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Alistair Berg / Getty Images Direct exporting involves exporting directly to a customer interested in buying your product (rather than to a third party distributor). You are responsible for handling the market research, foreign distribution, logistics of shipment, and invoicing. Advantages of Direct ExportingDirect exporting, in general, avoid all the costs and confusion of a "middleman." It also allows you to have greater control over sales and to interact directly with your clients. Here are some of the top advantages:
Disadvantages of Direct ExportingWhile there are real advantages to direct exporting, in some cases you may feel that the intermediary is worth the cost. Here's why you may choose not to manage exports yourself:
Corporate ManagementDirect exporting requires dedicated personnel, a great deal of knowledge, and quite a bit of time and energy. Even so, however, corporations of all sizes manage to make it work. Here are some models that may work for your business.
Should you decide to export directly, make sure you have a company-wide commitment, which includes your import/export dream team to ensure the initiative is fully supported. What Is an Export?Exports are goods and services that are produced in one country and sold to buyers in another. Exports, along with imports, make up international trade. ExportUnderstanding ExportsExports are incredibly important to modern economies because they offer people and firms many more markets for their goods. One of the core functions of diplomacy and foreign policy between governments is to foster economic trade, encouraging exports and imports for the benefit of all trading parties. According to research firm Statista, in 2019, the world’s largest exporting countries (in terms of dollars) were China, the United States, Germany, The Netherlands, and Japan. China posted exports of approximately $2.5 trillion in goods, primarily electronic equipment, and machinery. The United States exported approximately $1.6 trillion, primarily capital goods. Germany's exports, which come to approximately $1.5 trillion, were dominated by motor vehicles—as were Japan's, which totaled approximately $705 billion. Finally, The Netherlands had exports of approximately $709 billion. Advantages of Exporting for CompaniesCompanies export products and services for a variety of reasons. Exports can increase sales and profits if the goods create new markets or expand existing ones, and they may even present an opportunity to capture significant global market share. Companies that export spread business risk by diversifying into multiple markets. Exporting into foreign markets can often reduce per-unit costs by expanding operations to meet increased demand. Finally, companies that export into foreign markets gain new knowledge and experience that may allow the discovery of new technologies, marketing practices and insights into foreign competitors. Special Consideration: Trade Barriers and Other LimitationsA trade barrier is any government law, regulation, policy, or practice that is designed to protect domestic products from foreign competition or artificially stimulate exports of particular domestic products. The most common foreign trade barriers are government-imposed measures and policies that restrict, prevent, or impede the international exchange of goods and services. Companies that export are presented with a unique set of challenges. Extra costs are likely to be realized because companies must allocate considerable resources to researching foreign markets and modifying products to meet local demand and regulations. Exports facilitate international trade and stimulate domestic economic activity by creating employment, production, and revenues. Companies that export are typically exposed to a higher degree of financial risk. Payment collection methods, such as open accounts, letters of credit, prepayment and consignment, are inherently more complex and take longer to process than payments from domestic customers. Real World Example of ExportsOne example of an American export that makes its way all over the world is bourbon, a type of whiskey native to the U.S. (in fact, it is defined as a "distinctive product of the United States" by a U.S. Congressional resolution). Furthermore, if the liquor is labeled Kentucky bourbon, it must be produced in the state of Kentucky, similar to the way a sparkling wine must hail from the Champagne region of France to call itself "champagne." The global market has developed quite a thirst for American bourbon in general and Kentucky bourbon, in particular, in the 21st century. However, in 2018, trade wars between the U.S. and the European Union and China led to 25% tariffs being slapped on the corn-based spirit, leaving a sour taste in the mouths of many distillers, exporters, and distributors. Key Takeaways
Is a way to reach overseas customers by exporting?A way to reach overseas customers by exporting through domestic-based export intermediaries. A combination of innovative, proactive, and risk-seeking behavior that crosses national borders and is intended to create wealth in organizations.
Which of the following is one of the methods by which entrepreneurial firms internationalize by entering foreign markets quizlet?Indirect export is one of the strategies used by entrepreneurial SMEs to internationalize without leaving their home country. is a way to reach overseas customers by exporting through domestic-based export intermediaries.
What is one way entrepreneurial firms could internationalize while staying in domestic markets?A firm can internationalize by becoming a supplier for a foreign firm that is doing business in the domestic market.
What is the definition of an entrepreneur quizlet?Entrepreneur. An individual who undertakes the risk associated with creating, organizing, and owning a business with the desire to make a profit. Venture. A business undertaking that involves a level of risk. Entrepreneurship.
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