Export Guide

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CHAPTER 7
7.1 When exporting indirectly, is it better to use a merchant or an agent in the export marketing channel? Explain. When exporting indirectly, whether it is better to use a merchant or an agent when exporting depends on the objectives and needs of the exporter. A merchant takes title to the goods and assumes most of the risk. In return for this, the merchant consumes a greater share of the return, receiving a greater share of the producer’s profit margin. This can be justified for a producer who has little foreign market and export knowledge or is very risk adverse. An agent does not take title to the goods and so most of the risk remains with the producer. Agents act by bringing buyers and sellers together without assuming the role of either. For this they generally consume a smaller portion of the profit margin. A producer who is willing to assume more financial risk may prefer this type of channel. 7.2 Under what conditions is it best that an exporter use an export management company and when is the manufacturer’s export agent a better choice? An export management company (EMC) is most commonly used in situations where the manufacturer either cannot afford or does not desire to get involved with export marketing. EMCs are experts at this and handle several related, but noncompeting products. This serves to share the expenses of export promotion between several producers. They often assist clients in setting up their own export department or begin direct exporting once established. The manufacturer’s export agent functions much in line with an EMC, but does not provide advertising and financial assistance. They are used most effectively when a firm wants to sell small orders to overseas buyers, enter a new overseas market, or sell a product which is new to consumers in overseas markets. These agents prefer to retain more of their own identity and remain as the foreign sales representative on a permanent basis. In general, a major difference between the EMC and the manufacturer’s export agent is that the EMC serves as the export department for a manufacturer while the export agent serves as a salesperson. 7.3 For a small manufacturer, is it better to engage in piggyback marketing or join an exporting combination? Why is this so? For a small manufacturer, piggybacking can offer the advantage of relying on the already established export capabilities of a larger company. It is a low risk way to begin export marketing for companies too small or unwilling to invest in it themselves. The drawback is a loss of control over marketing activities.Export combinations work well in situations involving undifferentiated goods produced by more than one firm. Under this type of arrangement, the producers work together in export activities and can control a market through price-fixing, restriction of supply, division of marketing territory, centralization of sales, or pooling of profits. 7.4 Cooperative exporting organizations are most suited for small- and medium-sized organizations Discuss Cooperative organizations are currently used by large organizations to form export cartels, often with special legal status. Small- and medium-sized producers of similar, undifferentiated products may form a cooperative exporting organization. Problems are most likely when differentiated products are being handled through the cooperative organization. The dangers of entering any type of cooperative exporting organization include lack of agreement between members on key issues, loss of corporate and brand identity, and lack of representation of individual interests. 7.5 What types of channel conflict may arise in indirect exporting? Because of such conflict is it not better for the exporter to do it directly? The types of channel conflicts which might arise in indirect exporting include transfer pricing and decisions on marketing activities. In transfer pricing all parties want to obtain the highest level of profit margin they can. Marketing...
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