There are several ways your business can benefit from exporting goods and services to foreign countries. When you first enter into a foreign market, special efforts are required. In the early stages, export activity may seem difficult, but once you get accustomed to the procedures, you will find that it can be much the same as selling your products at home!
First you will have to study the needs of buyers and consumers and then learn everything about the distribution systems of your target market. Adjustments to the basic differences between doing business at home and doing business in a foreign country will have to be made. Pertinent business customs, tax systems, laws and regulations, settlement procedures, and transportation networks must also be understood.
Letters of Credit (L/Cs), are extensively used to settle foreign trade transitions, have almost the same value as cash. Although the contents of a letter of credit, of course, will vary according to the type of transaction, generally the negotiating bank will pay in cash to the exporter when the documentary bills including the shipping documents are submitted after the cargo is loaded for shipment. In many cases, therefore, cash payments can be received for the products or services sold to foreign countries faster than for products and services sold domestically.
What is Gained buy Exporting to Foreign Countries?
• Expansion of Sales
• Balancing out seasonal sales trends
• Covering drops in domestic sales due to business cycles
• Learning about different technologies used in foreign countries
• Gain of Knowledge needed to compete internationally
• Possible licensed procedure in foreign countries
What Processes are involved in Exporting to Foreign Countries?
There are various types of export transactions therefore, there is no single set of export processes or procedures. However, generally export transactions go through the processes outlined below:
Research Stage:
Preliminary surveys and gathering information – Exporters must conduct research on the marketability of their products, sales channels and whether or not any regulations would apply to the sale of their products in target foreign country.
Sales Activity Stage:
Tools such as catalogs and price lists will have to be created along with a list of contacts.
Initial Sales Activities: When approaching foreign companies, in most cases it is absolutely necessary to ask for a meeting with top management when proposing business discussions.
Transaction Stage:
The following are the most general procedures followed for C&F or CIF transactions where a Letter of Credit is used for the settlement:
Estimates, Offers and/or Pro-Forma Invoices are sent in response to inquiries. Credit Information is gathered to verify that the other party has good credit standing. Terms and Conditions are negotiated.
A Sales Agreement is signed – Business conducted between two parties of same country is often based on verbal agreements, and no detailed contract is drawn up. However, companies do enter into detailed contracts for international transactions. The Seller sends a Contract of Sales Agreement to the purchaser who countersigns and returns a copy of it to the seller. (This is just one example from the many possible methods of confirming orders).
In most cases the purchaser is asked to open L/C. The seller receives that L/C through mediating bank. The contents of the L/C are checked to ensure that there are no discrepancies with the terms of the contract. If discrepancies are found, a request for an amendment is sent to the purchaser.
The products are made or procured. An application for cargo space is made by the seller directly or through a freight forwarder.
Trade Terms:
There are terms agreed to by the two parties in which the exporter and importer (seller and buyer) set up how the costs and risks involved in the shipment of the goods are to be borne – at what point they will be transferred from exporter to importer – in the course of the delivery. The most common types of term is C&F port of destination.
Payments:
The most common method of settlement used for foreign trade is L/C. The L/C is a document by which the bank guarantees a fixed payment within a set period of time at the request of an importer.
Shipping Documents:
This term indicates a set of documents including the B/L, invoice, packing list, and other related documents. Some transactions may include trade terms calling for the inclusion of other documents such as certificates of necessary inspections or of weights or measurements. If these documents are not prepared and delivered as specified in the L/C, the negotiating bank will not purchase the documentary bill.
What is the Key to Success in Exporting to Foreign Countries?
The exporter must research and systematically cultivate the target market. Let us briefly explain some of the areas about which an exporter must become knowledgeable in order to plan entry into the foreign market:
Find a Good Partner:
Business is the highest evolution of consciousness, responsibility and morality. No other animal is even remotely able to function on a business level. The essences of business are honestly, responsibility, integration, abstraction, objectivity, long-range planning, effort, discipline, thought control. Business creates essentially every major human value, ranging from the development of language, mathematics, the arts upto the electronic revolution, etc.
But unfortunately, business circles also consist of too many destructive, malevolent and dishonest people who circulate a system of ideas which is based on cheatings! They provide such philosophical ammunition which diminish happiness, drain prosperity and cheat productive people on a grand scale.
