:It means the sale abroad of an item produced ,stored or processed in thesupplying firm’s home country. It is a convenient method to increase thesales. Passive exporting occurs when a firm receives canvassedthem. Active exporting conversely results from a strategic decision toestablish proper systems for organizing the export fuctions and for procuring foreign sales.
Advantages Of Exporting
Need for limited finance
;If the company selects a company in the host country to distribute thecompany can enter international market with no or less financialresources but this amount would be quite less compared to that would be necessary under other modes. b.
;Exporting involves less risk as the company understand the culture ,customer and the market of the host country gradually. Later after understanding the host country the company can enter on a full scale.c.
Motivation for exporting
:Motivation for exporting are proactive and reactive. Proactivemotivations are opportunities available in the host country. Reactivemotivators are those efforts taken by the company to export the product to a foreign country due to the decline in demand for its product in the home country.2.
In this mode of entry ,the domestic manufacturer leases the right to useits intellectual property (ie) technology , copy rights ,brand name etc toa manufacturer in a foreign country for a fee. Here the manufacturer in thedomestic country is called licensor and the manufacturer in the foreign iscalled licensee. The cost of entering market through this mode is lesscostly. The domestic company can choose any international location andenjoy the advantages without incurring any obligations and responsibilitiesof ownership ,managerial ,investment etc.
;1. Low investment on the part of licensor.2. Low financial risk to the licensor 3. Licensor can investigate the foreign market without much efforts onhis part.4. Licensee gets the benefits with less investment on research anddevelopment5. Licensee escapes himself from the risk of product failure.
:1. It reduces market opportunities for both2. Both parties have to maintain the product quality and promote the product . Therefore one party can affect the other through their improper acts.3. Chance for misunderstanding between the parties.