7points

MAIRKETINC
EXPORT
RISKS INVOLVED IN
opportunities. Ik
as
involves several risks as well
Export marketing aware of export marketing risks, so that the
is important to be and manage such risks. The followino
exporter can identify, analyse risks.
are somne of the export marketing
1. Quality Related Risks:
important to inspect the quality of goods before shipment
Itis
However, if the goods are not properly inspected, the exporte
may find his entire shipment being rejected by the importer on
account of poor quality of goods. As such the exporter ma
suffer huge loss.
M
Introduction to Export Marketing
ation Professional exporters may
negotiation stage that a suggest to the
importers
19
during the
by an
protectsindependent
pre-shipment
the exporter inspection
inspection be
agency. Such an carried out
as well as the
The costs of importer. inspection
ts costs may beinspection
included the
in
may be borne by the
importer or such
en
contract price,
The exporter may also
the importer before provide a few samples of the goods to
of sample goods, andshipment. If the importer accepts the
IP
of samples, then it if thebegoods are shipped as per the quality
quality
the shipped goods. would difficult for the importer to reject
ent
2. Foreign Exchange Fluctuations Risks:
The exporter may be subject to foreign
exchange
exchange rate fluctuations, when the payment is
risk due to
basis of foreign currency. If the agreed on the
Rupee) appreciates against foreigndomestic currency, (say Indian
will receive lower amount in currency, the Indian exporter
0

nd Indian Rupees at the time of

realization of payment.
he For instance, at the time of
$ =70/- but at the time contract,
of
the exchange rate was 1 US
rate becomes 1 US$ =65, i.e.,receipt of payment, the exchange
appreciation of Rupee, then the
Indian exporter will receive lower
(If the contract price was 1000 US $,amount in terms of Rupees.
the exporter was expected
to get ? 70,000, but due to
appreciation of Indian Rupee, the
Indian exporter will get 65,000 (a loss of 5000). However, if
the domestic currency depreciates, the Indian exporter will
gain.
If the contract is made in domestic currency, the
exporter wil
not be subject to foreign exchange risk. The importer will bear
the loss on account of exchange rate fluctuation.

It is to be noted that if the export billis purchased or negotiated

under letter of credit by a bank and the exchange rate fluctuates
(aomesticcurrency appreciates), the bank has to bear the risk.
If the export billis sent for collection, the exporter will have to
Suffer the loss on account of exchange rate fluctuation (domestic
currency appreciates).
 Export Marketing (T.Y.B.Com.: SEM-V, Introdu
entering int
Large exporters hedge the exchange rate risks by
forward contracts, or future contracts. C
i
3. Credit Risks:
credit risks on account
Goods sold on credit are subject to may provide credit terms
1

non-payment by the buyer. Exporters

from the importers. Credit is
to get good orders
to the buyers competitive business world.
generally unavoidable in 6.

credit risks, Indian exporters can

To overcome the problem of ECGC. Toprotect the exporters
obtain credit risks policy from
ECGCissues:
against credit risks, the
exporters to protect them
(a) Standard Policies - issued to exports on short term
against payment risks involved in
credit.

(b) Specific Policies - designed to protect Indian exporters

involved in:
against payment risks
Exports on deferred terms of payment.
Services rendered to foreign parties.
Construction works and turnkey projects undertaken 7.
abroad.
4 Cargo Risks:
Amajor part of export of goods takes place with the help of seaof
transport. Sea transport is subject to cargo risks on account
damage to goods due to storms, collisions, leakage, explosion.
spoilage, fire, etc. Apart from loss due to damage, the carg°
risks involve theft, and loss due to sea pirates.
The exporter needs to get the cargo risks insured by obtainin
Air can also be insured with
marine insurance policy. cargo
the domestic or international insurance firms.
5. Legal Risks: importer
and
Different business laws prevail in the exporter frequent
countries. International laws and regulations change
applied differently from that of the exporte
and/or may be
 Intnxuction to Exprt Marketing 21
country. Therefore, the exporter needs to draft the export
contract with the help of a legal firm. This will protect the
interests of the exporter.
Legal risks can be minimised to great extent by including a
provision for arbitration, if dispute arises relating to terms of
contract.