Business is the profitable development, production and marketing and values that benefit others. Every aspect of business succeeds to the extent that effort, thinking, planning and action are free of cheating or fails to extent that cheating is injected into any decision. Business ultimately flourishes in the absence of cheating. Business is “Solving of Problems” where they exist; Cheating is the “Creating of Problems” where none exist. Business represents life; cheating represents death. Business is non-cheating and cheating is non-business.
Business people create values through highly intellectual effort involving the widest range integration of facts and knowledge. The cheaters are attacking producers which forces, coercion, fraud, bribe, blackmailing, false guilt in order to usurp values from them. The master cheaters gain power by constant, negative attacks on values rather than by productions of values. They rise in power not by the long, hard, positive efforts that build values but by the quick, glib, negative ploys that undermine the producers and their values. The fact becomes obvious on comparing the words of honest business people to cheating media people.
Cheaters are guilty losers who harm everyone. But business people are innocent winners who benefit everyone. Honest business people are cheerfully focused on reality – on benefiting others by creating and trading values. The cheaters detach themselves from reality, remain ignorant of reality and what is actually occurring; survive by usurping values from others. Such cheaters stage furious but meaningless or destructive activities in their need to appear busy and important to themselves and other.
Any conscious individual, however, can choose at any time to reject cheating and exchange the unhappy world of cheaters for the happy world of producers.
Your partner in foreign country must be very reliable and enthusiastic about handling the products or services your company wants to sell. In the beginning, observe carefully how your partner reacts to your proposals to judge whether a cooperative relationship can be built!
One way of entering the foreign market is to establish your own importing office as base but this can be risky in the beginning. There are shortcuts to exporting industrial goods to processors and consumer goods to major retailers, but there may be difficulties in handling deliveries, after-sales service, claims, and communications. If you work through a reliable agent you can be much more efficient in entering the foreign market. Without the help of a reliable local agent or representative it is very difficult, for a foreign company, to establish independent and more direct links with the foreign buyers.
The liaison representative or a sales agent plays a crucial role in foreign market’s distribution system. The main function of an agent or liaison is to establish personal relationships between the producer/exporter and wholesalers/end-users.
With consumer products, the duties of the manufacturer’s representative transcend those of an ordinary salesperson. The chief activities of manufacturer’s representative in this field are collecting information, assuring retailers and wholesalers of continued interest on the part of the producer and providing support services including assistance in merchandising, sales promotional activities, advertising and publicity, etc. to smaller wholesalers and retailers.
Another principal duty of a manufacturer’s representative is to ascertain for the producer the precise volume of sales at the consumer level. The manufacturer’s representative also solicits the opinions of wholesalers and retailers regarding the product and then determines exactly how well the product is selling.
The scope of activities of an agent also encompasses helping the wholesalers, traders, distributors, brokers and retailers in merchandising. A prime example being offering the distributor and retailer advice on optimal store layout. When a new product is to be launched using a special display case, the agent will often see to it that the distributor, broker and retailer has presented the product in the most advantageous way. As an added incentive to using the showcase to maximum advantage, the agent can arrange a special payment for distributors, retailers and brokers.
Types of Sales Promotion Activities:
It may not be easy to sell those products for which the market has already reached a high degree of saturation and even over-supply. Entering the foreign market in such areas of high competition will require considerable efforts on the part of exporter.
Regardless of the broad range of sales promotion techniques used in the world-over, close contacts with wholesalers and users is necessary to ensure the maximum effectiveness of the promotion. Concern for the interests of customers can be demonstrated by various types of incentives provided by manufacturers.
Besides advertising and publicity, popular sales techniques used to motivate customers including gifts, give away products, invitations to resort areas, etc. A number of other options are available for products promotions, including participation in trade fairs, exhibitions and sales contests.
Decisions regarding initial contacts depend to a large extent on the method selected for entering a foreign market. The selection of the method of entry is a long-term decision that cannot be easily reversed. And for this reason great care should be exercised in selecting from among the various alternatives available. Determining the appropriate method depends primarily on defining the level of involvement required to establish a desired market position. Generally a higher level of investment provides a greater degree of responsiveness to changing market requirements.
When writing to a sales agent or a trading company as a first approach, be sue t describe your business in a lively way in order to arouse the company’s interest. When you write, be sure to include an outline of your company and catalog of your products.
