective need not necessarily be the best suited to achieve some
other international marketing objective. '
(b) Parameters for Selection: For proper evaluation and selection of the
markets, it is essential to clearly lay down the parameters and criteria for
evaluation. The different parameters for the selection of a market are firm's
resources, international environment, market situation, nature of competition,
government policy, etc.
(c) Preliminary Screening: The objective of the preliminary screening is to
eliminate the markets which are not potential. The parameters used for the
preliminary screening may vary from product to product. However,
parameters like the size of population, per capita income, structure of the
economy, infrastructural factors and political conditions are commonly used.
(d) Short Listing of Markets: Preliminary screening enables to eliminate
markets which obviously do not meet consideration at the very outset. There
52. Export Import Procedures & Documentation.

would be a large number of markets left even after the preliminary screening.
They are further screened with the help of more information than was used at
the preliminary screening stage.
(e) Evaluation and Selection: The short listed markets are further evaluated
with reference to the cost-benefit analysis and feasibility study. They are,
then, ranked on the basis of their overall attractiveness. Of the markets, the
best one is chosen for the launching of product considering the company's
resources and external environment.
(f) Test Marketing: Initially, the market is tested on a smaller scale by
launching the product in a part of the market. This provides a feedback to the
producer about the market. At the same time, it helps the producer in
assessing overall response of the consumers from a specific market. After
tested success, the production can be undertaken on a mass scale.
(g) Commercial Production: Once the product is tested in the selected
markets, the company goes ahead with mass production. Minor
modifications, if any, are introduced in the product mix during this stage.

3.6 Focus Market Scheme (FMS):

The main objective of Focus Market Scheme (FMS) is to offset high freight cost
and other externalities to select international markets with a view to enhance
India's export competitiveness in these countries.
Exporters of all products to notified countries (as in Appendix 37C of Handbook of
Procedures Volume - I) shall be entitled for Duty Credit Scrip equivalent to 3% of
FOB value of exports (in free foreign exchange) for exports made from 27.8.2009
onwards. The countries listed in Appendix 37C of Handbook of Procedures
Volume -1 are:

Table 1 Focus Markets:

Sr. No. Focus Market Code Country Code Country
Countries in Latin American Block
1. L01 AR Argentina
2. L02 BO Bolivia
3. L03 CL Chile
4. L04 EC Ecuador
5. L05 PY Paraguay
6. L06 PE Peru
 Gniprfinn of Products and Markpts

7. L07 UY Uruguay
8. L08 VE Venezuela
9. L09 DO Dominican Republic
10. L10 SV El Salvador
11. L11 GT Guatemala
^ 12. L12 JM Jamaica
~~ 13. L13 TT Trinidad and Tobago
14. L14 CO Columbia
15. L15 HN Honduras

| Countries in African Block

16. A01 AO Angola
17. A02 BJ Benin
18. A03 BW Botswana
19. A04 BF Burkina Faso
20. A05 Bl Burundi
21. A06 CM Cameroon
22. A07 Canary Is
23. A08 CV Cape Verde Is
24. A09 CF Central African Rep
25. A10 TD Chad
26. A11 KM Comoros
27. A12 Congo P Rrep
28. A13 ET Ethiopia
A14 ER Eritrea
A15 GQ Equatorial Guinea
L~30~ A16 TF French South & Antartic Terr
A17 GA Gabon
A18 GM Gambia
^33~

bi
A19 GN Guinea
A20 GW Guinea Bissau

d
A21 Cl Cote d' Ivoire
A22 LS Lesotho

1
A23 LR Liberia

hi- A25
. .
A24

A26
LY
MG
MW
Libya
Madagascar
Malawi
A27 ML Mali-
A28 MR Mauritania
A29 MU Mauritius

56. Export Import Procedures & Documentation.

(a) Supplies made to SEZ units;

(b) Service Exports;
(c) Diamonds and other precious, semi precious stones;
(a) Gold, silver, platinum and other precious metals in any form, including plaii
 and studded Jewellery;
(d) Ores and Concentrates, of all types and in all forms;
(e) Cereals, of all types;
(f) Sugar, of all types and in all forms;
(h) Crude/Petroleum Oil & Crude/Petroleum based Products of all types and in
forms as specified; and (i) Export of Milk and
Milk Products as specified.

3.7 Selection of Overseas Buyers:

The location of prospective customers or importers is the next important task after
the identification and selection of markets. It usually takes a long time in finding M
right customer who is interested in exporter's product(s). There are a number of
published sources of information and organisations and institutions, which
provide information on prospective customers in the overseas countries. It just
requires a little exercise and contact with different agencies and follow-up action
on the information provided by them.

Sources of Locating Overseas Buyers:

(a) Market Surveys and Delegations Reports: The best source of locating the
importers of various products in different countries is the reports of market
surveys and studies conducted by the trade delegations or study-cum-sales
teams. Almost all the reports contain names and addresses of the importers
of product relating thereto. Some reports even contain buyers1 profiles.

(b) Trade Directories: The second best source of locating the overseas!
importers is the trade directories published in India and abroad. However, the
main limitation of most of the trade directories is that the various items are
grouped under broad heads whereby one is not able to locate the importer of
product of one's direct interest. The following are some of the important |
international trade directories:
International Business Directory (IBD) 2002.
World Importers Directory.
Directory of International Importers and Exporters.
World Directory of Agents and Distributors.
 Selection of Products and Markets-------------------------------------------------------
57.

(c) Telephone Directories: Yellow Pages in telephone directories of various

countries contain classified list of prominent trading houses and importers of
several important products imported into the country concerned. Since the
telephone books are, by and large, issued every year, the information on
names and addresses is almost up-to-date and accurate.

(d) Journals and Periodicals: Journals and periodicals have an added

advantage over trade directories as they are published at a regular interval,
weekly, fortnightly or monthly. International journals can be obtained from the
Directorate General of Commercial Intelligence & Statistics (DGCI&S), Indian
Institute of Foreign Trade (11 FT) and Indian Trade Promotion Organisation
(ITPO). The following are some of the important journals :-
Export Import Enquiries and Marketing.
Export Import Times (fortnightly).
Indian Export Bulletin (weekly) published by ITPO.
o Pragati India (bi-monthly) published by ITPO.
Indian Trade Journal (weekly) published by DGCI&S, Kolkata.
Trade Point India (weekly) published by the National Centre for Trade
Information (NCTI).

(e) Export Promotion Organisations: Export Promotion Councils (EPCs) and

Commodity Boards (CBs) are the most important sources for locating foreign
importers. Both these organisations publish their bulletins in which necessary
information about foreign markets and buyers is published for the benefit of
Indian exporters.

(f) Trade Point and National Centre for Trade Information (NCTI): Indian
Trade Promotion Organisation (ITPO) premises in New Delhi houses the
, Trade Point and the National Centre for Trade Information (NCTI). Both
these organisations collect and disseminate information about foreign buyers
to Indian exporters.
(9) Trade Portal and Business Information Centre (BIC): India's first Trade
Portal and the Business Information Centre (BIC) has been set up in Indian
Trade Promotion Organisation's (ITPO's) premises as a part of the country's
tr
ade promotion efforts. The Portal and BIC provide a comprehensive data
bank on foreign markets and buyers.
(h) Directorate General of Commercial Intelligence & Statistics (DGCI&S):
The DGCI&S, Kolkata collects information relating to the overseas importers
'rom Indian embassies and high commissions abroad and also from a
number of foreign directories for the benefit of the Indian exporters.