TOPIC ONE:

AN OVERVIEW OF EXPORT
AND IMPORT BUSINESS

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 Introduction
EXPORT (EX – PORT)
• Means ship goods / services out of the port of
the country.
• An export is a function of international trade
whereby goods produced in one country are
shipped to another country for consumption,
future sale or trade.
• Exporting means the sale of goods/ services
produced by a company based in one country to
customers that reside in a different country.
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 Characteristics of Exporters
1. Size;
 Large
 Small and Medium sized Enterprises (SMEs)

2. Management skills
3. Management commitment
4. Efficiency
5. Cost structure

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Why Companies decide to Export?
• A product can be near the end of its life cycle
in the domestic market at the same time it
experiences a growth market abroad.
• Competition in the foreign market may be less
intense than domestically.
• When a firm has excess capacity, it can
produce for export in the foreign markets at a
favorable marginal cost per unit.
• Geographical diversification, that is, going
international, may be a more desirable
alternative than product-line diversification.
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 Why Companies decide to Export?
• Increase market share; widening the markets
and sales volumes.
• Organisation efficiency; this helps to improve
knowledge, attitudes, skills and social
behaviors. Therefore, the overall efficiency of
the organisation improves due to training,
research and other activities which are
encouraged by export management.

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 Benefits of Exporting for Firms
1. Increase sales volume / market share.
2. Increase revenues.
3. Increase profits.
4. Spread business risks by geographically
diversifying into multiple markets.
5. Increase production capacity.
6. Reputation and Goodwill; exports bring
reputation to the export firm in international
market as well as in the domestic market.
7. Transfer of knowledge and technology
between nations.
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 Benefits of Exporting for a Nation
• Earning Foreign Exchange.
• International Relations.
• Favorable Balance of Payments.
• Reputation in the World.
• Creates Employment.
• Improves standard of living
• Increase Country’s Economic Growth – (GDP)

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February 8, 2022 D. Ringo 8
 Introduction
IMPORT (IM- PORT)
• Means bring in goods/ services in to the port of a
country.
• An import is a good or service brought into one
country from another.
• The word "import" is derived from the word
"port" since goods are often shipped via boat to
foreign countries .
• Importing means the purchase of goods/services
by a buyer in one country from a seller in another
country.
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 Export and Import Management
• Management is a term commonly used in every
activity. It means planning, organizing, directing,
controlling and coordinating the specific activity
so as to achieve its objective.
• Export management means conducting the
export activity in an orderly, efficient and
profitable manner.
• Export / Import management is basically about
planning, organizing, coordinating and
controlling all activities relating to export or
import of goods and services to other countries.
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 Features of Export Business
• Large scale operations, involves large scale
marketing and production operations of goods
and services.
• Systematic Process, the export manager under
takes various marketing activities such as
marketing research, product design, branding,
packaging, pricing, promotion etc. All these
aspects require collection of data, analysis of
data, then in perpetration of data in order to
take systematic export marketing decisions.

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 Features of Export Business
• Three faced Competition, competition from
within the country exporters, competition from
local producers of Importing country and
competition from exporter of other nations.
• Trade Barriers, export trade is subject to trade
barriers (restrictions) tariff and nontariff barriers.
• Domination of MNCs, MNCs have huge
investment and conduct business operation all
over the world.

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 Features of Export Business
• Foreign Exchange Regulations, export trade is
subject to foreign exchange regulations
imposed by countries.
• Documentation formalities, export marketing
is subject to various documentation formalities.
The documents include Bill of lading,
Commercial consular invoice, Shipping bill,
Certificate of origin etc.
• Diverse customs and Traditions, the export
markets differ in languages, customs and
traditions.
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 Functions of an Export Manager
• To decide export objectives of the organization
and prepare comprehensive short term and long
term plans and programmes to achieve such
objectives.
• To conduct marketing research.
• To introduce product development and to
produce quality goods as per specific needs of
foreign markets/buyers.
• To execute long-term export promotion
programmes for the products with promising
overseas demand.
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 Functions of an Export Manager
• To fix up the prices of exportable items with
proper care.
• To find out new designs for packaging of export
items.
• To look after the advertising and publicity
abroad and to maintain effective
communication with prospective buyers.
• To analyze the policy of the government and
the current export regulations and procedures.
• To face challenges of international competition
and changing marketing environment.
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Modes of Entry into Export Business
Factors to consider in deciding entry modes;
1.Goals of the firm; if a firm’s objective is to be a
leader it will choose direct entry and also if a firm
wants to have more control in the market it will
choose direct entry.
2.Personnel and Administrative Requirements; if
the firm lacks skilled and experienced
international personnel, it should avoid direct
and high risk entry strategies.

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 Factors to consider in deciding entry
mode;
3. Capital Requirements; the amount of capital
requirement will vary with the method of entry
hence determines the choice of entry method.
4. Risks; firms with limited capital and low tolerance
for financial risks, indirect methods would be
preferred and vice versa.
5. Flexibility; firm’s ability to adapt to meet
changing circumstances is desirable.