Choosing The Right Partner:
It is best to start out by using the services of a honest and reliable newcomer or a smaller agent or trading company rather than an old established big company. The following questions pertain to choosing a partner to work with:
- Is the company headed by the person who:
- concentrate on realities rather than potentials
- can face all problems with great courage
- are not afraid to take risks of a reasonable nature
- keeps promises and commitments
- don’t think of themselves negatively
- are good natured and neighborly
- have mind of calm and supportive nature
- are capable of maximizing sales of your products
- Does the company have access to the specialized knowledge, human resources, etc. required to handle your products?
- Does the company have the credit position, market position and reputation, management team, personal contacts, business affiliations, and potential for growth that you are seeking?
Take On The Challenge Of Entering The Market With A Long-Term View:
Majority of business transactions are normally based on long-term relationships and trust rather than short-term interests. Therefore, in the case of foreign exporters, great importance is placed on their being firmly established and stable suppliers. It is essential to attach more importance to reaping the benefits of a long-term relationship than to realizing quick profits.
Despite the abundant opportunities, many companies may still be inclined to adopt a short-term outlook and seek only to capitalize on the current economic opportunities. While there is nothing to prevent exporting companies from taking a short-term outlook, exporters eyeing their target market must keep in mind that their foreign business partner will spend tremendous amount of time and efforts in developing and maintaining long-terms business relationships.
Take into Account the Expectations and Opinions of Importing Companies:
In order to sell in a foreign market it is essential to be familiar with the local ways of conducting business transactions and to adapt to these practices as much as possible. Some good products have failed in foreign market because exporters failed to pay sufficient attention to the following points:
- Look all aspects of buying behavior
- Select a very reliable business partner
- At first, respond to even small orders
- Great importance is attached to packaging; listen to and try to meet the requests of importers
- If at all possible, prepare a catalog and specification sheet with plenty of samples
Learn from your current customers. Pursue targets that resemble the best customers who make purchase decisions easily, appeared satisfied and paid their bills. Make the best offers for the most responsive customers. Make some secret arrangements for special discounts with these important dealers.
In addition to the above considerations, you need to pay close attention to uniformity of product quality, timeliness in meeting deadlines, quickness of after-sales service and regularity and stability of supply.
How Can An Exporter Obtain Information Which Will Help Him Locate A Good Partner in Target Market?
Broadly speaking, the quickest way is to find someone who can introduce you to a reliable business partner. The following methods are always available in all over the world:
- Using Chambers of Commerce and Industry Database.
- The Trade and Industry Associations do more than simply maintaining membership lists; they also have in-depth information about market trends and firms in their industry.
- Searching for promising contacts in Directories and Yellow Pages both Off-Line and Online.
Gather Information about the Market for the Product You wish to export including the following:
1) General market information such as import trends, supply and demand conditions, custom duties, excise taxes, competition from the target country and from third country products;
2) The import system, relevant laws and regulations and standards;
3) The distribution system and business practices, including knowledge about producers, wholesalers, retailers, sales promotion methods and after-sales services;
4) Consumers’ Lifestyles and tastes; and
5) Potential buyers and a list of import companies.
Prepare Explanatory Materials About Your Company and Products including:
1) A Company Profile
2) Product Information such as Catalogs, Photographs, Specifications, Instructions, Manuals, Price-Lists; and
3) Samples
How do you make best use of the services offered by trading companies?
Using the services of a Trading Company in a foreign country can be an effective way of selling your products in the target market. Trading companies which have experience handling international transactions can help foreign exporters who lack experience in their market.
What Role Do Trading Companies Perform?
Essentially trading companies perform two tasks: they act as trade intermediaries, linking product suppliers with users, and they develop trade flows by engaging in activities that increase the supply of products and stimulate additional demand. Other activities – such as financing, risk absorption, resource development, project coordination, investment and provision of information – are generally carried out to facilitate these two principal tasks.
When the trading company is considering your products for import, it will base its decision on the marketability of your product – its quality, specifications, packaging, uniqueness and appropriateness of pricing. Secondary considerations will include such matters as lot size (availability of product in small or large shipments), delivery and labeling.
We hope that you will find the information contained herein helpful and useful. Please do not hesitate co contact us for any further information you may like to have. No matter where you are you can always call us – On the road to your success you will not feel yourself alone – TAAJIR International – your International Business Partners is always with you.
