Export Guide
CHAPTER 7
7.1 When exporting indirectly, is it better to use a merchant or an agent in the export marketing channel? Explain.
When exporting indirectly, whether it is better to use a merchant or an agent when exporting depends on the objectives and needs of the exporter. A merchant takes title to the goods and assumes most of the risk. In return for this, the merchant consumes a greater share of the return, receiving a greater share of the producer’s profit margin. This can be justified for a producer who has little foreign market and export knowledge or is very risk adverse. An agent does not take title to the goods and so most of the risk remains with the producer. Agents act by bringing buyers and sellers together without assuming the role of either. For this they generally consume a smaller portion of the profit margin. A producer who is willing to assume more financial risk may prefer this type of channel.
7.2 Under what conditions is it best that an exporter use an export management company and when is the manufacturer’s export agent a better choice?
An export management company (EMC) is most commonly used in situations where the manufacturer either cannot afford or does not desire to get involved with export marketing. EMCs are experts at this and handle several related, but noncompeting products. This serves to share the expenses of export promotion between several producers. They often assist clients in setting up their own export department or begin direct exporting once established. The manufacturer’s export agent functions much in line with an EMC, but does not provide advertising and financial assistance. They are used most effectively when a firm wants to sell small orders to overseas buyers, enter a new overseas market, or sell a product which is new to consumers in overseas markets. These agents prefer to retain more of their own identity and remain as the foreign sales representative on a permanent basis. In general, a major difference between
7.1 When exporting indirectly, is it better to use a merchant or an agent in the export marketing channel? Explain.
When exporting indirectly, whether it is better to use a merchant or an agent when exporting depends on the objectives and needs of the exporter. A merchant takes title to the goods and assumes most of the risk. In return for this, the merchant consumes a greater share of the return, receiving a greater share of the producer’s profit margin. This can be justified for a producer who has little foreign market and export knowledge or is very risk adverse. An agent does not take title to the goods and so most of the risk remains with the producer. Agents act by bringing buyers and sellers together without assuming the role of either. For this they generally consume a smaller portion of the profit margin. A producer who is willing to assume more financial risk may prefer this type of channel.
7.2 Under what conditions is it best that an exporter use an export management company and when is the manufacturer’s export agent a better choice?
An export management company (EMC) is most commonly used in situations where the manufacturer either cannot afford or does not desire to get involved with export marketing. EMCs are experts at this and handle several related, but noncompeting products. This serves to share the expenses of export promotion between several producers. They often assist clients in setting up their own export department or begin direct exporting once established. The manufacturer’s export agent functions much in line with an EMC, but does not provide advertising and financial assistance. They are used most effectively when a firm wants to sell small orders to overseas buyers, enter a new overseas market, or sell a product which is new to consumers in overseas markets. These agents prefer to retain more of their own identity and remain as the foreign sales representative on a permanent basis. In general, a major difference between