Ch. 10: Export Modes

Indirect Export
The manufacturing firm does not take direct care of exporting activities (another domestic company performs these activities without the manufacturing firm’s involvement)
Direct Export
The producing firm takes care of exporting activities and is in direct contact with the firm intermediary in the foreign target market
Cooperative Export
Collaborative agreements with other firms concerning the performance of exporting functions
Partner Mindshare
The level of mindshare that the manufacturer’s product occupies in the mind of the export partner (e.g. agent or distributor)
Three Drivers:
-Commitment and trust
-Collaboration
-Mutuality of interest and common purpose
Five Main Entry Modes of Indirect Exporting:
-Export buying agent
-Broker
-Export management company/export house
-Trading company
-Piggyback
Export buying agent
A representative of foreign buyers who is located in the exporter’s home country. The agent offers services to the foreign buyers, such as identifying potential sellers and negotiating prices.
Broker
Brings a buyer and a sell together but does not actually handle the products sold or bought
Export Management Company/Export House
Specialist companies set up to act as the ‘export department’ for a range of non-competing companies
Advantages of Export Management Company
-Allows individual companies to gain far wider exposure of their products in foreign markets at much lower overall costs than they could achieve on their own
Disadvantages of Export Management Company
-Specialize by geographical area, product, or customer
-Paid by commission
-Tempted to carry too many product ranges
-Carry competitive products
Trading Company
-Play a central role in shipping, warehousing, fiance, technology transfer…
Piggyback
An abbreviation of ‘pick-a-back’: i.e. choosing a back to ride on. It is about the rider’s use of the carrier’s international distribution organization
Carrier Advantages
Fill gaps in product line by acquiring products outside
-Low-cost way to get the product
Carrier Disadvantages
-Will quality be maintained?
-Continuity of supply
Rider Advantages
-Can export conveniently without have to establish their own distribution system
-Learn from carrier’s experience
Rider Disadvantages
-Giving up control over the marketing of products
-Lack of commitment
-Lack of sales opportunities in regions not covered by the carrier
Distributors
-Independent company that stocks the manufacturer’s product.
-Has substantial freedom to choose own customers and price.
-Profits from the difference between its selling price and its buying price from the manufacturer.
Agents
Independent company that sells on to customers on behalf of the manufacturer (exporter)
-Usually it will not see or stock the product
-Profits from a commission (typically 5-10 per cent) paid by the manufacture on a pre-agreed basis