6. Unforeseen Risks:
Exporter may suffer loss on account of unforeseen risks. For
ter instance, a natural disaster or man-made disasters (like terrorist
attacks) in a particular country could completely destroy an
export market.
her:
err Unexpected occurrences may also increase the cost of transport
causing great loss to the exporter. Therefore, an exporter needs
to include a force majeure clause in the export contract to protect
ters against unforeseen risks.
The force majeure clause frees both parties from liability or
beyond
obligation when an extraordinary event or circumstanceearthquake,
the control of the parties occur such as war, riot,
volcanic eruption, hurricane, etc.
Ken Culture Risk:
7. Language and
importer come from
In international trade, the exporter and Therefore, there is
different culture and language background.
possibility of misunderstanding in communication and in
a instances business
international trade transaction. In most
sea
accounting
of
practices, tax systems, rules and regulations,
on,
currency controls and customs procedures differ from
methods, importer. On account of
go
exporter's country and that of the
the exporter may lose
cultural differences, there is a possibility
ng the contract and suffer losses.
ith avoid culture related risks, the exporter must
Thus, in order to the cultural differences. The
understands
ensure that he fully overseas market (in which he intends to
exporter may visit the nuances of culture.
export) and understand the
et
 22
Export Marketing (T.Y.B. Com.: SEM
8. Political Risks: Introductior
The export business is also subject to political risks. Most of
political risks can be covered under ECGC policies. The
risks include: polit,
Imposition of restrictions on remittances by
government in the buyer's country or any governme. (b)
action which may block or delay payment to exporter.
War, revolution, or civil disturbances in the buver
country.
Cancellation of a valid import licence or new impor
(C)
licensing restrictions in the buyer's country, after the da
of shipment or contract, as applicable.
Cancellation of export licence or imposition of new expor
licensing restrictions in India after the date of contrac
(under contract policy). (d)
Payment of additional handling transport or insurant
charges occasioned by interruption or diversion of voyag
which cannot be recovered from the buyer.
Any other cause of loss occurring outside India, no
normally insured by commercial insurers and beyond th
control of the exporter and/or buyer. 10. Int
9. Commercial Risks: Int
There are various commercial risks relating to export marketing de
Some of the commercial risks such as insolvency of the buyer th
H
buyer sfailure to accept the goods subject to certain conditions
etc. and so on can be insured with ECGC. But some commercia
ex

risks such as loss on account of lack of market knowledge, lach TI

of product adaptability, etc cannot be insured. pr
The commercial risks include:
(a) Lack of Market Knowledge: The exporter may lack prope
knowledge of the international market, which he ha
chosen to market the product. Lack of market knowledg
will lead to failure in international business, as the sale
 SEM Introduction to Export
st of
Marketing
will be badly 23
affected. To overcome this risk, the
should thoroughly
oliti, to customer study the overseas market exporter
preferences, the with respect
the rules and regulations of thecompetitors' strategies, and
Oy tt (b) Lack of Product importing country.
nme
ter. takes place due Adaptability: A major
to lack of product commercialin risk
adaptability
overseas markets. Nowadays, due to constant the
uyer changes, and innovations by competitors, the technological
suffer a huge loss, if he does not adapt his exporter will
the changing situation in the product as per
mpo: overseas markets.
e da (c) Delays in Shipment: The
commercial risks due to delaysexporter may also suffer
in shipment of goods to
the importer due to various reasons.
xpo: of goods may result in rejection of Delays in shipment
ntra or cancellation of orders. goods by the importer
(d) Unforeseen Events: The exporter may also suffer loss on
ranc account of unforeseen circumstances beyond the control
yag of the exporter. For instance, the sudden closure of the
importer's business or the importer may
and therefore, the exporter will suffer a become insolvent,
loss either due to
, no cancellation of order or due to non-receipt of export
dth proceeds.
10. Intellectual Property Risk:
Intellectual property, such as patents, copyrights, unique
etin: design, etc., is one of the most valuable asset of a company. If
uye the IP is protected, it can act as a barrier to
competitors.
ion However, if the IP is stolen or misused by the competitors, the
ercië exporter would be at a loss.
lac The following are the ways to protect IP apart from legal
protection:
Continuous improvement and innovation in the
product(s).
h
Maintaining low operating costs to create price advantage.
 Lxport Murketing (T.Y.B.Com.: SLA
marketing and branding strategies w%. ntroductio
Developing imilate in time. other
Competitors may tind it difficult to some
product formul. prob
Maintaining secrecy about process or
customer needs so as to build cust. The
Customising as per their
loyalty. UK
The
EXPORT SECTOR it d
PROBLEMS OF INDIA'S
3. Re
H
Indian exporters face a number of problems, Ov
In recent times, business firms to enter into forei
problems demotivate the su

Some of the problems are as follows: be

markets. in
Markets:
1. Recession in the World m
markets faced recession in 2008 and 2009 due to su
The world faced recession in 201 A
prime crisis of USA. Also, the world has
Zone Crisis.
and 2012 due to Euro
recession, the demand for several Indian items such.
Due to
clothing, and other item
gems and jewellery, textiles and considerable decline i
reduced considerably. There was crisis. As
exports of India during 2012-13 due to Euro Zone
result of lower demand, some of the exporters suffered heav
losses. 5.
In 2015-16, there was a slowdown in China, European Countrie
and in USA. There was direct impact on exports of India an.
other countries. In fact, there was negative growth in India
exports during 2015-16.
2 Protectionist Measures by Developed Countries:
The developing countries like India have to face the problen
of protectionist measures by developed countries. 6

For instance, in 2009, USA Govt. provided a bailout package

General Motors and other firms to overcome from financia
crisis. The bailout package contained 'Buy Americanfrom
Clauxth
which means the firms getting financial assistance
Govt., have to use domestic content rather than importing tron
 Murketing 25
ies Intnvlution to Export
Me, other countries. Since USA is the major importer from India,
face
some of the exporters such asS auto parts suppliers have to
problems.

