Nowadays, conducting business

overseas is electronically driven

Internet promotional tool,
procurement, digital trading (trade
transport network embracing the
logistics chain)
Scanning the web to obtain potential
overseas buyers, markets, and
companies (B2B, B2C contract)
 Exporter/importer must have hi-tech
computer resource & software (EDI)

Procurement suppliers buyers

relationship, need to understand buyers
needs & aspirations, harmonized their
strategies (develop synergy)
3.3 EXPORT ENTRY MODES
 Choice between using direct and indirect
exporting organizational forms involves:

1. cost of performing functions,

2. transaction costs of organizing activities or
contracting with others.

Figure 7.1 shows how a foreign manufacturer

may use both direct and indirect forms of export.
Figure 7.1 Indirect and direct export of consumer goods
Figure 7.2 Direct and indirect exporting
 3.3
EXPORT ENTRY MODES

3.3.1 3.3.2
INDIRECT EXPORT DIRECT EXPORT
 Exporter/manufacturer uses independent
organization (IO) located in the
manufacturers country.
Process of selling goods overseas through a
third party, thereby relinquishing control of
the selling process of the goods.
In some cases, exporters may works together
with IO & coordinates the export activities.
 In other words, exporter uses middleman or
third party in their home-country.
They do not export on their own but instead
relies on the middleman/IO.
Example: Local buying office (525), piggyback
operations (496-497), an export house (484)
& trading house (498)
Advantages: not necessary of internationally-
focused organization because no contact is
made
 Two (2) alternatives:

3.3.1.1 International Marketing Organizations

a. Merchants
b. Agents

3.3.1.2. Cooperative Organization

a. Piggyback Marketing
b. Export Combinations.
 3.3.1
INDIRECT EXPORT

3.3.1.1
3.3.1.2
INTERNATIONAL
COOPERATIVE
MARKETING
ORGANIZATION
ORGANIZATIONS

3.3.1.1.1 3.3.1.1.2
HOME-COUNTRY BASED HOME-COUNTRY BASED
MERCHANTS AGENTS
 a. Merchant
Take ownership

b. Agent
Doesnt take title.
 HOME-COUNTRY
BASED MERCHANTS

(iii)
(i) (ii)
EXPORT DESK
EXPORT MERCHANT TRADING COMPANY
JOBBER
(i) Export Merchants (EM)

Domestic-based (home-country).
Buys and sells on its own account.
Operates similar to a regular domestic
wholesaler (export-import).
Handled international marketing task (except:
modification of products, packaging, etc.).
Well known of certain localities or even nations.
Thus, not available in all markets.
(ii) Trading Companies (TC)

Usually large and do more functions.

Few types of TC (refer Table 7.1)
Large TC = heavily involved in domestic
distribution.
Small TC = limited foreign trade activities.
Play central role in diverse areas as shipping,
warehousing, finance, technology transfer, etc.
Things that differentiate GTC with others TC is
GTC offers financial services.
(iii) Export Desk Jobber (EDJ)

Also known as export drop shipper/cable

merchant.
Usually involved in international sales of raw
materials.
EDJ never see/physically acquire the goods they
sell & buy.
Goods are typically owned in very short time.
Exporter handle the physical movement of the
goods to the EDJ customer.
Responsibility: negotiation of sales.
 5
HOME-COUNTRY BASED
AGENTS

(i) (ii)
(iii) (vi)
EXPORT CONFIRMING (iv)
COMMISSION HOUSE RESIDENT (v) MANUFACTURER
HOUSE BUYER EXPORT EXPORT AGENT
MANAGEMENT BROKER
COMPANIES
(EMC)
(i) Export Commission House (ECH)

A representative of foreign buyers who resides in

the exporters home country.
In other words, ECH is an overseas customers
hired purchase agents.
Responsible on order made by importer &
indents (purchase offer including price to be
paid).
Received commissions from buyer (importer).
Scans the market for the merchandise that it has
been requested to buy.
Sends out specifications to manufacturers.
(ii) Confirming House (CH)

Assists overseas buyers by confirming, as a

principle.
Exporter will get payment from CH once good are
shipped.
Alike commission house because performing some
of the ECH functions.

Responsibility:
- making arrangements for the shipper
- all contract between buyer & exporter would go
under CH.
(iii) Resident Buyer (RB)

Operation same like ECH.

Represent all types of foreign buyers and are
domiciled in the exporters home market.
Represent foreign concerns that want to have close
and continues contact with their overseas sources
of supply.
Can be expatriate or local people.
E. g.: usually used by large retailers.
Foreign buyer responsible for the rest exporting
process.
Advantages: Reduce language barriers, cultural &
business customs.
(iv) Broker

Primarily finds buyers for sellers and vice versa.

Function: to bring buyer & seller together
(contract/agreement).
Specialist in performing the contractual function.
Does not involve/handle the products sold/bought.
Received commission from principal.
Usually specializes in particular products.
Responsibility:
- act as an agent for either exporter/ buyer.
- negotiate price and handle quotation.
(v) Export Management Company (EMC)

Defined as international sales specialist who acts as

exclusive export department for several allied but
not competing exporters.
Act as domestic export sales agent for exporter.
EMC conduct business in the name of each
exporter that it represents.
Business negotiated under exporters name and all
quotation and order are subject to confirmation by
the exporter.
EMC takes all risks and problems of export while
the manufacturer/exporter only filling the orders.
(vi) Manufacturer's Export Agent (MEA)
o In contrast with EMC.
o MEA Operates in own name; doesn't provide
many services (no advertising and financing
assistance).
o Paid straight commission.
o Does not involved in buy-and-sell
arrangements with the manufacturers represents.
o Conditions required the use of MEA:
- Small order from foreign buyer.
- Wants to enter new market.
- Sell product that relatively new to foreign
costumer.
 3.3.1.2
COOPERATIVE ORGANIZATION

i ii
PIGGYBACK MARKETING EXPORT COMBINATION
(i) Piggyback Marketing

Occurs when one manufacturer (called carrier)

uses its foreign distribution facilities to sell another
companys (called supplier) products alongside its
own.
Used for products from different companies, that
are noncompetitive (but related), complementarily
(allied) or unrelated.
Products use private labels never their own.
Used by manufacturers to broadening the product
lines that can offer to foreign market.
Also to bolster the decreasing export sales.
Government encouragement.
 Advantages:

Easy, low-risks for beginner.

Well suited to small manufacturers which do not
want to invest heavily in foreign market.
Transaction are domestic in nature.
For larger firm, they can provide export
department to smaller firm.
But for smaller firm, piggybacking means that
control over the marketing products is passed to
the carrier.
(ii) Exporting Combinations

Associations to promote exports of member's

products or to serve as export cartels.

Export cartels: A combination of independent

business organizations formed to regulate
production, pricing, and marketing of goods by
the members.

Cartels may be for market domination,

international commodity agreements to stabilize
prices, or to promote exports (sometimes under
special laws allowing cooperation).