 Manufacturer or exporter sells directly to an importer or buyer located in the foreign market area.  Exporter take a more direct approach to exporting may choose to transport the goods into a foreign market themselves.  This proactive approach gives the company greater controls on issues such as the finished product, the selling and marketing methods  The actual transaction flow between nations is handled directly by a dependent organization of the manufacturer or a foreign-based marketing organization or customer.

5.2 DIRECT EXPORT HOME-COUNTRY BASED DEPARTMENT FOREIGN SALES BRANCH STORAGE OR WAREHOUSE FACILITIES FOREIGN SALES SUBSIDIARY TRAVELING SELASPERSON FOREIGN-BASED DISTRIBUTORS & AGENTS (REPRESENTATVES)

 Export department or division in the home country.  Also known as dependent organization.  Involved directly in making export sales.  Serve as the home-based export marketing department to coordinate and control the activities of other dependent organizations located in foreign markets.

 Three different types of home-country based export organizations: (i) Built-in export departments (ii) Separate or self-contained export department (iii) Export sales subsidiary

5.2.1 HOME-COUNTRY BASED DEPARTMENT (i) BUILT-IN DEPARTMENT (ii) SEPARATE EXPORT DEPARTMENT (iii) EXPORT SALES SUBSIDIARY

 The simplest form of export organization.  Easiest to establish.  Consist of an export sales manager with some clerical help.  Primary job of the sales manager is to do the actual selling or directing of selling.  All functions connected with export transactions e.g. advertising, logistics, credit, shipping done by appropriate domestic department.  May have problems getting support from other units and in carrying out technical functions.

 Built-in form is best suited for direct export for the manufacturer who operating under any of the following conditions: Small in size; New or relatively new to export marketing; Expected foreign sales volume is moderate to small; Management philosophy not oriented toward; growth of foreign business; Company resources are limited.

 As overseas business increases, separate export department may be established to take care of it.  Essentially self-sufficient unit and well equipped to handle export activities (advertising, logistics, etc.).  In other words - complete export marketing department.  Structured internally upon the basic of functions, geographic region, product, or a combination of these.

 Characteristics of separate export department: No inherent possibility for clash between the international and domestic sides of the firm regarding the time to be spent by domestic marketing personnel on foreign business matters. Export operations can be conducted on a full-time basis by personnel knowledgeable and trained; specifically committed to exporting. Has a fairly high degree of flexibility in terms of where it is located.

 Much more complex and almost completely independent organization.  Wholly owned and controlled by the parent company.  Functions same as SED but differs significantly in financially and organizationally.  ESS purchase goods from parent company and resell in foreign countries.  Benefit: total and independent control of their activities.

 Advantages: ◦ provides unified control; ◦ profit center; ◦ can more easily allocate orders and supervise traffic management; ◦ ease of financing; ◦ wider product line; ◦ tax advantages in some countries.

 Serious involvement in international trade. Primary purpose:  Closer supervision of foreign sales by manufacturer in home country. Secondary purpose:  A foreign facility for manufacturer to display its product line (Display center).

 Responsibility:  Provides control, service, dedicated staff for your products; costly.  Handles all of sales distribution and promotion in a designated market area.  Storage or warehouse facilities  Used when inventory in foreign markets is necessary or profitable.  May be for one country or regional.

 May be the complementary action to the set up of ESS and may be part of a sales branch.  Due to the exporter decisions to invest in foreign country.  Operates as a separate entity and set up to fill orders made by foreign distributors.  Reasons: Faster and more secure flows of goods; Create consumer trust and satisfaction; Facilitates easier trading with wholesalers and retailers.  Best set up in a free port or trade zone.

 Similar in operation to the ESS and FSB.  Differences: greater autonomy in decision making.  Has its own organizational structure, separate financial accounts and marketing division.  They purchase goods from parent-company and resell it to foreign buyer.  Using transfer pricing.  Why establish foreign sales subsidiary? Potential tax advantages Business practices

 Functions: selling activities, customer relations, information gathering.  May act as a chain between manufacturer and end users. Traveling export salesperson:  A person who lives in one country, often the home country of the employer, and travels abroad to perform the sales duties. Resident sales person:  A person who is sent out of the home country to live and work in a foreign market.

 Basic functions of traveling sales personnel: (i) Communication of product information to customers, and obtaining orders. (ii) Customer relations: maintaining and improving the company’s position with customers and general public. (iii) Gathering and communicating information. (iv) Arranging the delivery of products.

 A distributor is a customer of the manufacturer, who purchases the goods and earns their profit through a profit margin when it’s resold.  An agent is a representative of the manufacturer who earns commission for finding foreign purchasers of the manufacturers goods.  Unfortunately, terms are often used interchanged.  In direct exporting, use of exclusive agents or distributors is easiest and least costly; also has potential for development.

 Conditions required the uses of distributors/agents: Little knowledge of foreign market; Do not wish to make greater investments; not sure the product will be successful or not; Do not have personnel capable of being a traveling salesperson; Order small in quantities or size.  More importantly, the uses of distributor/agent is less risks and less costs.