Custu The developed countries like USA provide huge subsidies to

their exporters. For instance, in case of agriculture exports, USA.
UK and others provide huge subsidies to their exporters.
Therefore, the exporters of developing countries like India find
TOR it difficult to face competition in the world markets.
3. Reduction in Export Incentives:
ems, Over the years, the Govt. of India has reduced export incentives
fore such as reduction in DBK rates, withdrawal of income tax
benefits for majority of exporters, etc. The reduction in export
incentives demotivates exporters to export in the overseas
markets.
e to s
n in 4. Competition from China:
India is facing stiff competition from China in the world
markets, especially in the European and other developed
Ssuch
countries.
er iter
cline The Chinese exporters quote lower prices in the world markets
sis. A due to the lower cost of production. As a result, India's share
dhea of exports in the world markets has not increased.
5. Problem of Product Standards:
Ountn
Developed countries insist on high product standards from
diaa' developing countries like India. The products from developing
importing
Indi the
countries like India are subject to product tests in do
countries not allow
countries. At times, the importingtextiles and other items on
imports of certain items like fruits,
of excessive toxic content. Therefore, Indian
the grounds developed countries.
exporters lose markets especially in
robk

6.
Problem of Anti-dumping Duties: duties on certain
impose anti-dumping
kag
Developed countries developing countries like India, Brazil,
goods imported frominstance, USA had imposed anti-dumping
nan

China, and so on. For August 2018.

om
duties on Indian metal pipes in
 26 Export Marketing (T.Y.B.Com: St.
Quite often, the anti-dumping duties are not justified.Th.
India had to approach the dispute settlement body of V
resolve the dispute regarding anti-dumping duties. t
dispute is resolved, Indian exporters lose b
opportunities.
7 Problem of Sea Pirates Attacks:
A major risk faced by international trade is attack by ni
the Gulf of Aden. More than half of India's merchandise
(exports and imports) passes through the piracy infested r
of Aden. New exporters and importers are facing prob
because of increased pirate attacks as they find it diffiou.
get insurance cover. 2.
8 Negative Attitude of Overseas Buyers:
Some of the overseas buyers, especially fromdeveloped nat
have a negative attitude towards Indian goods. They are of:
opinion that Indian goods are of inferior quality, and that:
Indian exporters provide poor service after sales. Therefe
there is a need to correct this negative attitude through eftet
promotion and good marketing practices.
9. Documentation Formalities:
There were a number of documents to be prepared in exp3.
trade. Previously, Indian exporters had to prepare.
documents. However, aligned documentation system (Al
has simplified export documentation procedure.
Under FTP 2015-20, the number of mandatory docume
required for exporters is brought down to 3, which includes
Billof Lading/ Airway Bill
Commercial Invoice-cum-Packing List
Shipping Bill/Bill of Export.
10. Foreign Exchange Regulations :
Export marketing is subject to foreign exchange regula
For instance, in India, the
in Fom GR to the Reserveexporters have to give a decla hd
they
Bank of India (RBI) that ner
realise the full value of exports withina period of 180 da
Intrxiuction to Export Marketing
11. Poor Infrastructure:
The infrastructure required for export of goods is poor. Due to
poor infrastructure facilities, Indian erporters find it difficult
to get orders, and also to deliver the goods at the
right time.
The poor infrastructure facilities include:
Poor port-handling facilities.
Inadequate warehousing facilities.
Poor transport facilities, etc.
12. Problem of Trading Blocs:
Indian exporters are affected due to the presence of trading blocs.
There are some powerful trading blocs in the world such as
NAFTA, European Union and ASEAN. The trading blocs reduce
or eliminate trade barriers on member nations, whereas, they
impose the trade barriers on non-members.
Since India is not a member of the powerful trading blocs, Indian
exporters do face problems to export goods to the member
countries of the trading blocs. However, India has signed
preferential agreements with ASEAN and other countries.
13. Exporters Related Problems:
India's export trade is also affected due to exporters related
problems such as:
Delays in handling grievances
High pricing as compared to other exporting countries
Poor promotion-mix
Poor after-sale-service, etc.

DIRECTION (REGION WISE) OF

INDIA's EXPORTS SINCE 2015

India exports to about 240 countries in the world. In 2017-18, India's

merchandise exports accounted for 1.7% of the world's merchandise