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Factors to consider in deciding entry
mode;
6. Political condition; a firm should consider the
political condition of the country whether it
favors the entry method. For instance, in a
centrally planned economy, joint ventures are
more favorable.

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 Market Entry Strategies
1. Indirect Exporting
2. Direct Exporting
3. Foreign Production

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 Indirect Exporting
1. Export Houses; this is any company which is not a
manufacturer, whose main activity is the handling
and financing export trade. Export houses include;
(a) Export Merchant; they buy goods outright and
sell them on their own name. they act as domestic
wholesalers operating in foreign markets through
their own sales agents or sales force. Export
merchants pay the firm in cash thus the firm
avoids credit risks. On other hand a firm lacks
control over the foreign market.
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 Indirect Exporting
(b) Confirming Houses (CH);
 firms in an exporter’s country which acts as an
agent and guarantor for an importer, and pays
the exporter’s invoice on behalf of the importer,
thus eliminating the credit risks.
 They purchases and arranges the export of
goods on the behalf of overseas buyers.
 CH negotiates the price with the suppliers, ships,
insures and provides information on the goods
on the overseas buyers’ behalf.
 CH receives commission from the buyer.
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 Indirect Exporting
(c) Export Agents;
• Act as manufacturer’s export department and
undertake most or all of the exporting tasks, e.g.
attending to the physical and clerical tasks
associated with exporting, stocking goods at
home or abroad, following up delivery dates,
providing after-sale service if required, carrying
credit risks etc.
• Their remuneration is in the form of a commission
from manufacturer, although an alternative form
of remuneration is possible, e.g. on cost plus
profit margin basis.
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 Indirect Exporting
2. Export Management Company (EMC)
• Independent private company that acts like an
export department for several non-competing
manufacturers and suppliers.
• EMC can act as; (i) external sales department (ii)
an agent (iii) a consulting firm with abroad
experience and knowledge in fields of exports.
(iv) an exclusive distributor on a buy-sell basis;
EMC buys manufacturer’s products at a set price
and resells to foreign customers at a price
established by the EMC.
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 Indirect Exporting
• EMC is responsible for invoicing and bears the
risk on non-repayment.
• EMC operates on either a commission (as an
agent), a free basis (as a consultant) or taking a
possession of goods.

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 Indirect Exporting
3. International Trading Company (ITC)
• ITC tend to be large scale manufacturers and
merchants and they are involved in wholesale
and retail distribution.
• They normally acts as agents for principals in
overseas markets.
• EMC is similar to ITC except, ITC;
 Specializes mainly in international purchasing or
selling on behalf of foreign clients, while EMC
has no loyalty to a particular manufacturer.

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 Indirect Exporting
 Usually buy products in big orders and pay cash
to suppliers.
 Identify what foreign buyers want to spend their
money on and then searches domestic sources
willing to export, in comparison to EMC which
attracts buyers.

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 Indirect Exporting
4. Piggyback Exporting
• This occurs when a firm enters into collaborative
arrangement with a major manufacturer in a
similar field.
• One manufacturer (the carrier) uses his
established overseas distribution network to
market the goods of another manufacturer (the
rider) alongside his own.
• There are two possible arrangements in this
arrangement;
(i) the carrier can act as an agent by selling the rider’s
products on commission basis
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 Indirect Exporting
(ii) the carrier can act as a merchant and buy the
products outright to resell them.
• It is suitable when;
(i) the marketing, distribution and service costs are
high.
(ii) the marketing requirements are high and
sophisticated.
(iii)the carrier may sell the rider’s products because
they complement his product range.
(iv)the opportunity for lowering unit distribution
costs exists.
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 Direct Exporting
1. Agent;
• An agent is an individual or organisation that acts
on behalf of a principal to bring the principal into
a contractual relationship with third parties to
whom the principal’s products or services can be
sold.
• They act as intermediaries between suppliers
and users.
• Agents can be commission agents, after sale
agents, stocking agents and Del credere agents.

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 Direct Exporting
2. Distributors;
• Distributors are customers who have been given
exclusive or preferential rights to purchase and
re-sell a specific range of products from a
supplier organization.
• Normally they are given sole rights and operate
in specific geographical areas or markets.
• Their remuneration comes from the difference
between the purchase and resale price.

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 Direct Exporting
• Distributors can offer exporter a number of
valuable services such as; stockholding,
promotional support, after-sale services, market
feedback, sales forecasting and sales reports,
sales and distribution management.

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 Direct Exporting
3. Overseas Subsidiaries;
• The exporter may choose to use own resources
i.e. sales personnel, set up an overseas branch
office or set up am overseas marketing
subsidiary.
• The company’s own sales person occurs in
market where suitable agents are not available or
difficult to find.
• Overseas branch office use local personnel
trained in the firm’s product and organization
culture and supervised residents executives.
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 Direct Exporting
• These offices are usually set up because overseas
operation has become too large for the local
agent to handle.
• Overseas subsidiary company; this is possible
only if the scale of business can support a higher
level of operations. It provides a firm with a base
in the market for elaboration of marketing
operations and carrying stock.

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